Government Will Honor Discontinued HH Bonds

Question: I just read that the government is planning to discontinue Series HH bonds next year.

When this occurs, will there be any other option available for converting mature Series EE bonds without incurring a tax on the accumulated interest? Would it be practical to convert all my remaining EE bonds to HH bonds now, even though many are several years from maturity?

I have accumulated a significant number of EE bonds over the years through payroll deductions and have been converting them as they mature to HH bonds.

Answer: Treasury Department officials say there are no plans for another savings bond vehicle to take the place of HH bonds, which the government plans to discontinue to save money.

Until then, you can exchange EE bonds for HH bonds as long as you have owned the EE bonds at least six months. The government will continue to honor HH bonds, even after it stops issuing new ones.

Converting now would mean accepting a lower interest rate, because EE bonds currently earn 2.66% and the rate for HH bonds is down to 1.5%, said Bill Houlette, a Treasury Department spokesman in Los Angeles.

But the tax savings may make the conversion worthwhile, particularly if you might be in a lower tax bracket when you cash in the bonds in the future.

You might want to check out the savings bond calculator at the Treasury Web site www .savingsbonds.gov for help in making your decision.

*

How Closed Accounts Affect a Good Rating

Q: I recently ordered my credit report before buying a car last month. Although my FICO score was excellent at 790 points, I was told it wasn’t higher because I have too many accounts. My credit report shows 25 accounts, but only nine are open and active.

When I called Equifax to ask why these closed accounts remain on my credit report, I was told that they can remain for up to 10 years, not unlike a bankruptcy. Lenders, I have found, are quick to debit and slow to credit.

A: When a credit score is as high as yours, the reasons given for why it isn’t higher are pretty much meaningless. Even if you somehow could rectify the “problem,” you probably wouldn’t see a significant increase in your score.

The closed accounts to which you refer aren’t considered a negative mark by lenders, so they’re not subject to the Fair Credit Reporting Act’s seven-year limit on reporting of delinquencies, defaults and other credit bloopers.

So relax -- and enjoy your excellent credit rating.

*

Pitfalls of Putting Children on House Title

Q: As an attorney, I’m asking whether you can again discuss the disadvantages of putting children on a real estate title. Once a child has received partial title to real estate, he or she is an owner, and title cannot be transferred by the parent without the child’s consent. All too often the child refuses to permit the parent to sell the property without paying the child his or her “money.”

I recently had contact with a newly widowed woman whose husband had added the couple’s two adult children to their title. After the husband died, the children demanded that the woman pay them their share -- which surely was not what the husband intended.

Anytime clients want to put their children on a title, I tell them why it isn’t a good idea. Even though these misguided parents may go to someone else to effect the transfer, I refuse to be a party to such a bad idea.

A: Putting a child on a house deed typically is done to avoid probate, but it may create more problems than it solves. Often parents do this without consulting an attorney, who at least could warn them of the drawbacks.

Adding children to a title also makes their creditors your creditors. In other words, your home could be seized or attached if your child is sued or runs up big debts. That’s a big risk for any parent to take.

*

Liz Pulliam Weston is a contributor to The Times, a columnist for MSN Money and a graduate of the personal financial planning certificate program at UC Irvine. Direct your questions to ask_liz_weston@hotmail.com or to Money Talk, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012. She regrets that she cannot respond personally to queries.