What's a Donor-Advised Fund? (And Should You Use One?)

Rob West: If you've ever wished your giving could be both simpler and more strategic, there's a powerful tool worth knowing about: the donor-advised fund, or DAF for short. Hi, I'm Rob West. Today, we'll unpack what a donor-advised fund is, how it works, its advantages and limitations, and how it can help you practice wise, intentional generosity. Then we have lots of great listener questions ahead, but we won't be taking your live calls today because this program is pre-recorded. This is Faith & Finance on American Family Radio: biblical wisdom for your financial decisions.

Before we talk strategy, let's start with Scripture. Paul writes in 2 Corinthians 9:7, "Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver."

Generosity begins in the heart, not in the tax code. But wise stewardship means we can use tools that help us maximize our impact for the Kingdom. A donor-advised fund, when used rightly, can help you do both: give joyfully and steward resources efficiently.

Think of a DAF as a charitable checking account designed to support the causes you care about. You contribute cash, stock, or other assets, receive an immediate tax deduction, and then recommend grants to ministries or charities on your timetable. In other words, it separates the act of giving from the act of distributing.

You can make a large contribution in a high-income year or before selling an asset for tax advantages, and then prayerfully take time to decide where those dollars should go. Behind the scenes, the DAF is managed by a sponsoring organization. For example, we recommend the National Christian Foundation, one of the largest and most trusted Christian providers, founded by Larry Burkett and Ron Blue, among others. They handle the recordkeeping, they issue the grants, and they provide the online tools to manage your giving.

So, here's a quick example. Suppose you're planning to sell a business or a piece of real estate where you would normally have a significant capital gain. Well, you could donate it to your donor-advised fund before you sell and not have to pay that capital gain. More money goes into the Kingdom. Now, because it's an irrevocable charitable contribution, you receive an immediate deduction for the full amount. The funds can then be invested for potential growth while you prayerfully decide which ministries to support, or you could grant it out immediately. When you're ready, you simply recommend a grant—say $10,000 to your church or mission organization. The DAF sponsor, in our case National Christian Foundation, verifies the charity and then sends the gift in your name or anonymously.

Donor-advised funds have become the fastest-growing vehicle for charitable giving in America, and for good reason. They combine the flexibility of a personal giving account with the efficiency of professional administration. Here are some of the key benefits:

· Simplicity: One contribution can fund all your charitable giving with a single tax receipt and one place to track every grant.

· Tax Efficiency: You receive the deduction when you contribute, not when you give. Donating appreciated assets can help avoid capital gains taxes, allowing more funds to be directed to ministry efforts.

· Flexibility: You can give now and decide later where the funds should go, allowing generosity even as you discern where God is leading.

· Legacy Planning: You can name successors, such as children or grandchildren, to continue recommending grants and carry on your legacy of giving.

· Focus on Mission: Since the administration is handled for you, you can spend your energy discerning where God wants you to give.

Of course, no giving tool is perfect. There are a few limitations to understand:

· Irrevocability: Once you contribute, it's a completed gift. You can't take the money back.

· Qualified Recipients: Grants can only be made to IRS-approved charities, not to individuals or political causes.

· Timing of Impact: Funds can remain in the account for years, which can delay charitable impact.

That's why at FaithFi, we encourage you to use donor-advised funds for timely generosity, not indefinite storage. A donor-advised fund isn't meant for hoarding resources while ministries wait for support. It's a place to organize your generosity, not store up what God has already called you to give.

If you'd like to explore whether a donor-advised fund is right for you, we have an article on this topic in the latest issue of our Faithful Steward magazine, an exclusive resource sent directly to our FaithFi partners. FaithFi partners receive Faithful Steward delivered to their mailbox each quarter, along with other resources designed to help them grow in biblical stewardship. You can become a partner with a gift of $35 a month or $400 a year at faithfi.com/give. That's faithfi.com/give.

Stay with us. We'll be right back.

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Rob West: So thankful to have you with us today on Faith & Finance here on American Family Radio. Just a quick reminder to you, don't call in today. We're not here; we're away from the studio. But we will have some great questions with listeners like you that we've lined up in advance, so those will be coming just ahead.

Let's take an email. These come in to us at [email protected]. We always enjoy receiving them. This one comes from a curious parent. Anonymous writes, "What kind of credit card would be good for a 14-year-old? One that money can be put on and there is a limit? Is there any reputable company that offers one?"

Well, let me just say, first of all, thanks for writing. You must be 18 to get a credit card in your own name, and that's true even for a secured credit card. This is because the credit card agreement is a legal contract. However, you can make a child an authorized user on your credit card as early as age 13. This would help the youngster build a credit history, but it won't teach responsibility because you'll be managing the card.

Many banks, however, will allow a child to get a debit card as young as 13 to use with either a joint checking account that's also in your name, or it could be with a custodial account in the child's name. The child will manage the account, and it would give them a great opportunity, with your supervision, to learn responsibility.

You could go to bankrate.com and search for the bank programs that are the best right now. We happen to use the Capital One MONEY account with our kids right now, but there's a lot of great ones out there. But I think the key is a debit card is the way to go.

Now, use this as an opportunity to help them develop a spending plan, understand that money is limited, and it needs to be used among the save, grow, and give categories. We also want to take it as an opportunity to teach the biblical basis for handling money, starting with the idea that God owns it all and recognizing that we're stewards or money managers for the Lord's resources. But this can be a great opportunity for you to do some instruction and set them up for success as they prepare to be future adults managing their own money.

So thank you for writing to us. By the way, if you have a question you'd like us to read it on the air, send it along to [email protected]. We'd love to tackle it.

Let me dive in. We're going to begin in Colorado today. Zach, go right ahead.

Zach: Hi. I am 29, and then I have a friend who just called me and asked if I'd be interested in working for him. He told me essentially that he wants to know what it would take for me to jump ship and go to him. He never threw out a salary number and was asking what I would have to have. Right now, I make about $20.75 an hour. I work 40 hours a week. But the reason I'm sticking at my job is my employer currently covers 100% of myself and spouse and dependents on insurance. And then they reimburse all but $1,800 of our deductible. And so I'm curious as to what you think would be a good number or ballpark, or how I would figure out what I would need salary-wise to justify a switch to a job that does not offer health insurance at all, to where I'd have to go on my wife's health insurance that's offered through the school she works at. That one's a $2,500 deductible, and it'd be an extra 800 bucks a month to add me to her plan.

Rob West: Yeah, yeah. Very good. Well, it's a great question to ask and to compare the two jobs fairly, although, you know, jobs are more than just what you're earning in terms of your hourly rate or your salary including benefits. You know, there's the non-financial side that needs to weigh into all of this. But just purely from the financial standpoint, you want to convert the benefits difference into an hourly wage equivalent.

So you're making $20 an hour with full family health insurance and an employer reimbursement for a good portion of your deductible. The new job: an unknown hourly rate, no health insurance, and you would join your wife's instead. So the question is, how much extra would you need to make up for losing your current benefits?

So to estimate the annual value of the current insurance benefit, you'd really need three numbers from your wife's plan: the extra monthly premium that would be required to add you, the difference in deductible or out-of-pocket exposure, and then any loss in coverage—you know, copays, networks, prescriptions, things like that.

So a very common estimate for adding a spouse to family coverage is somewhere between—and I realize, you know, this is a pretty wide range—$400 and $900 a month in extra payroll deduction. Let's take a middle-of-the-road number at $600 a month. You multiply that by 12, that's $7,200 over the year. So just the premium difference is about $7,200, you know, and you'd want to plug in real numbers here.

And then if we add your current employer's deductible reimbursement, you know, if that protects you from all but $1,800 worth of exposure, that could easily be worth another 3 grand. So that puts us now at a little over $10,000.

So I think the health insurance difference may realistically be worth $10,000 a year, and I'm just obviously making some big guestimates here, but, you know, you can follow my thinking. And then if we were to convert that to hourly pay, you know, that's 2,080 hours. So we'd divide that by, you know, 10,200, and you'd come out in my example of $4.90. So let me call it $5 an hour more that you would need just to break even on insurance. So that would put you at, you know, $24.90 or let's call it $25 an hour.

And that's before considering any retirement matching, or any paid time off, or job stability, or, you know, those kinds of things. Not to mention, you mentioned it's a friend. There's friendship risk. There's also, assuming this is a small, relatively newer business—and maybe it's not—but is there any business risk you're taking on there?

But I think essentially as a starting point, you know, $25 an hour at a minimum would probably be what you need to offset losing that insurance and other benefits.

Zach: Okay, awesome. Thank you very much.

Rob West: All right, very good. And kind of work that same thinking through with any numbers you can lock in, so we're kind of not, you know, making as few guesses as possible. And then you can kind of work through any other elements that you would need to factor in as well, like that out-of-pocket deductible coverage. And you can convert all that to a—the equivalent of an hourly rate.

Hey, Zach, thanks for your call today. We appreciate you being on the program.

Down to Florida. Trudy, how can I help?

Trudy: Yes. My husband and I are retired. We are on traditional Medicare with a supplement. When we signed up, we signed up with Plan F, which is, quote, "the Cadillac." It's very expensive. And down in Florida, of course, it costs even more. That's the area that you live in. Medicare's the same, but the supplement's not.

So we pay, like I said, it's about $14,000 a year with the increase we just experienced. However, we have been told we cannot get off of the supplement plan that we have because now you need a physical, and neither my husband and I, for health reasons, can step down to another supplement plan.

So then I heard that you have a senior plan. I don't know if that would benefit us or prior health conditions would affect that, and we just need to stay where where we are.

Rob West: Yeah. And how—are you talking specifically about the Senior Care at Christian Healthcare Ministries?

Trudy: Yes, and the other thing is a Medicare Advantage plan, which, honestly, for a lot of reasons, we're not ready to go there yet.

Rob West: Got it. Okay, yeah, this is all really helpful. Let's do this: I'm up against a break here, Trudy, but I've got the question. This is really helpful background. As soon as we come back, I'll give you my thoughts. Thanks for being on the program today.

I'm Rob West, and we'll be right back

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Rob West: Great to have you with us today on Faith & Finance here on American Family Radio. This is the program where we apply God's wisdom to your financial decisions and choices, help you make decisions in light of God's word as you're a steward of God's resources.

Before the break, we were talking to Trudy in Florida. She's 75 and retired. She and her husband have traditional Medicare with a supplement. They've got the Cadillac of supplements with the F category there, the Plan F supplement, which, you know, is really nice, but also very expensive. They're paying about $14,000 a year, and she's heard there is some options out there, including Christian Healthcare Ministries. They have something called Senior Share, which is not insurance, but does allow Christians to share one another's medical bills. And it's specifically an option that's to ride alongside Medicare in that in that season of life.

And I think you pointed out here, Trudy, some of the the concerns, and that is, you know, this idea of "I can't ever switch because of health issues." That's certainly partly true, and something you need to keep in mind. In most states, changing Medigap plans after the initial enrollment period does require medical underwriting, so that's going to be a key part of this. Although Florida has some consumer protections and switching opportunities that may help, so you're going to want to understand that.

But you have, as you acknowledged, one of the richest insurance setups here where you've got the the Plan F supplement on top of original Medicare, predictable health insurance or healthcare costs, and a broad nationwide provider group. So that's going to be hard to replace, especially if you have medical conditions. And so the decision is less about "Can we save money?" and more about "How much risk are we willing to take to lower premiums?"

When it comes to Christian Healthcare Ministries and the Senior Share, this of course is not insurance. That matters, but the advantages are much lower monthly costs—certainly than $14,000 a year with Medigap—a faith-based community. It can work well for healthier seniors with manageable expenses, and, you know, a lot of folks have great experience there. We have a lot of listeners and even some of our staff that use CHM and are really thrilled with it.

But, you know, you just have to understand that, you know, they may not cover things as predictably or, you know, you may, you know, have additional out-of-pocket costs. And so once you leave that Plan F, you may not be able to get comparable Medigap coverage later if your health changes. That's the irreversible part.

So what can you do here? I mean, I think you certainly could look at it. I mean, your ability to save a bundle each year on something like Senior Share would allow you to fund a reserve fund where you could pay, you know, some of these things out of pocket and still make sure you have something to cover the big-ticket items with Medicare and Senior Share on top of it. So that could help.

You could look at shopping other Plan F carriers. The benefits are standardized, but the price differences between companies can be pretty significant. And so you could switch, though underwriting rules still matter depending on which situation. So you would have to have a Medicare broker who is working with you to find a carrier that's more lenient on underwriting to make sure you don't lose coverage quality.

You could look at moving to like a Plan G, which is often a sweet spot for people because it doesn't pay the Medicare Part B deductible, but otherwise, the coverage is extremely similar, and sometimes the premium savings exceed the deductible difference pretty substantially. But again, you're back into the same underwriting issues, so it depends on your health and the carrier acceptance, but it's still worth investigating.

There's also the high-deductible plans, and then there's the Medicare Advantage, which some people will move from Medigap to Medicare Advantage because the premiums are, you know, often down near zero, and you get the drug and the dental and the vision. But you have networks, you got to have referrals, you got higher out-of-pocket exposure, and, you know, you just have to understand that going back into Medigap later is going to require that medical underwriting.

So I would probably get an independent Medicare broker to review it, maybe re-quote that Plan F, see if you can medically qualify for Plan G, compare the annual kind of worst-case costs, not just the premiums, so you know what you're getting into, and then understand a little bit more about the Senior Share at CHM, which I'm a fan of, and if that would allow you to just, you know, take all that money you're spending right now on the the Plan F and and pile that into savings that you could use to fall back on. Does that all make sense, though?

Trudy: Yes, it does. The only other, one, from what I was told, one hospital stay could wipe me out. So, something serious, so it's very—it's rather risky. And the G plan was—we tried that, but as I said, dropping down supplements, they're very stringent about that. So, but I appreciate that.

Rob West: Yeah, yeah. Yeah. Well, I mean, here's I guess what I would say, though. I mean, usually that idea that one hospital stay could wipe you out is generally not true for Medicare-covered services. So, you know, the Plan F is designed to protect against large hospital bills. You know, it's it's the most comprehensive plan available, but with original Medicare alone, a long hospitalization, you know, can absolutely create a major out-of-pocket cost because it has deductibles and coinsurance with no cap. But I would say, you know, Medicare-approved hospital costs are usually almost entirely covered after premiums.

You know, so yes, could you still get financially hurt? You could. But I would say generally, you know, if it's if it's covered, then you should be okay. You know, programs like CHM and the Senior Share, you know, are designed to be a supplement to Medicare, and, you know, although it's not legally guaranteed, I would say, you know, it's going to provide some extra peace of mind alongside these these other plans to make sure that you do have the coverage you need at the end of the day.

But I hear what you're saying, and I think, you know, you've just going to have to look at at the whole landscape here and the and the risks, and then, you know, make the best decision you can, because $14,000 a year a year is a lot of money. I certainly understand that.

So Trudy, I don't have a silver bullet for you here, but hopefully I've given you a few other things to think about. We appreciate your call today. I know this is tough navigating all this, but you'll get there, and call anytime if we can help. We'll take a break and back with more questions right after this. Stay with us.

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Rob West: Great to have you with us today on Faith & Finance here on American Family Radio. This is the program where we apply God's wisdom to your financial decisions and choices. Just a quick reminder: we're away from the studio, so don't call in today, but we did line up some questions, so we will be getting to those in just a bit.

First, an email. This one comes to us by way of Laurie, and she writes: "My husband is planning to wait until full retirement age to take Social Security. I'm going to take spousal benefits, but I'll only be 65 when he retires. Can I take spousal benefits then, or will I have to wait until my full retirement age?"

Laurie, you can take spousal benefits once your husband begins taking his benefits. So, as we say, he's got to walk through his door first, and then you can take them after the fact.

Now, if you haven't reached full retirement age, your benefits will be permanently reduced by about 1/12 of 8% for every month you take them early, and that's a permanent reduction in your benefits. So, it would be better for you to maximize those spousal benefits—which, by the way, you can get up to 50% of his benefit as a spousal benefit. But you will need to wait until full retirement age.

So, can you take them early if he's taking them first? Yes, but it'll start reducing it down from that 50% of his benefit max down to whatever it is based on how early you're taking it. So, my advice to you would be: if you can wait, absolutely wait.

Now, back to the phones. Cleveland, Ohio. Jim, how can I help you, sir?

Jim: Yeah, thanks, Rob, for your ministry. Appreciate taking my call. Got a question regarding education savings accounts. My wife and I wanted to provide for our granddaughter, and her parents—our son and daughter-in-law—he has a modest income as a teacher, and she's a stay-at-home mom, so they're really sacrificing for, I think, good values and what they want to do.

So, an uncle of the mother-in-law—so it'd be the uncle, I guess the great-uncle of the child—has taken out a 529 in her name, so to speak. But as I understand it, it's technically owned by whoever takes out the 529 plan. And my wife and I were thinking maybe we should open up a separate account, just as a sort of maybe more protected. We have no thoughts of ill intent by this uncle, but as we understand it, if the person were to pass away, it goes to the estate. And also, for other reasons, if something comes up—financial hardship—that person could take tens of thousands of dollars and liquidate it in their name.

So, we were thinking of a Roth, or a custodial, or a simple brokerage account in her name. And the fact she's female is, you know, maybe she would get married soon after high school and wouldn't even need it for education. What's your thoughts on all that thinking?

Rob West: Yeah, yeah. Well, I think you're onto some things here. There are some risks and control issues when you're contributing money to a 529 plan owned by someone else, even a trusted uncle or grandparent. The key principle is, as you said, the account owner controls the 529, not the beneficiary. So, even if he opened it for your grandchild, the grandchild is the beneficiary, but the uncle legally controls the account, which means he controls the investments, the withdrawals, changing beneficiaries, successor owner designations.

So, you just need to understand that. And if he were to pass away, ownership transfers to that successor owner, which could be a spouse or another relative or a parent of the child, someone named in the estate documents. And if no one is designated, the amount may become part of the estate, which, as you said, could create delays or complications.

So, I think that's an important consideration, but doesn't mean you couldn't open another 529 or a custodial Roth. For many families, the best option is going to be the 529 plan. It just has a lot of benefits, largely that you can put in a lot more money. And so that's, you know, one of the superpowers, if you will, of the 529, because the contribution limits are vastly higher. A parent or grandparent can contribute significant sums.

In terms of the tax benefit, it's about the same. 529 has a slight edge for many families because, depending on where you're at, about 30 states offer some state income tax deduction. That's not something the Roth provides.

And then financial aid: if they could qualify for need-based aid, the 529 is going to be an asset of the parent, which is a much lower impact on financial aid eligibility. The custodial Roth is not reported as an asset on the FAFSA at all, but money taken out of the Roth—even just the contributions that you're withdrawing back out to use for college—is counted as student income on the following year's FAFSA, and that then could significantly reduce financial aid.

So, you know, so long as you're pretty sure that you want to go ahead and earmark this for college, then the 529 is probably going to be your best option. You know, and the other thing to keep in mind is with the Roth, you can only go up to the max every year, and the child has to have at least that much in earned income for that contribution to be made. And so, again, that's where the advantage goes to the 529.

But give me your thoughts on all that, and whether you had any other specific questions.

Jim: Yeah, that's perfect. That's so helpful to think of the limitations of the annual contributions for the Roth. You could get maxed out way before the 529.

Yeah, and the original uncle's thought, and I think the parents' as well, was to have the 529 in the uncle's name to sort of shield it or hide it from assets for the FAFSA. To me, that seems even a little bit—you know, is that the fair way to do it? I don't know.

But then, maybe a second 529 in the parents' name would be more protected against, you know, some kind of weird events with the uncle. But it would be counted in a FAFSA, but maybe less so than the student, is kind of what you're saying.

Rob West: Oh, yeah. I mean, well, first of all, yeah, I don't love the idea if that's really the intent there. A parent-owned 529 is reported as a parent asset, but keep in mind, in terms of the financial aid formula, it is much lower. I think it's less than 5% versus an asset that is controlled by the child, which would be like a custodial account, let's say.

Now, a grandparent- or an uncle-owned 529 is not reported as a parent asset on the FAFSA, but the withdrawals could count as student income later. And so, you know, I think there's been some changes that removed that student income issue. I'm not totally sure on that—you'd want to make sure you get some counsel on that.

But I think at the end of the day, it's really not going to be a significant issue if the parent owns it. And if that would give you greater peace of mind, or maybe you open your own, but if you know that it's earmarked for college, you certainly are going to have more flexibility in that 529 than the Roth.

Jim: Yeah, I really—I'll pass that along to the parents if they wanted to open one in their name. I think they were thinking it would be a much bigger asset on the FAFSA than the ballpark, I know you're just saying, maybe 5%. That's super helpful.

And yeah, we'll see. Maybe then we could have something just—even a third account on the side, even for two other grandkids that are just coming on the scene, as a savings account in case they don't go to college. I know there's a 10% penalty, as I understand it, if it's not used for education, and then plus taxes on the interest, I assume. So that part may be a wash, no matter what account. But thank you. That is super helpful.

Rob West: Yeah, you're very welcome. No problem. And here's what I would say is, you know, the other benefit of the 529 is you can over time put in up to $35,000 now into a Roth if it's unused. So that's a benefit where you could ultimately fund a Roth. You get it back based on any scholarships and grants, so just keep that in mind. And again, you can have multiple 529s, so you could in fact open your own.

Thanks for your call, Jim. We'll be right back.

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Rob West: So thankful to have you with us today on Faith & Finance here on American Family Radio. Our goal on this program is to help you be a wise and faithful steward. That means we have to start with the idea that God owns it all. The earth is the Lord's and everything in it. Therefore, we're his money managers or stewards of his resources and money. Well, money's a tool to accomplish his purposes, so we should really start with our values and priorities as believers, and then order our financial lives accordingly, heeding the counsel of Scripture, applying principles, and then building a spending plan based on how much is enough, asking God what lifestyle he's called us to, and then building a plan that allows us to give every dollar a name, but not letting the world or the culture or a system built on materialism inform our decisions, but really making our decisions in light of what's most important to us. Well, we want to help you do that on this program each day, not pointing a finger at you or trying to discourage you in any way. We want to be helpful and encouraging as we help you apply God's wisdom to your financial life. So, what are you thinking about today? What decisions are you trying to make? We'd love to tackle those with you. Let's head right back to those phones. Chattanooga, Tennessee. Gary, go ahead, sir.

Gary: Yes, Rob. Thank you for your show and your always sound wisdom. I have a friend that cannot afford to purchase a house, and her sister has a rental property and is considering transferring that rental property to her sister who cannot, basically transferring the title. What is the tax consequence to the recipient?

Rob West: Yeah, yeah. Good question. So, in terms of her gifting that house and just quitclaim deeding it over, there really is generally no income tax consequence for the recipient because the IRS doesn't treat gifts, which is what this would be, as taxable income. The big issue is just what's called the cost basis. So, when a property is gifted during life, the recipient inherits the original owner's cost basis. It's called a carryover basis. So, let's say she bought it years ago for 80 grand, it's worth 300 today, the recipient receives the gifted house, the recipient's basis would remain that 80,000. So, if she sells it later, it grows from 300 to 320, then she could owe, in my example, $240,000 in capital, the capital gains tax would be calculated on a $240,000 gain. Versus she inherits it, she gets a stepped-up basis, where instead of the 80,000 that the person paid for it years ago, it jumps up to the market value as of the date of death. The only other issue for the giver would be they'd have to file an annual gift tax return just to take this off of their lifetime gift exclusion. But that sits today in 2026 at $15 million. So, she's going to have to give a lot of money away in order to ever have any issues there. So, bottom line to your original question, what's the impact to the recipient? Nothing other than the carryover basis.

Gary: Fantastic. Rob, thank you, sir. I knew you'd have a great answer.

Rob West: All right. We appreciate it, Gary. Take care. Hey, make sure you get a real estate attorney to help with that, just so that's done properly if you do end up having that done, or she does, just so it gets filed correctly, and just kind of the legal side of it is all buttoned up. It doesn't have to be expensive, but you do want it done correctly. Thanks for your call, Gary. Dion in Georgia, go ahead.

Dion: Good afternoon, Rob. I had a question. My mom's going to gift me an acre of land in Georgia, and then I'm going to build a duplex. And I'm trying I just sold my house in Florida, and so I'm trying to decide how much money I need to put towards that duplex because I also want to build another house. Next year, she's going to give me another piece of land behind there so I can build my house. And then that way, I can watch over her rental property and mine.

Rob West: Okay.

Dion: And I still have my VA home loan. I haven't used. My credit score is over 800, so I can get a good credit rating, a good interest rate.

Rob West: You don't own another home now with a loan on it, is that right?

Dion: No, sir. I just sold that one. So, like, should I That's what I'm trying to figure out. Should I put 200,000 towards the duplex and then maybe try to pay that off in two or three years because it's about 350,000 to build it, or should I take and do 100,000 towards the duplex and build it, and then six months later build my house and then put the 100,000 towards that and use the VA home loan?

Rob West: Yeah. Yeah, great questions. I think you're thinking through this right, and obviously there's a benefit to having that VA home loan, and that could make quite a bit of sense, I think, for the duplex. You know, in terms of you have an unused VA eligibility, so that's really one of the best financing tools around. The VA home loan can be used for not only single-family homes, but duplexes and triplexes and others, as long as the borrower lives in one of the units as their primary residence. So, if you build a duplex, my understanding is, in order to follow that VA occupancy rule, you'd have to live in one side. Is that your plan?

Dion: I could. Well, one thing I looked, they said that at least for 12 months, and then after 12 months, then you can rent it out.

Rob West: Yes, exactly. So, you would stay there in one side of it for 12 months?

Dion: Yes, sir.

Rob West: Yeah. Okay. Yeah, so that could work. I mean, they're pretty straightforward for buying an existing home, but a VA construction loan is harder to find. And, you know, the biggest challenge is the construction phase. So, you know, if you end up using one of these structures, you know, you could use a construction-to-permanent VA loan where it converts after the build, or a construction loan and then refinance into VA, that would be the more common approach, or construction loan conventional financing and then use the VA elsewhere. But I think, using the land from your mom, is she going to gift you that acre? Is that what's happening?

Dion: Yes, sir. She was going to think about doing the four acres, but then we found out you can only do 19,000 without having to If you go over 19,000, you had to pay the taxes.

Rob West: No, over 19 would just have to chip away at her lifetime exemption, which is $15 million. So, yes, she'd have to tell the IRS, but she would not have to pay any tax on it, and you wouldn't either. So, that wouldn't be any issue. And if she gifted it, the land equity may help satisfy part of the construction loan equity requirement, but the lender's going to want clear title and a legal parcel and a survey, and they're going to want it recorded. So, it's going to need to be done right, and that's going to take a little bit of time and money, but that could help. And there's no reason why she couldn't go ahead and gift it now and then, again, just have it anything over 19,000 kind of chip away at her lifetime exemption per individual is $15 million as of 2026.

Dion: Wow, $15 million! That's high.

Rob West: Yeah. You might as well be 100 million, right? Yeah, that's the I mean, that could change, but in 2026, the federal lifetime gift tax and estate tax exemption is 15 million per individual. So, you only owe federal gift tax if your non-exempt lifetime gifts exceed that amount. So, it's just a non-issue for, you know, most people. So, that would allow you, if it's done right, to have, you know, the actual parcel that you could use as a part of the equity requirement. And then I think that duplex strategy could be really strong because, you know, you build the duplex, you live in one side, you rent the other, the rental income offsets the mortgage, the VA financing gives you a, you know, a really low or no down payment, it's an owner-occupied multifamily, which is a great way to do it. And then the second house next year is going to change the planning. I mean, if you do the duplex now and another house later, you know, if you're going to keep the duplex and now rent both sides because you've been there long enough, just make sure you satisfy the VA loan requirement. And then, other than that, I think, you know, you should be in pretty good shape. Just figure out what type of loan for the construction.

Dion: And then well, then after do that, then I'd have two mortgages, but I think with my income, I'd still be in about 24% to 30% of my gross income.

Rob West: Yeah, yeah. Yeah, just make sure you kind of run some worst-case scenarios. I mean, what if we got into a recession and you had a hard time, you know, renting out those duplexes? What would that mean? How much staying power do you have? How much reserves do you have? I know these would be new properties, so they shouldn't have a lot of maintenance, but, you know, things can go awry. But the bigger question is just what would happen if you didn't have that rental income?

Dion: That's true, yeah.

Rob West: So, you just, you know, you're going to need to look at the area of town you're in and how strong the rentals are, and then, you know, we're in a pretty good economy right now. What if we're in a totally different situation, you know, five years down the road or 10, and what would that mean for you? And I just don't want you to put your financial house at risk, so to speak, because you've got so much riding on this debt service.

Dion: Well, and the one thing I'm going to kind of focus on, rent to Fort Stewart soldiers.

Rob West: Say that again. Oh, you're going to try to rent... Yeah, yeah, interesting. I love it. Yeah, I think that's a great plan. Just make sure you don't operate on the best-case scenarios. Let's kind of play out some worst-case scenarios and see, you know, what that would the implications of all that would be. But I think you're on the right track here. I like the plan.

Dion: Oh, thank you, sir. I have to thank God too for getting me in this position. He's guiding me, and he's awesome.

Rob West: Yes, amen, brother. We appreciate you giving testimony to God's faithfulness here on the program today, and thank you for your service to our country as being retired from the National Guard, Dion. That's going to do it for us today, folks. Thanks to my team: Devin Patrick, Pat Montague, and Jim Henry. Couldn't do it without them. Thank you for being here as well. Hope you have a great rest of your day, and come back and join us tomorrow. Lord willing, I'll be here, and we'll see you then. Bye-bye.

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