Well done, good and faithful servant. You have been faithful over a little.
I will set you over much. Enter into the joy of your Master. Matthew 25, 23. I am Rob West.
Christians are called to be faithful stewards of God's resources. When we do that, we leave a legacy for generations. Today, I'll talk with Tom Conway about what that means and what that means. Well, I'm excited to have my good friend Tom Conway on the program today. Tom is a CPA by training, a Certified Kingdom Advisor, and a founder of Legacy by Design. Tom, it's a joy to have you in the studio today. Thanks, Rob.
It's great to be here. Tom, I think we all leave a legacy to our children and grandchildren, whether we know it or not, but there are actually three kinds of legacies that you teach about, and I'd love for you to unpack that for our audience today. Yeah, I think I originally thought there were only two, the kind of the one you received, which you did or didn't have any control over.
And for some people, it was a great legacy, and for others, it was a very difficult one. And then there's the one that you leave. But over time, I've come to realize there's a third one, and that's the one that you're leaving every day.
People are watching you. You know, if you're at home with your family, your kids are watching you, and you can say one thing, but they're watching what you do with your time, with your resources. And that is part of the legacy that they're going to remember at some point based upon your life.
Yeah, that's really important. The legacy you received, the one you will leave, but then the one you're leaving every day, which requires us to live intentional lives. Now, Tom, getting to your work, you help families plan their legacy.
And this, of course, isn't a one-size-fits-all process, is it? No, every family is unique. And one of the things I seek to do is just to get to know the family, not just mom and dad, because they generally are the people that I work with initially. But I often ask for the permission to get to meet their kids and interview their kids. And that gives me a whole lot more insight into how to help the whole family. I imagine it does. So for our audience today, how do you help families prepare a legacy?
What does that look like? Well, I think it all starts with questions, Rob. It's just, especially with a family, you're wanting to know what are their desires? What are their hopes and dreams for their kids? And in the work that I do, I'm really asking them about five areas of their legacy. What is their personal legacy? What do they want to be remembered for? The second is their family legacy. And that's where we talk about their kids, their grandkids, their parents, if they're still alive. The third is their financial legacy or their wealth transfer. What kind of an inheritance do you want to leave to your children that's going to be a blessing and not a curse? Because as you know, too much money in the hands of the wrong people can not be helpful, but it can be very detrimental. And the fourth is their business legacy. If they're business owners, what are you going to do with your business when you're gone?
Are there family members that want to be involved in it? How do you plan to exit it at some point? And then lastly, and really importantly, as well as your charitable legacy, what are you doing currently to impact the lives of others through your charitable giving? And then what do you want to do at the end of life to bless the kingdom of God?
Wow, that's powerful, Tom. And I suspect for most families, they haven't thought about their legacy in quite this way, either under these various headings, or with the intentionality you're bringing to the process, right? Yeah. And I think sometimes people think that legacy is all about money, especially here, we're talking about money. So people are thinking, well, that's all it is. It's all about how much money am I going to leave? And how am I going to leave it?
And to whom am I going to leave it? But it's really much more than that. It does include money, but it's really not about money. Probably the most significant legacy you're going to leave is not about money.
It's about your faith, it's about your values, your character, the memories you leave with your kids. So I think sometimes I just want to get people away from thinking only about the money part and think about the other parts. Oh, that's powerful, Tom. Well, obviously, we've just gotten started today.
There's a lot more to talk about. We're going to continue this with Tom Conway today to talk about leaving a family legacy. What should the goal be for your family as you think about legacy? What is it you should desire to achieve in this process?
And where do folks get it wrong? Tom Conway is with us today. He's a legacy planner, a certified kingdom advisor, and today helping us to think about leaving a godly legacy. Then it's on to your calls at 800-525-7000. Stay with us.
We'll be right back. Great to have you with us today on Faith and Finance Live. Today I'm talking to my friend Tom Conway. He's the founder of Legacy by Design. He's a certified kingdom advisor, and he really specializes in helping families leave a lasting legacy. And that's more than financial. As he said before the break, that's your personal legacy, your family legacy, your business legacy if you're a business owner, and your kingdom or charitable legacy.
And that's all in addition to your financial legacy. And Tom, just before the break, you were walking us through how we should think about that. What goals perhaps should guide us as we think about the legacy we want to leave? Well, I think number one should be what do you think God wants you to do in this situation?
I often encourage people with the idea that I have two goals for you. One is that you hear, well done, good and faithful servant at the end of life, because there is going to be a final exam for every one of us. We're going to stand in God's presence. He's going to say, what did you do with what I gave you?
And so we're going to have to answer that. But then secondly, I love what Paul says in Colossians chapter one, verse 28 and 29. He says, we acknowledge him warning everyone and teaching everyone with all wisdom that we may present everyone mature in Christ. For this I toil struggling with all the energy that God works throughout me.
So the whole idea is to present people mature in Christ. So the question is, how am I doing personally and growing in my own maturity? But then also, how are my children doing?
And what can I do to help them to get there? And how have you been successful, Tom, once a family realizes this, the matriarch and patriarch, and helping them to really lean into that and perhaps be more intentional to think about the faith legacy they're leaving? Yeah, well, part of it is I ask permission and get permission generally to talk to their kids. So and a lot of times, you know, kids can be anywhere from two years old to 40 years old. So mostly with adult children, when I get to talk about adult children. And by the way, if you think about that, that terminology, adult children is an oxymoron.
They're either adults or their children. And the question is, how are you treating them? Are you treating them as adults? Are you treating them as children? But in the conversations I have with the kids, I just asked them a lot of questions. The same way I do with their parents, not so much along the areas of those five points that we mentioned earlier, but just about how they're doing in life.
You know, are you happy with what you're doing? How are you doing financially? How are you doing relationally?
Who are your friends? What are the things that are influencing you the most? What about your work? What are you interested in? What would you really like to do if money was not an object?
What would you like to do? So those kinds of questions to really get to know the kids a little bit better. And that enables me to help the family. For example, I did it with one family. They had four kids. And so I got permission and actually met with each one of the four kids and they were all married. So I got to meet with them and their spouses and asked them a lot of questions, got to know them pretty well. And then I went back to mom and dad and said, hey, you guys need to know you've done a great job with your kids.
I mean, these kids are pretty solid. You don't need to worry about the fact that your money is going to ruin them because they're going to seek to steward it. Just like you have sought to do that during your life. So it was really encouragement to the couple to know that, yeah, somebody who's totally outside of our family has been able to observe our kids and is confident that they're going to do and be good stewards, just like we have sought to be.
Yeah. Tom, what about a family that realizes their kids are not there spiritually or maybe they're not mature financially? How can they, after they identify that, begin to lean into that to prepare them so they can either make a decision not to leave money, which could further accelerate their move away from the Lord, or perhaps help to make progress in that direction between now and their death? Well, I think you have to ask yourself the question, if you're leaving money to a child, what is your hope that that money will do? What I do with a lot of clients, I have them write an introduction to their documents where they they put in writing what their hopes and dreams are for their kids. But, you know, depending upon the age of the kids, if the kids are still in the house, you still have an ability to influence them.
Once they move outside the house, it becomes a lot more difficult. But you can also do things that would benefit them. So I've had clients that have taken their kids when they weren't strong in their faith on a mission trip. Okay, we're going to go build a building or we're going to build a church or we're going to build an orphanage for people.
And sometimes just getting people exposed out of their element of confidence into a place where they see the needs of others, it just really begins to open up their mind. How would you counsel those parents that really feel like when they answer that question, what is my hope that they won't be able to accomplish that by giving the inheritance that it's actually going to accelerate a lifestyle that's moving quickly away from the Lord. And yet they're conflicted because they feel like that's just part of their responsibility to leave money to the kids.
How do you help them think through that difficult decision? Well, I tell people that there are three myths in estate planning. First myth is I'm never going to die.
We know that's not true. The second myth is I've got the highest priced attorneys in town. Certainly my estate is in good shape. I say, well, I could be 50% correct.
You might have the highest price attorneys in town. And then third is that it's my kids' money. I said, God didn't give it to your kids.
He gave it to you. And so if you're going to give it to your kids, you need to seek to make sure that they're going to steward it well. And if they're not, then really what it comes down to is a conversation. I tell people there is going to be a family meeting.
It's just a matter of whether you're going to be there or not. So if you can begin to talk to them, and even if you're not inclined to leave money to them, you just need to tell them. And you need to tell them why. And I would not disinherit any children.
But I might leave different amounts to different ones, depending upon how I feel that they're going to be able to manage it. You and I both know Ron Blue well, and he says, if you love your children equally, you will treat them uniquely. People often struggle with that, that I need to treat all my kids the same. And yet you're supporting that idea that that's not true. Yeah, that's not true.
But communication is really important. I just think what happens in a lot of families is people don't talk about money. So the kids don't know how much money mom and dad has. They don't know what they're going to do with it. They assume they're going to leave it all to them, but they don't know. And then if you think about it from another perspective, Rob, is that when most people leave money to their kids, it's when they die, which they may be 80, 90 years old. That means your kids are 60 or 70. You need to be thinking about what do my kids need when they're 20 and 30 and 40? And if I have the ability, what can I do to help them now, as opposed to waiting to when I'm gone?
This is great. And Tom, what's the benefit of all of this when you watch a family implement what you're talking about? Well, for me, it's a lot of fun just to see the joy that they experience and the peace that they have because they've talked with their family. And quite honestly, I've done a lot of family meetings where we get these things out on the table and the kids get to speak in an environment where they feel comfortable.
And then I actually get to mediate that conversation. We've only scratched the surface, but Tom, great insights. Thanks for stopping by today.
You're welcome. My friend Tom Conway has been our guest today. You can learn a lot more about planning your family legacy at legacybydesign.co. That's legacybydesign.co. Your calls are next. 800-525-7000. I'm Rob West and this is Faith and Finance Live, biblical wisdom for your financial decisions.
We'll be right back. It's always great to have my friend Tom Conway in the studio. Tom's a legacy planner. And, you know, I think one of the big ideas of what Tom shared there is that as we think about wealth transfer, it's certainly much bigger than just the financial resources God has entrusted to us. But the question we need to answer is related to our financial resources.
Is the next steward chosen and prepared? In terms of chosen, well, there's only three places we can leave financial means at death. We can leave it to the government. We can leave it to charity or ministry or your church.
Or thirdly, you can leave it to heirs. And the question is, have we chosen where we want it to go? Has there been an intentional process of thinking and praying through that? And then, is that next steward prepared and particularly related to heirs? Could that inheritance actually lead them astray? Could it accelerate their move away from God, if that's the direction their life is trending?
Or could it be a real blessing? And are they mature and ready to handle it? And, you know, I think that's a really important thing. Well, thinking and praying through that, realizing this principle of, if I love my children equally, I will treat them uniquely and perhaps considering differing amounts based on who the child is. That's all a part of the process, but it all comes back to, is that next steward chosen and prepared? This is the last stewardship decision we will make, and it's an interesting one. By the way, if you want to do more reading on this topic, the book I like in this space more than any other is a book called Splitting Heirs by my friend, one of my mentors, Ron Blue, Splitting Heirs. You can buy it wherever you buy books.
It's not on the mechanical tools and strategies. It's really on the why, the worldview, the questions you should ask yourself as you think through wealth transfer. Check it out today if you want to learn more about it. All right, let's head to the phones. By the way, we've got some lines open today. We're going to turn the corner and answer any financial questions. So whatever you're thinking about today, we'd love to know about it. Whether it's a spending plan, debt repayment, maybe it's your giving strategy or wealth transfer, whatever it might be, give us a call. Lines are open at 800-525-7750.
Our team is standing by. That's 800-525-7000. You can call right now. We're going to begin today in Florida. Hi, Dottie. Go right ahead.
Hi there. My question is from Proverbs 19-27. It says, A good man leaves an inheritance to his children's children. Now that is the grandchildren. And I know nothing is set in stone in the scripture, but I've talked about this with my husband because so far we've left all our money to our children.
But the Bible has the scripture there for a reason. Should we consider giving some money to our grandchildren as well? That's all. Thank you. Well, it's a great question, Dottie.
Let's talk about that. I love this topic because it really does fit very well with where we started today. I think the first thing we have to do when we look at Proverbs 13-22 is to ask the question, what does the Bible mean by the word inheritance? Because I think it's easy enough at face value to think that inheritance is referring to a financial inheritance, and that's something that good people leave. And so that verse is often used to affirm our pursuit of accumulating enough wealth to leave a financial inheritance for our families. However, if we look at it in the bigger context of the passages surrounding it, I think what we'll find when we define inheritance and what it means to be a good man is when we look at the verses surrounding it, it was really a group of verses contrasting the righteous and the unrighteous, which helps us understand that the good man spoken of is good because he's righteous. So then we can ask, well, what kind of inheritance does a righteous person in Israel during this time leave to his family? Remember, this is being written to poor farmers living in a land-based society. Well, one thing that every righteous person can pass along to his family is wisdom.
He did that by teaching his family how to worship the giver of the land, Yahweh, and how to honor him by not squandering the land through laziness or unrighteousness. So therefore, if the good or righteous man did this, his descendants would generally be able to hold on to the land of their fathers through righteous diligence and character. And, you know, if you think about it, that's actually what can last from generation to generation. Usually financial means does not. So, you know, I think that's really the big idea here is something anybody can do, whether, you know, you're in the United States of America, North America or North Korea. Now or a thousand years from now, we can pass on character and righteousness and a right picture of worship, and that will result in an inheritance that can last for generations. And we can clearly do that not only to our children, but our children's children. Now, does that mean it's wrong to leave a financial inheritance?
No, absolutely not. I think you've got to pray through that. Again, you've got to ask the question, Lord, what would you have me to do? How much am I to take and invest in your kingdom right now during my life? How much should I leave as an inheritance, a financial inheritance to my children? And are they chosen and prepared? What's the right amount?
How will it be used? I can't control that, but I can give great thought and prayer to, you know, who the steward will be and how much they should receive. But given that broader context, I guess I would ask, you know, you what your thoughts are on that.
And if we assume that really the inheritance being talked about in this particular verse is an inheritance, inheritance of righteousness and wisdom, then that does change it quite a bit, doesn't it? Dottie, are you there? Yes. Oh, great. Yeah, I just want to get your thoughts on that. I can now.
Yes, ma'am. Yeah, I think that the spiritual response is a better response than just money to our children or our grandchildren. I just wanted to make sure we were in the right, that we didn't leave anything to them. But I guess we could, you know, we can talk about it, pray about it, look at their characters now and see if we should leave something to them. Yeah, but I don't think you would you would want to look at this verse and assume that it's saying you're not doing something right if you don't leave material wealth to your grandchildren, because I think that would be taking it out of context here.
Ultimately, you may want to leave it to your kids, whatever portion to each of the kids and let them decide how to pass it to their kids at the appropriate time and based on their own spiritual and financial maturity. Bottom line is you guys pray through it and decide the next step, but hopefully that helps you understand this passage. We'll be right back. Stay with us. I'm so thankful to have you with us today on Faith and Finance Live. I'm Rob West.
All right. We're taking your calls and questions. We had a great question just before the break on inheritances.
But what are you thinking about? We'd love to hear from you. We've got 800-525-7000. We've got some lines open again. 800-525-7000. By the way, before we head back to the phones here as we head toward the end of the month, you can help us stay on track financially.
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Chicago, Illinois. Hi, Sean. How can I help you?
Hi there, Rob. So I have a question regarding using some monies for my first purchase of a home. I just started a job, and I'm about to get my relocation assistance, and my question is, should I use the majority of that relocation assistance to be used as a down payment for my first home, but at the same time, I'm kind of iffy about it because I have some immediate needs, like I'm falling behind on some bills, a car payment. Should I use that relocation to take care of my immediate need, or because it's such a large amount, should I think of the future and say, put it towards the purchase of my first home?
Yeah, that's a great question, Sean. So let's unpack this a bit. So have you already moved at this point? Have you already done the relocating? I have, and I'm fortunate to be staying with family, but I don't want to stay too long. I don't want to overextend my stay there. Yeah, so just based on the timing you had kind of settled on in your mind, plus conversations you've had with your family, what do you feel like is an appropriate runway for that? I mean, I don't want to stay more than three months with them, and that would be about as far as I'd want to go, and I could have maybe 10% for a fairly good-sized house. I'm expecting my first child too, so I've got to think of two, three bedrooms kind of thing. So I just want to be a good steward of my monies, especially when it comes to receiving some large amounts of money. Do I use them for immediate or save them kind of thing?
Yeah, no, so that's really helpful. So in three months, you're looking to either buy something with a smaller down payment around 10%, buy something with a larger down payment, which would mean that you'd use up most of that relocation assistance, or rent, or is the rent option really not an option? I could rent for another year or two. I just feel like rent, at least in the Chicago market from where I came from, I wouldn't get as nice of a place as where I would have came from, much less being able to pay rent and save at the same time. Yeah, no, I certainly understand that. Let me ask you, do you have a real good feel since you're new to the area of where you want to land? Because that's the other case for renting, beyond even just I need more time to save for the down payment, is there's any number of neighborhoods and areas of town that I can live in, especially given commutes there in Chicago and so forth. I might want to take some time and figure that out, or do you really have a good sense of where you want to be?
I do have a good sense of where I'd like to be, so I praise the Lord for that. Okay, well that's good. Alright, let's talk about the other things that you mentioned that you have. By the way, if you don't mind me asking, what was the relocation amount?
$4,000 even. Okay, and what are you thinking about doing? So for instance, do you already have an emergency fund separate from that? I had, but then I had to move and put everything that I had towards the move. Even me and my wife had to sell many things too to help cover it.
Alright, yep, that's helpful. And then what other things do you have that are immediate beyond just kind of replenishing your emergency fund that you would consider using this money for if you didn't put it toward the house? I do need to pay for my car notes, my insurance has fallen behind, and there's a few other things too, like small bills like just the phone bill, you know, that come up.
Okay, so here's what I'm hearing. Just given the state of things, the fact that you've depleted your emergency fund, and I can understand life happens and you just kind of had to do it in the context of this move, but now taking that only margin that you have, which is a blessing, and plowing that back into a home when you've fallen behind on some real immediate things like keeping the utilities current and other things, I'm just not seeing that as an option right now. I think at the very least you've got to hang on to that 4,000 because it's not even truly an emergency fund.
You're telling me you're needing it for things that are due today. Beyond that, as much as I don't like to rent, and I agree rent prices are high right now, I'm getting the sense until things get settled out, you're on a budget that balances, so even once this, you know, ideally you'd be able to set this 4,000 in an emergency fund and not touch it, but what I'm hearing is there's probably not even enough available for you just to keep everything current on an ongoing basis, which tells me we've got to be really careful about putting that budget together, and so I think for that reason it doesn't sound like given what you have for a down payment and given some of these immediate needs without any margin to fall back on, it doesn't sound like this is the time to buy a house until you work through a lot of those things, and so I'd look for either A, extending the time you're with family, and that may not be an option, and I certainly understand that, or B, maybe renting something more temporary so you can get all of these pieces in place, but I'm a little concerned about you taking on a major purchase right now with not the typical 20% down payment on top of the fact that you really don't have any emergency funds and we're behind on current bills. All of those things tell me we could take a situation that's a little difficult right now and make them even worse, but give me your thoughts on that. I'm seeing your point on that, and I'm actually leaning towards that too because it is immediate. I don't want to lose my car, I don't want my phone to be turned off, and I still need to put gas and do some groceries, so there's still that immediate need.
It was only because of receiving such a large amount that it's like, what should I do with such a large amount? Could it be used for the future or my immediate, but as the way you're putting it there, it does make more sense that the immediate right now, the groceries, the gas, is more important than the house. Let me do this for you, Sean, because it sounds like you're a little bit...
I don't want you to be overly alarmed, but at the same time, what you're describing here is this is something that needs to be addressed. We've got bills that are falling behind, and you're brand new in town, and yeah, you've got $4,000, but that could be gone in a hurry. What I'd like to do, just to serve you really well, is connect you at our cost with a Christian financial counselor.
This is a certified Christian financial counselor who can come alongside you and your wife, help you all put a spending plan together, answer some of these questions, make plans for the future, look at what it's going to take between now and when you're ready to buy that house to get to an appropriate down payment. I think you'll feel a lot better by having a third party just kind of walk alongside you to put all these pieces in place. We'll get your information. I'll get you connected to someone, and we've got to hit a break, so we'll be right back. Thanks for calling. Well, I'm so glad you've decided to join us today on Faith and Finance Live. Here in our final segment, we'll get to as many calls as we can. Let's head to Mississippi. Angela, go ahead.
You're our next caller. Yes, I have a question about credit cards. I have a balance about $2,700 on a 20% interest rate. However, I've been offered a card that transfer balance is 0% for 21 months. So I'm just trying to see, would that be a good idea to do that, and would I risk my credit score going down? Well, it will go down slightly, Angela, if you take out a new credit card, because that's what's happening. If you accept this 0% transfer offer, they're going to pre-qualify you or do a credit check. And when they do the inquiry to the credit bureaus for the purpose of extending your credit, that in and of itself is going to bring your score down modestly.
But I wouldn't be terribly concerned about that. What I'm most concerned about is what's the right plan for you to get out of debt once and for all, and to really pay this off in a way that not only we're going to end up with a zero balance, but you won't go back into debt again. Usually when we've got less than $4,000, I would say snowball it, which means just kind of do it yourself. You could do that either by just keeping it right where it is, but I understand why you're going to want to get rid of this 20% interest rate. So the other option is to do a balance transfer. I think the key is that the concern I have for most folks is that they do this and it takes the pressure off because the interest rate is zero, and so they just have no incentive to get it paid off.
And so then they're left with a card that's open, and in some cases, if they haven't dealt with the issues of overspending, then six or 12 months later, the debt's still hanging around on the 0%, except now the card you transferred it from is back up to $2,000 or $3,000, and we've just doubled our debt. So I would want you to go into this with a real plan to get out of debt as soon as possible. So talk to me about that just in terms of have you solved what got the debt, you know, that created the debt in the first place, the overspending, and then secondly, how much are you looking to put toward this credit card on a monthly basis, which then tells me how quickly you could pay it off? Angela, are you still there?
Yes, sir. Actually, I wanted to take the fourth amount of time to pay it out without accumulating interest. But, of course, I have other cards and I'm trying to do the snowball method, and I know it's going to take me some time. I'm projecting maybe three to five years to get all my debt paid off. What's the total amount of credit card debt that you owe? Probably maybe $50,000. $50,000 or $15,000?
Maybe $50,000. Okay. All right. So here's the way I would go about this. I wouldn't touch the balance transfer given what I'm hearing and the total debt that you have. My preferred way to do this is through what's called credit counseling.
So essentially, here's what would happen. These cards are going to be closed, but the debt is going to stay right where it is. You're not going to open a new account and do a balance transfer. You're not going to take out a loan and consolidate them.
If it's with Citibank, it's going to stay with Citibank. The difference is, in credit counseling, the interest rates are going to drop. So you're going to go through a nonprofit credit counseling agency. I recommend Christian Credit Counselors. They work with hundreds and hundreds of our listeners.
They're wonderful, godly people. The interest rate is going to drop. They're going to give you one level monthly payment that's not going to change. And the combination of that level payment every month that fits into your budget, plus the reduction in the interest rates with the creditors right where they are, is going to help you pay that off 80% faster.
And then you're going to take the guesswork out of it. You're not going to have to do the balance transfer game and try to open new accounts and move balances. You're not going to have to worry about the interest rate anymore. That's going to be the method that I think is going to help you get out of debt once and for all. The other thing we have to do at the same time is right size your budget. And they'll help you with that also. Because unless you're living below your means, even if we get you out of the debt that you have today, it's going to come back. And so we've got to solve the budget issue and we've got to get you on a plan that's going to help you get this paid off. So your next step, if you want to take this route, which is what I highly recommend, is to go to ChristianCreditCounselors.org, schedule a visit with them over the phone. There's no cost. And they'll tell you exactly how it'll work.
And they'll tell you what the new lower interest rates will be on all of the credit cards. All right? Yes, sir. Okay. Sounds good. Very good.
ChristianCreditCounselors.org will be the next step for you. Thanks for calling. To Covington, Indiana. Hi, Greg. Go ahead, sir.
Hi. I have a question going this way. Thinking of legacy and thinking of I have three children and I have three houses, extra houses, really. And I was thinking of perhaps deeding a house to each of my three children now so that they could do something with it before I die. And that is really my question. Is there a limit to a value that I could deed to them? And that's basically my question. These would be homes that they would rent out. They have lenders in the homes at this time.
All right. So currently you own them and you're receiving the rental income, but you'd want to deed them to your kids and let them to start generating the rental income to themselves? Yes. To give them something to work with because they have children. I now have grandchildren. And I'm thinking this might be something you stimulated me with the earlier part of the program doing some legacy planning.
Yeah. I guess the only problem with that strategy is from a tax standpoint, if you deed it over to them, they're going to inherit your cost basis. So the cost basis on the property currently is what you paid for it originally plus any improvements you made. So when you sell it, anything above your original purchase price plus improvements is going to be capital gains and you're going to have to pay capital gains tax on it. If you deed it over to them, they inherit your capital or not capital gain, but your cost basis. If they receive it as an inheritance because you place these properties in a trust or in your will, you pass them to them at your death, they inherit the properties and the cost basis is not what you paid for it. It's stepped up to the market value as of the date of death. So you're going to have to count the cost on losing that benefit of the stepped up cost basis by transferring it to them.
Now, what would be the alternative? Well, the alternative is you hang on to the properties in your name and maybe you start gifting them the rental income, which you can do up to 12 million dollars in gifts to anyone you want in total throughout your lifetime. You could do seventeen thousand five hundred this year without even telling the IRS. If you go above that, you would have to tell the IRS, but there's no tax on it. It just would chip away at your lifetime gift exemption or exclusion of 12 million dollars. Very interesting. And so if I say did be the property to them now, would there be a taxable event?
No, no. It would be considered a gift and you'd have to fill out IRS Form 709, the gift tax form, and tell the IRS you made the gift. And that would chip away at your lifetime gifting of 12 million dollars. But nobody pays any tax. You don't. They don't. You would just have to report it. OK. And so the disadvantage to them would be if they wanted to turn around and sell it, they would have my cost basis instead of, say, the value of the home in the event of my death in the future.
That's correct. So the question would be, could you structure a way to actually allow them to inherit it at your death through a trust or a transfer on deed, transfer on death deed or through a will so they get the stepped up basis? And still do whatever giving you're wanting to do to them now, which you can do as a gift. So I would probably schedule a visit with an estate attorney just to talk through all of that.
If you don't have one, you could go to our Web site, faith.com, click find a C.K.A., connect with a certified kingdom adviser there in Indiana and ask for a referral. Hopefully that helps you, Greg. We appreciate you calling today. Quickly to Indianapolis.
Lou, we've just got a little bit of time left. Go ahead. Hello.
Thanks for taking my call. I'm trying to put this into a short question. This is about retirement. And I should be already having a good plan on this.
I'm 69. And I just wonder if you could tell me a little bit about the differences between an annuity and insurance hybrid policy, maybe using short term policies. But I don't really want any traditional policies as those seem to have been going up in price and there's no end to the payment on it. Although I want to add, I hear that some of these policies can be pretty expensive for the annuities.
And I know enough to know I want a deferred one so that I won't get it out for a while. And that because there's long life in my family and because I'm a female, I'd like it to be a pool of money, probably five years or more. So I don't know if you can quickly summarize. I'd be happy to.
The challenge is, yeah, I have very little time and this can get very complicated. And it probably does require, I'll just say this at the outset, requires you to get with a competent financial advisor who can help you think through all this because you're talking about things that do get sophisticated and they really are dependent upon your financial situation. The chief difference between life insurances and annuities is that life insurance provides a cash benefit for your loved ones after you die and annuities provide you with lifetime income until you die. And then both include death benefits. The hybrid just pays out part of the policy's death benefit to pay for long term care in some cases should you need it.
We typically recommend you having a life and term life insurance policy and then buying long term care insurance separately, usually around age 55 to 60, and then doing your long term savings in your investment portfolios. But beyond that, I'd connect with an advisor. Thanks for your call, Lou. Faith and Finance Live is a partnership between Moody Radio and Faith Buy. Thank you to Luke, Tahira, Jim and Amy. Hope you have a great rest of your day and come back and join us tomorrow. Bye bye.
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