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On money

This joint ownership affords protections

Published December 7, 2003

If you ever bought a house with your spouse, you may have noticed the title listed the two of you as "tenants by the entireties."

That's a special type of joint ownership limited to husbands and wives. You probably know that this type of ownership gives the surviving spouse sole ownership when the first spouse dies. What you may not know is that "tenancy by the entireties" offers protection against creditors under the laws of Florida and certain other states, including Delaware, Michigan, Pennsylvania and Rhode Island.

Creditors of only one spouse cannot seize property owned as tenants by the entireties unless the other spouse gives permission. In Florida, homestead property already is protected from creditors' claims, but tenancy by the entireties can be used to protect other property as long as the account was set up properly and the debt was not an obligation of both spouses.

Your jointly owned real estate, bank and brokerage accounts may be protected even if the account is not specifically titled "tenants by the entireties."

Clearwater lawyer Alan Gassman said a Florida husband and wife are presumed to own joint accounts as tenants by the entireties if certain conditions are met. They include:

* The account was set up as a joint account with both signing the signature card. Retitling an individual account as a joint account isn't good enough.

* Both spouses have ownership and control. It does not matter if one puts in most of the money as long as both have the same right to it once it has been deposited.

* Both spouses have right of survivorship, becoming sole owner if the other dies.

* The signature card for the account does not specifically disclaim tenancy by the entireties.

As an extra protection to make your intent perfectly clear, Gassman suggests adding the letters "TBE" to the title of the account.

Then don't get divorced.

Q. I am in default on a nine-year federally guaranteed education loan that I took out for my daughter to go to court-reporting college. She attended part-time only two years, but now I owe $14,000. In September, she paid some money to keep the loan from defaulting, but a collection agency is now taking $162 out of my $457 monthly Social Security check.

I am 71 and am confused about how this works. Can they legally sell to another company? What should I do?

You took out what is known as a PLUS loan, which makes the parent responsible for repayment. Your daughter may have made some payments, but not enough of them to keep the loan from defaulting. Because of the default, your lender turned the loan over to one of the guaranty agencies that administers the program for the government. The agency has the right to assign it to a collection agency and assess you for collection costs, which can increase your repayment amount by as much as 25 percent. Under federal law, student loan debts can be withheld from government payments. Debtors often find their income-tax refunds have been withheld.

Call the guaranty association to discuss your repayment schedule and how to get your loan out of default. If you do not have the number, call the U.S. Department of Education toll-free at 1-800-621-3115. It is unfortunate for both of you that your daughter did not complete her education. I think she should repay this loan, but unless she does, you are stuck.

Q. I own several long-term municipal bonds with maturities 10 to 25 years away that are paying about 5 percent interest. With interest rates reportedly due to go up, experts are suggesting holding short-term bonds. Would it be wise to convert these to bonds that mature in two to three years or stay with what I have now? I do not need the income.

Stick with what you have, but if you have new money to invest, buy shorter-term bonds.

Speculating on the direction of interest rates is a tough game. It is difficult to come out ahead in any bond trading strategy because of the "spread" between the price the brokerage firm charges when you buy a bond and the price it will pay you if you want to sell it.

If rates go up, your bonds will be worth less. However, that matters only if you sell them. You still can hold them to maturity and collect full value.

- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

[Last modified December 7, 2003, 01:34:09]

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