You have asked for the legal requirements of a bona fide loan between a minor and
an adult in Missouri, Kansas, Nebraska, and Iowa. The legal opinions which you attached
addressing this issue in Kansas, Nebraska, and Iowa are still valid. In short summary,
these states generally provide that minors may enter into bona fide loan agreements
with an adult, but the minor maintains the right to disaffirm the agreement upon reaching
the age of majority, absent factors such as the minor's own misrepresentations concerning
his or her age and good cause reliance by the adult, or emancipation by marriage.
See KAN. STAT. ANN. §§ 38-102, 30-103 (2008); NEB. REV. STAT. § 43-2101 (2008); IOWA
CODE §§599.1, 599.2, and 599.3 (2008). The age of majority is 18 years of age in Kansas
and Iowa, and 19 years of age in Nebraska. See KAN. STAT. ANN §38-101 (2008); IOWA CODE § 599.1 (2008); and NEB. REV. STAT. § 43-2101
A minor may also enter into a bona fide loan agreement with an adult in Missouri but,
as with the other states at issue, upon attaining the age of majority he or she may
refuse to ratify that agreement. See MO. ANN. STAT. § 431.060 (2008). The legal age at which a person becomes competent
to enter into a contract is 18 years old. See MO. ANN. STAT. § 431.055 (2008). Debts contracted before the person attains the age
of majority may be ratified after the age of 18. See MO. ANN. STAT. § 431.060 (2008). Acts indicating ratification include: (1) acknowledging
or promising to pay the debt, in writing; (2) partial payment of the debt; (3) disposal
of all or part of the property subject to the debt; and (4) refusal to deliver the
property in the minor's possession or under his control for which the debt was contracted,
to the other contracting party upon written demand. See MO. ANN. STAT. § 431.060 (2008).
You also indicated that the situations of interest to you involved circumstances where
children are residing with either their parent or a "nonparent," wherein the adult
asserted that they "loaned" the child his or her share of the household expenses until
receipt of the child's SSI benefits. In addition to the typical situation in which
the child is residing with his or her parent, addressed below are the most common
circumstances in which a child would be legally residing with a "nonparent." Please
note that while these types of cases may fall under the general categories described
below, each case should be reviewed based upon its specific facts, as it is not possible
to cover every scenario here. Different facts, even within the same general category
of cases, may produce a different result. Each case requires a fact-specific analysis
under the following general guidelines. Some of the important factors to consider
include whether the adult with whom the alleged contract exists is the natural parent
and/or representative payee, and whether the adult has any other non-compensable legal
obligation of support to the child.
In all four states under review, parents have a legal obligation to support their
children. See State v. Reed, 181 S.W.3d 567, 569 (Mo. 2006); Secretary, Kansas Department of Social and Rehabilitation Services (SRS) v. Rice, 121 P.3d 458, 461 (Kan. Ct. App. 2005) review denied Feb. 15, 2006; NEB. REV. STAT.
§ 43-1402 (2008); IOWA CODE § 597.14 (2008); In re Marriage of Herriott, 707 N.W.2d 336 (Iowa Ct. App. 2005); In re Marriage of Van Ryswyk, 492 N.W.2d 728, 731 (Iowa Ct. App. 1992). Therefore, it is reasonable to conclude
that the parent may not "loan" an apportioned share of household expenses to a child
he or she is already legally obligated to support. The POMS site you referenced, SI 00835.482, does not address the situation where the alleged loan is from a minor child of the parent. Rather, it addresses loans between adults or situations where
an adult child is providing food and shelter to the parent. The distinction is legally
significant because a child has no legal obligation to provide support to his or her
In Missouri, a legal guardian has the obligation to provide for the ward's "care, treatment,
habilitations, education, support, and maintenance." See MO. ANN. STAT. § 475.120(3) (2008). However, the guardian is not required to use
his or her own resources to support the ward. Rather, the guardian may use the child's
estate and available public benefits. See MO. ANN. STAT. § 475.120(4)(2008). Thus, in situations where the child resides with
a guardian, in kind loans are not improper. However, because a guardian may receive
compensation for his or her services to the ward, as deemed reasonable by the court,
review of the guardian's in kind loan may be appropriate to determine if compensation
has already been received. See MO. ANN. STAT. § 475.265 (2008).
In Kansas, guardians have a statutorily imposed duty to provide for the minor's "care, treatment,
habilitation, education, support, and maintenance." See KAN. STAT. ANN. § 59-3075(2)(b)(1)(2008). As in Missouri, a guardian in Kansas is
not obligated to use his or her own financial resources for the child's support. See KAN. STAT. ANN § 59-3075 (c) (2008). Thus, in kind loans are not improper. Because
the guardian has no power to exercise control or authority over the ward's estate
without court authorization, it would be prudent to inquire whether the guardian has
received compensation by the court for the expenditures he or she is alleging an in
kind loan agreement was made. See KAN. STAT. ANN. § 59-3075(e)(8)(2008).
In Nebraska, guardians of minors have the "powers and responsibilities of a parent who has not
been deprived of custody." See NEB. REV. STAT. § 30-2613 (2008). However, the guardian is not legally obligated
to provide for the minors out of his or her own funds. Id. Thus, as in Missouri and Kansas, in kind loans are not clearly improper and inquiry
regarding whether the guardian has already been compensated should be made.
The Iowa statutes are not as clear as the statutes in Missouri, Kansas, and Nebraska. However,
taken in combination, the statutes provide that a guardian's duty is to make important
decisions for his or her ward, and expenditures must be approved by the court. See IOWA CODE §§ 232.2 (2008), 633.635 (2008). Absent a breach of fiduciary duty or willful
and wanton misconduct, guardians and conservators are not personally liable for actions
taken while acting within their official duties. See IOWA CODE § 633.633A (2008). Given the totality of the statutory language, it appears
reasonable to conclude that a guardian could enter into an in kind loan agreement
with the minor.
In Missouri, so long as the child is in the care and custody of the state, whether that be in
an institution or a foster home, the state is the legal guardian. See MO. REV. STAT. § 211.021 (2007). Foster parents receive payment from the state which
are intended to provide economic benefits for the foster children. See Bryant v. Bryant, 218 S.W.3d 565, 569 (Mo. Ct. App. 2007). While the foster parent spends the money
at his or her discretion, he or she has an obligation to provide food, clothing, and
shelter for the foster children placed in his or her care. Id. Thus, it is reasonable to conclude that in kind loans may not be appropriate in foster
care situations, if compensation has already been received by the foster parent. However,
the payment received may not, and very likely does not, adequately compensate the
foster parent. Therefore, careful review of the compensation received versus the resources
expended for the care of the child should be undertaken prior to disapproving these
in kind loan situations.
In Kansas, foster parents are considered the custodial parents of the foster child in their
care while SRS is the child's legal guardian. See KAN. STAT. ANN. §§ 38-133, 38-134 (2007). While foster parents are compensated by
SRS, the amount of compensation is "minimal." See Mitzner v. SRS, 891 P.2d 435, 438 (Kan. 1995). Thus, it is reasonable to conclude that the cost
of caring for the foster child does not adequately compensate the foster parent and
in kind loans may therefore be proper.
In Nebraska, the Department of Health and Human Services (DHHS) is the legal guardian for children
in foster care and foster parents are paid a monthly fee. See NEB. REV. STAT. §§ 43-247, 43-285, 43-905, and 43-1320 (2008). As in the other states
under current review, careful review of the foster parent expenses versus the money
received from DHHS should be undertaken when presented with an alleged in kind loan.
In Iowa, the Department of Human Services (DHS) is "responsible for paying the cost of foster
care for a child." IOWA CODE § 234.35 (2008). Foster parents are paid by DHS, in the
amount of 65 percent of the estimated cost of raising a child in the preceding year,
as determined by the Department of Agriculture, assuming the child has no special
needs. See IOWA CODE § 234.38 (2008). Thus, in kind loans alleged by foster parents may be proper,
but like the other states, a careful review of the alleged loan and the money already
received for care of the child should be conducted.
In sum, minors may enter into bona find loan agreements with an adult, but the minor
maintains the right to disaffirm the agreement upon reaching the age of majority,
absent factors such as the minor's own misrepresentations concerning his or her age
and good cause reliance by the adult, or emancipation by marriage. Despite that general
rule, an in kind loan between a minor and an adult with the legal obligation to provide
support and maintenance for that minor child is not appropriate. In instances where
the adult has a legal obligation to the child, but that obligation does not require
him or her to expend his or her own financial resources to fulfill that duty, an in
kind loan may be allowable. As is often the case, these cases must be reviewed on
a case-by-case basis as differing facts may well produce different results.
Kristi A. S~
Acting Chief Counsel, Region VII
Pamela J. M~
Assistant Regional Counsel