Your thoughts on the best way to pay it forward to our children?

[Kurt G.]

Now that my wife and I are hooked on REI with plans to grow our business, we have been thinking about how to use it to help our children. We don't want to just give them money from our flips, instead we want to 'teach them to fish', so to speak. One is 28 and married with a 1 year old, the other turned 15 today, and we are now investing part time under an LLC.

What we've been considering so far would be to open a (joint?) savings account for each of them, and deposit maybe $1,000 to each of their accounts from each successful flips we complete. In the beginning, they would be welcome to use that savings to act as private money lenders for our future projects. Assuming we stay in the game long enough, there could eventually be enough for them to use the money to seed their own real estate investments, and we would coach them through the process. I could foresee the older one doing a flip, and the younger one using the funds to house hack his way through college. How to minimize tax liability through the process is a bit unclear to me. Although they would have no legal obligation to use the money for REI once we 'gift' the money to them, we would like to see them use the money to acquire assets of their own.

Please give some honest feedback on this idea, or if you can think of a better way to giving an teaching.  It would be great to hear any stories from other investors who've done something similar.

[Jennifer L.]

I'm not sure how you can structure this, but if you just put the money in an account for the kids, you can't really dictate how those funds are invested or spent.   

Also, you have an adult, married son.  So you would need to be extra careful with any funds that were place in his name.  Depending upon the laws in his state, it could be subject to community property.  (Although I can't remember if gifts are separate property.)  I certainly wouldn't put it in an account with both of your childrens' names.  That could get really, really messy.

I think with my adult son, I would see if he was interested in learning your trade and try to include him in the process.  Pay him if he helps.  If he isn't interested, or doesn't want to help, he's an adult and he can learn his own way.

Given all this, I think the better course is to set the money aside in an account in you and your wife's name with the idea that if your children come to you in the future and want to venture into this, then you would have the capital to help them get started.  I just don't think that handing kids a chunk of money is a good idea.  In general, people do better with money they have earned.  Just my two cents.