Couple's refinancing hits a snag

DEAR BRUCE: My husband and I married three years ago; he is 44, and I am 46. He has one child from a previous marriage, 16 years old, sharing joint custody with his ex. We live in the house my husband (and his wife at the time) built 12 years ago. He refinanced when they divorced, and removed her name from the deed. Recently, we looked into buying insurance so that if anything happened to either of us, the house would be paid off. However, since my name is not on the deed, I cannot be on this plan. In fact, it turns out that we would have to refinance just to have my name on the deed, and it would be with a larger interest rate than we are paying now. Hence, my husband will not refinance. He thinks that, even if something did happen to him, in his own words, "because you are my wife, you will get the house." I do work and help pay for everything. But I do not feel comfortable thinking that just because "I am his wife" I would be able to stay in my home. And, even if I could stay, I couldn't afford the payments by myself. Neither of us has a will. — M.J., via e-mail

DEAR M.J.: First of all, you and your husband should have reciprocal wills, leaving everything to the other. If that doesn't happen, your husband is completely incorrect about the house and anything else he owns. To your other point, you're looking for life insurance. It does not have to be connected to the domicile. You simply buy life-insurance policies on both of you with the other as the beneficiary. That way, you would have the money if he predeceases you and vice versa. Your husband may be a wonderful guy, but it sounds as if he's sloppy about his financial affairs. You are foolish if you don't insist on two properly drawn wills reflecting your wishes. You should also ride herd on him to make sure that the premiums are paid. Otherwise, you won't know if the insurance has lapsed until he passes away.

DEAR BRUCE: My son will be incarcerated for the next three years. How should I handle his bills? I'm not in a position to pay down his debt at this time, though perhaps in the future. The outstanding debt is about $4,000. — Reader, via e-mail

DEAR READER: The creditors will all recognize they cannot collect from someone who is incarcerated. You should notify each of them that you're the parent and mention where he's jailed so they may determine this fact for their own records. The debts will continue to accrue interest and possibly penalties. You can't do much about that. There's simply no reason to impoverish yourself. It's possible that, if they are spread across a number of lenders and service providers, these obligations may be written off.

DEAR BRUCE: I would like to put $10,000 into some sort of savings. I would like to earn the most interest in the shortest amount of time. I'm 51 years old and work full time, but money is tight right now. I don't know whether I will need it for an emergency, but feel just having it in the safe is wasting money. Should I open a regular savings account or some sort of short-term CD? — L.B., via e-mail

DEAR L.B.: You're absolutely right — keeping the money in the safe is like throwing interest down the drain. While you may need the money, you probably won't need it all — so why not invest in several short-term instruments? If one has to be sold or borrowed against, the others remain undisturbed. As you know, interest right now is quite depressed. When you start thinking CDs, you are talking 3 percent, which barely keeps up with inflation. At 51, you should be far more interested in creating a diversified portfolio, keeping perhaps $20,000 in a CD that could be used in an emergency. You should open a credit line so that, in case of an emergency, you can draw against it. That way, you're not penalized; it doesn't cost anything until you draw upon it; and your money is free to earn as much as your risk tolerance allows.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.

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