Partnering with your children on real estate deals

[Charles Mangum]

My 11 year old daughter has about $12k in funds she was given from her grandfather. I have custodial responsibilities for that money. I was thinking of purchasing a property and I would be the credit partner and she would be the partner with the money and then profits we would split in some percentage. I certainly think this would be a better approach then having her money in the stock market where it has been. Additionally, since a person doesn't have to report the first $7k income for a child it might have additional tax advantages as well. Thoughts/things to think about?

[Bill Gulley]

Charles, just what are your custodial responsibilities, you duties to protect and conserve her funds? And you want profit off of her money. Since you are a parent, it's not that you would end up in the same basket as other custodians or trustees but if you comingled funds of others like that you could go to jail!

I don't think that such funds shoulld even be in stock unless it's a very solid company, bonds rated A or better is generally the standard. Your duty is to conserve, protect and guarantee her funds not speculate with them. Your dabbling in RE certainly won't meet that standard of care IMO. If someone thinks they can guarantee a return in RE, I would like to meet them.......stuff happens in RE and that just can not be done 100% of the time.

Your daughter can not contract as a minor. She could have a trust and it could own RE. Perhaps RE held as rentals, a multifamily, a quality building could be a good investment long term for her, but I'd say that 12K is nothing near what is needed for such a property.

Basically, you want to borrow funds from your daughter and profit off of her position.....and do so based on your expertise.....

Putting all of her funds at risk in RE is not responsible in my opinion.
How would you have felt if granny gave you money when you were 11 and ten years later you asked where your money was and your dad said....I'm sorry, but we lost it in a RE deal because we got sued...????