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Jewish World Review Oct. 13, 1999 /3 Mar-Cheshvan, 5760

Bruce Williams

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Econophone

Clear up debt, only then tie the knot


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 IRA.



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).

Up

10/11/99: If it ain't broke...
10/04/99: Should I stick with the company IRA?
10/04/99: Get a financial education!
10/01/99: Insurance: Not much one person can do
09/30/99: Lost tickets are lost cash
09/29/99: Trusting only one financial planner
09/27/99: Adult children should help out
09/24/99: Tips for first-time home buyers
09/21/99: Use the rule of 72s!
09/17/99: Legal strategy can be a pain
09/15/99: Teen drivers drive up insurance
09/13/99: Always use an attorney!
09/10/99: Whose taxes are they, anyway?
09/08/99: How do I roll over my 401(k)?
09/03/99: How can I work out my IRS payments?
09/01/99: When your company can't pay you
08/30/99: Beware of shady viatical investments
08/26/99: Landlords vary on security deposits
08/25/99: Educational IRAs must be spent on education
08/23/99: Finding out the value of old stocks
08/20/99: How to get an FHA refund
08/19/99: 100 percent financing is a scam
08/16/99: Will I have to pay a capital gains tax?
08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
08/11/99: It's your job to shop around
08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

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