There are no bad dogs, only bad dog owners!
Most toy breeds are very protective of one person. It's not because they attach themselves to one person. They are carried around, allowed on laps all the time, ride on people laps in cars. In short, they attach to the person that empowers them to be in a dominant role. It's like having a spoiled child that's never been taught the meaning of the word "no".
Dogs are dogs! Not children. Treat them like a dog, and not a child. Train them, and set boundaries that the dog can NEVER be allowed to cross. This includes everyday activities with them. Every dog needs a pack leader. Even if it's just you and one dog. To a dog two or more is a pack. If you don't maintain the alpha position the dog will.
The right things to do:
Teach the dog come, sit, down, off, leave it, drop it, up, wait, stay, and okay as the basics.
Don't allow the dog to eat from any human plates, or food.
People (pack leaders) eat before the dogs.
Don't allow dogs to beg. Teach them to lay down away from the dinner table while you eat.
Make the "wait" when you put it's food down. The dog shouldn't be allow to eat until you give it a release word like "okay". The dog doesn't own the food. As the pack leader you are letting the dog share your food.
Only allow the dog on furniture that they can be on all of the time. Dogs don't generalize. A couch is not any couch. It's a very specific couch. If you change the couch the rules change with it.
Don't allow a dog to lay or sleep between a couple. If the dog is allowed to sleep closer to your woman than you are, it's like telling the dog that it is more important to the woman than you are!
Don't carry the toys breeds. They have legs and they know how to use them. Those little dogs can move pretty fast, and they have a lot of energy.
Don't "protect" the dog from the world. Have you ever seen a small dog that is always carried around? They shake like their going to explode if they are not being carried. They're not cold. They are having an anxiety attack, and are usually very anti-social to other dogs and people.
Exercise the dog everyday. Walk it for at least 20 minutes a day. You lead, not the dog. If the dog is walking with it's front legs forward of your knees it is leading you!
Crate train the dog. You will all be happier for it. It's a safe haven for the dog (it's den), and it will happily wait there in safety while you are away from home.
I have a good friend that has babied a Fox Terrier for the first year she had it. The dog started acting badly when my friend moved houses. The dog was peeing in every room in her new place. It was also marking everything it could lift a leg toward. She didn't think the dog could be trained to behave. We (me and the dog) spent a few hours breaking bad habits. She set the boundaries for her dog. She never waivers in what the dog is allowed to do. One month later the dog will sit, down, off, wait, fetch, drop it, and come. He's happier because he know she will be his pack leader. The dog doesn't snap at other people for sitting by her anymore, and he has quit marking everything in the house.
Dogs are like a 3 yr old child. You have to be consistent with the rules. The rules NEVER change for basic behaviors. I'm constantly after mine. They are always playful and happy to see me, even if I was only gone for five minutes. Mine are not allowed to roam my house when I'm not there. They have a room that I allow them in, and it has nothing that they could shred. Most dogs will get into things a few minutes after you leave because they are bored. They sleep the rest of the time you're gone, so by the time you get back they forgot what they did and punishing the dog does no good. When I get home I let them out in the yard to burn off the energy that they have been storing all day. They play hard for about 20 minutes to an hour. After that I eat dinner. They are fed after I eat. I play ball with them for at least 30 min.
My dogs aren't small (Springer Spaniel 54 lbs and Lab/Shepard Mix 65 lbs). I recently had them with me in a small house (my Grandma's 1000 sq ft 3/bdrm house). In three days they didn't so much as knock over one plant, and that place looks like an tropical resort.
K.I.S.S. Remember, you are in charge, no the dog. You and your wife need to be seen as leaders to the dog. The dog needs to know that people are not the followers.
If you can follow that tidbit you, your wife, and the dog will be just fine. (It's in that order on purpose.)