Q: I don't think kids have many legal rights. My family decided to buy new bicycles at a store that also finances its sales. Mom and Dad could just sign their promissory notes but I couldn't without them signing my note too. I even offered to give my bank account as security!

A: Sometimes dealing with legal rules is frustrating but the shop owner was only trying to protect himself. A minor can sign contracts and incur legal obligations but has a right to disaffirm (repudiate or legally back out) of a contract. There are exceptions to this rule but no one wants to be put in a position where a contract can be enforced against him or her but not against the other party.

Rightly or wrongly the law has chosen "to protect" minors because of the perception that your group may not have the judgment or experience to make commitments that could have a significant negative legal impact on its members for years to come.

That is why child entertainers, athletes, writers, etc. need to work through someone with the legal authority to represent them. In some states parents have the authority. In other states a formal conservatorship must be started through the Courts, often appointing parents. That is also why if a minor inherits something directly, a conservatorship is set up or the inheritance is administered under a protective statute such as "The Uniform Gift To Minors Act."

Thank you for your question. I hope this helped a bit to explain why the shop owner acted the way he did. He also probably sold the notes (they call it "paper") to an investor who probably required co-signers in your case. So the owner may not have had a choice.

Q: My financial advisor went volcanic when I suggested that I sell my office building for little down and take back an eight percent mortgage.

A: There are really no right or wrong answers, so let's explore just a few of the major issues.

With narrow segments of the stock market returning a 14% or 18%, or even a 20% annual rate of return, 8% seems relatively low. But a significant number of investors have been left behind these past few years or even lost money. The financial advisor might do better, but again may not, especially in the immediate future and depending if you happen to hold the "hot" stocks.

You avoid paying capital gains until you receive back principal. Typically the amount of the monthly payment is calculated over a 20, 25, or 30 year period. But the actual promissory note "balloons" (entire principal and any unpaid accrued interest), becomes due and payable, for example, in 3, 5, or 8 years, thus delaying the payment of capital gains. Remember that only a small part of the monthly payment reflects gain; most of it is interest and/or a return of basis. Then when the balance is due, maybe the capital gains tax has been reduced and of course you are paying with cheaper dollars.

You might be hurt if you take the building back and it has gone down in value. But you basically have what you had before plus any down-payment and interest. If the buyer abuses the building or fails to do things like pay taxes, then these grounds should constitute a default under the note (even if payments are current) and you then can take it back through foreclosure. Both the note and deed of trust (mortgage) should not require notice of any late payment before court action can begin and there should be a strict "due on sale" clause.

Now your mortgage probably has a "due on sale" clause which means upon the transfer of title, the lender can demand payment of the reminder of the loan. But often just talking to the lender or offering an incentive will bring the lender around. But in your case, the remaining balance is small and the interest rate is 12%. So you turn that money around from costing you 12% (less the equivalent interest deduction) to making 8% (less the amount taken by taxes).

You have always been concerned about landlord liability or even the loss of the building because of tenant illegal activity. Being a lender should remove you from those contingencies.

Legally, the foregoing covers some of the more significant points, and of course no one answer is right for everyone. But for someone like you (very low income, no desire to continue in real estate through a 1031 exchange, need for cash flow, and looking for peace of mind), this option should at least be considered by your financial advisor.