Smart Money: Family should consider following traditional path

DEAR BRUCE: I recently remarried after being a single mom for 12years. My kids are 20 and 17 years old. The oldest is finishing hersecond year in college. I make $65,000 a year, and we have taken outloans for her studies, receiving some Stafford subsidized andunsubsidized loans.

This year, my new husband does not want me to take on more debtbecause he is debt-free. I want to make sure my children geteducated. We now have a combined income of $300,000 a year. I don'twant my new husband to pay for their education. What are my optionsfor the best loans for my children? Am I missing some opportunity forthem to obtain monies? If I pay cash for their tuition, do we havetax benefits? If not, what is the best thing for me to do for thekids? I do have my other home in my name only, in case I need to sellfor their security.

D.K.

via e-mail

DEAR D.K.: You guys don't have any financial problems, only somedisagreement as to how your funds should be handled. Why not followthe traditional path of the husband supporting the family? That wouldmean you would have his income of $235,000 to support the family and,with your $65,000, you should be able to put your children throughschool comfortably. I still believe the kids ought to take out someloans. This education is for them, so why make it totally painless?But that's up to you. I'm also wondering if you guys have aprenuptial agreement. If not, you might consider a post-nup, sincethere are obvious differences of opinion as to how money should bespent and what debts should be entered into.

DEAR BRUCE: My two siblings and I inherited land from our parents.There are now two gas wells, another on the way, with plans to haveall our property pooled within the next two years, for a total offive wells. For me, the monthly income from the two wells is $6,000per month. The future wells will most likely have the same monthlyincome. For long-term investment and tax savings, would it be moreprudent for my husband and I (67 and 60 years old) to buy a largerhouse in the $300,000 range with the minimum down payment and thenrent ours for the tax break? Or should we put that money into sometype of equity-indexed annuity?

P.A.

via e-mail

DEAR P.A.: I don't know where you got the idea that buying ahouse, and then renting it, provides a tax break. Under presentfinancing, minimum down payments are minimally available, no punintended. The overwhelming likelihood is that you're not going tofind a decent rate. I'm not sure why you are considering the purchaseof a much larger house at this point in your life. In general, you'vegot a good income and investing in the marketplace, in anintermediate range of risk, would be the best long-term strategy forpeople of your age, income and worth.

DEAR BRUCE: My father worked in real estate and bought severalpieces of land, including the house I've been living in for the past30 years. He had a corporation in which we were all members. Heintended to do something that would leave a piece of property to eachof his children in a way that we would not be burdened with a lot oftaxes. But he had Alzheimer's and didn't get this done before hedied. What would he have been planning to do? I hope to get thiscompleted before my mother dies, too.

S.H.

via e-mail

DEAR S.H.: You mentioned he had a corporation in which you wereall members. I think you mean shareholders. Until such time as thecorporation has been examined, and the distribution of shares and anyrestrictions on their sale have all been examined, no one can answeryour question. Was your dad a stockholder, or was it in some kind oftrust? You need to hire an attorney to spell out the alternativesopen to you and your family members.

Send your questions to: Smart Money, P.O. Box 2095, Elfers, FL34680. E-mail to: bruce@brucewilliams.com. Questions of generalinterest will be answered in future columns. Owing to the volume ofmail, personal replies cannot be provided.