Bruce Williams
http://www.jewishworldreview.com --
DEAR BRUCE: I am in the process of buying a home. My significant other wants to get married, and he also wants to buy a new house, but not necessarily in that order. He has problems with his IRS taxes and state franchise taxes. If we get married, will I be responsible for any of that debt? We have a hard time agreeing on this matter. -- L.J., Sacramento, Calif.
DEAR L.J.: If I were you, I would keep my home and my name completely separate from this gentleman until he gets things straightened out. The technical answer is that you would not be responsible for his debts. But the problem is how you would clearly demonstrate the assets that you brought into the marriage. It would be a whole lot easier to wait until he gets these matters rectified to consider marriage.
DEAR BRUCE: My husband and I are interested in purchasing about $50,000 in municipal bonds. I am told that the interest received is tax-free. Is this correct? -- M.F., Cincinnati, Ohio
DEAR M.F.: Municipal bonds are moneys which are loaned to taxing authorities with faith in the credit of that authority. If properly purchased (meaning in the area as defined by the federal government), they are completely free of federal taxes. The same goes for state and city taxes as well. And, if the proper guidelines are followed, the interest on municipals is also totally tax-free. The reason for this is that you -- the investor -- are encouraged to buy the bonds to be spent for municipal purposes. This keeps the local tax rate down, because the cost of their money is cheap. In terms of general obligation bonds vs. revenue bonds, I would be very comfortable with the former, but not at all with the latter.
For example, if the municipality wants to build a hospital and the bond payments are predicated on income for the hospital, I would prefer to go with the general revenue bonds (G.O.s), which means that the full faith and credit of the community is placed behind them. In the event that the hospital doesn't raise enough in taxes, the community is obliged to do so, and therefore you will still get paid.
DEAR BRUCE: My wife and I are in our early 70s, and my wife has $17,000 in a regular IRA. Since we don't need the money, would it be wise to pay the taxes now and put the money into a Roth IRA? We feel that this way, no more annual withdrawals are required. -- M.R. in Pa.
DEAR M.R.: That's not a bad idea. You will pay some taxes, the amount of which depends on your income. This way, if you don't need the money, it can stay there and you can then name a beneficiary to your Roth
Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).
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