Wife's way of saving taxes is childish, ineffective

DEAR BRUCE: My wife goes ballistic when it comes to taxes. She thinks we are being screwed out of every penny we make by every level of government there is. She is constantly scheming to pay fewer taxes. Her latest involves putting many of our assets in the kids' names (the oldest is 12). This way, the earnings will be taxed at the children's rate, which would be relatively modest, instead of our high tax bracket. I've tried to explain that this is not appropriate for a variety of reasons. But the most telling reason is that, until the children are older, they will be taxed at our rate. Our accountant has even tried to make this clear to her, but she won't listen. — Very Frustrated, via e-mail

DEAR FRUSTRATED: You and your accountant are correct. Even if these transfers had merit and could be accomplished, there is no tax advantage. If there were a tax advantage, this course of action would still be foolish. The money would belong to the kids, and when they reached majority age, they could do whatever they wished with it. I understand not wanting to pay more taxes than necessary, but it would appear that your wife's aversion borders on sickness — perhaps that's what should be addressed.

DEAR BRUCE: The other day, I received a call from an independent company, saying it could help me lower my interest rate on all my credit cards. This is something the credit-card companies approve of, according to the guy, so that people do not default on their payments. We pay our bills on time and have the highest balance we've had in a long while — about $6,000. If they lowered the rates, it would be for life, and every six months, the credit counselor would renegotiate if I so choose. He said he would try to get the interest rates as low as 6 percent. Although they cannot promise any specific rate, this would cost me a one-time fee of $685, lowered from $995. I have tried to lower my rates on my own and only got a few points off. I am reluctant to say I joined this program a few days ago and have not received any paperwork yet. Is this a good thing? And if not, what is the best way to get out? I think I am having "buyer's remorse" just because it is so much money. — K.K., via e-mail

DEAR K.K.: I don't how these folks are going to guarantee a lower interest rate. First of all, if you are current on your credit-card debt, there is no way the credit-card company is going to offer a lower rate. After all, you're a good customer and you're paying your bills and they are getting their money. If a lower rate has been negotiated, this is not good for your credit and generally the only negotiations entered into are on cards in default.

Furthermore, this company is soliciting you on the phone for this type of arrangement. Well, I don't know the company, but there are so many red flags here (the price is $995, but you got the bargain rate). You say you're having buyer's remorse — does that mean you have entered into this? I hope not, but if you have, you should immediately move to get your name removed from the program. If you paid for this on your card, put this matter into contest with your card carrier — unless it immediately agrees to a credit.

DEAR BRUCE: My wife and I have been married for 40-plus years. We experienced a business failure several years ago, but have recovered nicely and are now "back on track." Our business was incorporated, and we paid all our bills so it did not damage our credit history. We both worked hard to recover and have an excellent credit rating. These are all joint accounts, where my name appears first and my wife's second. She is concerned that, credit-wise, she is a nonentity, because nothing is in her name. Is she correct? I think she is wrong and that she does have a credit history. Please settle this argument. — Reader, via e-mail

DEAR READER: Your wife's perception is accurate, and it's easily remedied. Open a credit-card account now in her name and her name alone. This should be no problem whatsoever. My wife has credit cards in her name, even though she is not employed outside the home at the present time. This way, if something happens to me, her credit is established and there are no hassles. If something were to happen to you, the credit issuers may choose to ignore her. But that can easily be overcome now with no additional cost.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL 34680. E-mail to: bruce@brucewilliams.com. 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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