What do we do with this very big check?

October 28, 2016 10:08 AM

My husband and I are looking to buy a (modest) home in (the farther reaches of) New York City. I recently mentioned this to my parents, who promptly offered to help and then wrote us a big check that's currently burning a hole in my pocket. It's a lovely, generous offer, but we don't need the money. What my parents don't know is that my husband has a trust fund that would cover a down payment with money left over.

I'm very proud of my husband's independence and responsibility. He doesn't live off his trust fund; he's always made his own living and he is reasonably frugal, too. The trust fund is strictly for a down payment or something of that nature. We feel very lucky to have it. Even though we collectively make a decent income and save a lot, New York is expensive and housing prices are ridiculous. (Our limiting factor is the monthly payment, not the down payment.) But I've been embarrassed to mention the trust fund to my parents thus far. It's none of their business and I don't want them to judge my husband for it.

But now that they've offered a substantial chunk of money, I don't know what to do. I believe they can easily afford it at this point in their lives; maybe there's even some tax benefit to them. However, their own home needs a ton of repairs. I'd rather see them spend the money on that, (although I actually think they can afford to help us and make the repairs). Although my parents are doing well now, we didn't have a whole lot of money when I was growing up. All our family's financial efforts were focused on buying and keeping a modest house. So I really don't take this offer for granted. I don't want to make them feel bad, like their help is nothing compared to a trust fund. At the same time, our budget doesn't actually have much wiggle room; it's just that there's this huge chunk of money that will allow us to do this one thing.

What should I do? What should I say? (My husband suggested we earmark the money for renovations.)

posted by anonymous to Work & Money (28 answers total)

I would bet that this wasn't some random thing your parents decided to do on a lark, and that they've been saving for just this reason for a really long time, and a lot of their self-image is "We are the kinds of parents who can help our kid with the largest purchase they will ever make."

Take the check, make a bigger down payment to reduce your monthly payments (or get ahead of them and finish paying it off years earlier), thank your parents effusively.
posted by Etrigan at 10:12 AM on October 28, 2016

I think I'd advocate for being honest with your parents, but if you decide not to do that for some reason, you could put this money aside to help them during their retirement years if they need it.
posted by MsMolly at 10:16 AM on October 28, 2016

Yeah, if you're potentially worried about your payments, why would you not use both sources of funding now, to reduce your loan (and thusly payment)?
posted by so fucking future at 10:17 AM on October 28, 2016

What do you want to do with it? Do that. Maybe make sure you have a cushion of cash to help your parents or other family/friends later if necessary.
posted by SaltySalticid at 10:18 AM on October 28, 2016

Agreeing with the people who say add it onto the down payment. Maybe not the entire thing (your husband's idea to earmark for renovation is a good one, esp. because you want to get as much of that done as you can before you move in) but we bought an apartment in NYC and paid considerably more than the down payment requirement so now our monthly mortgage bill is maybe half of what it would be if we had just paid the minimum down payment.
posted by griphus at 10:27 AM on October 28, 2016

But in a way, you do need the money. It isn't as though the trust fund money will buy a property outright. I would tell your parents that your husband's parents?/relatives? are helping out with a down payment, if the trust fund is from there. I don't think you need to call it a trust fund. Did your grandparents help your parents with their down payment? For many families, it's a loving tradition.
posted by umwhat at 10:35 AM on October 28, 2016

Unless you said "we want to buy a house but can't afford the down payment," and they responded by handing you a check, I don't think you need to tell them. You were talking about buying a house; presumably they figure you can already afford to do this but they want to make it a little easier. That is still true with or without your husband's family money.
posted by something something at 10:37 AM on October 28, 2016

Speaking as a parent who loses sleep about how I'm going to provide a decent launch for my children: PLEASE be honest with your parents. Think what a relief it would be for them to know that they don't need to forego their own house repairs in order for you to have a home. They may still urge you to take the gift, who knows. Maybe they'll suggest covering half, and your husband's trust covers half. There are all kinds of possibilities. But it'd massively unfair for you to leave them with the impression that your family wouldn't be able to do this but for them.
posted by fingersandtoes at 10:37 AM on October 28, 2016

I agree with what's been said, but just wanted to add: first thing is to make sure your husband is comfortable with them knowing about his trust fund, because it is their view of him that may change, not necessarily their view of you.
posted by egeanin at 10:40 AM on October 28, 2016

Buy a twelve month CD and give it a good long think.
posted by fixedgear at 10:43 AM on October 28, 2016

Have you done any bidding on the NYC market yet? I highly recommend keeping the money to have a higher down payment. A lot of desirable properties go for all cash, and sellers look very favorably upon having more than 20% down.
posted by decathexis at 10:49 AM on October 28, 2016

I think that you are over-worrying this. Your parents wanted to help, and they helped (such as, as others have mentioned above, by allowing you to put more than the minimum down payment --> smaller monthly). If you are still worried, you could say "Hey I am still blown away by your generosity. Also wanted you to know that I don't want you to put yourself in financial difficulty to do this for us, because we together have some money for this purpose too. Are you sure this huge generosity fits your needs too?" And they (assuming that they are well-adjusted and weren't putting themselves into jeopardy) will say "of course dear, love you."
posted by sheldman at 10:50 AM on October 28, 2016

It's none of their business

And yet it turns out it is their business, because not knowing this vital fact has induced them to make what may be a significant sacrifice of money they might otherwise spend on their own well-being, as fingersandtoes points out. You need to get over your embarrassment and tell them what's going on so they can make an informed decision. (And shame on anyone who says "Just take the money and do what you want"—we're adults here, not kids who see parents as endless fonts of money for fun times.)
posted by languagehat at 11:14 AM on October 28, 2016

Note that depending on the amount you might be subject to Gift Tax. So you really want this to be less then 14k. So you can always talk them down to only 14k so you're not paying taxes on it (if its over that amount). They can also give you 14k every year which you can use for improvements or paying down the principal.

If its less then 14k then take the money and add it to your down payment and/or look into a 15 year fixed mortgage. Frequently these mortgages don't add as much to your monthly payment as you might think and the extra from your folks may get you into a 15 year mortgage instead of a 30 with the same monthly bill.

Or you can tell your parents its very generous but you're okay and have a conversation with them about estate planning etc. It could be they are better off then you thought and it might be time to see what their plans are.
posted by bitdamaged at 11:29 AM on October 28, 2016

The gift tax issue was discussed on /r/personalfinance yesterday. If the poster is correct, and assuming this was not a really big check, you do not need to worry about gift tax.
posted by AwkwardPause at 11:34 AM on October 28, 2016

As Etrigan says, they've been planning this for a while, and reducing the amount of your mortgage is not a needless gift or a futile effort. BUT, make sure they know that thanks to some money from the family history on your husband's side, you already had enough for a N% down payment. And it's great that this gift would take it up to Y%, but you love them dearly and want to be sure their house repairs are also taken care of, so you wanted to be sure they knew it wasn't essential.

Note, you don't have to say "trust fund" if those words sound really entitled to you - it's family savings, it's a long-time plan from his (parents? deceased parents? older family?) it's a one-time thing, it's long-held investments paying off, etc.
posted by aimedwander at 11:43 AM on October 28, 2016

Ah interesting it looks like each parent can gift each person 14k. Which means the bar is 56k that can be gifted. Good to know...
posted by bitdamaged at 11:44 AM on October 28, 2016

I don't think there's any need to mention a trust fund specifically to your parents, especially if you think it would change their perception of your husband (and you know your parents better than any of us here as to whether it would or not). I do think you should have a more vague conversation, along the lines of: "Thank you so much for this extremely generous gift! I want to make sure you know that Husband's family is helping out too in addition to some of our own savings. This gift would allow us to put down a larger down payment (or save for renovations, or whatever), but I just want to make sure it's not eating into your own savings/house repairs."

Your parents might want to contribute even with knowing you would have had the money otherwise, simply because they want to help you. For example, my husband's parents recently gifted us with their used car when they upgraded, even though we make plenty of money to purchase our own car -- but, they liked the idea of it going to us instead of being sold to a used car dealership, and they wanted to help us out knowing that we are saving up for a down payment.
posted by rainbowbrite at 12:11 PM on October 28, 2016

Note that depending on the amount you might be subject to Gift Tax. So you really want this to be less then 14k. So you can always talk them down to only 14k so you're not paying taxes on it (if its over that amount).

This isn't how the gift tax works. It's imposed on the gifter not the giftee. There's a 14K per donee-donor combo per year exclusion (so a married couple can give 56K to another married couple without gift tax consequences). Above that, they reduce their $5M lifetime unified credit - basically, if they plan to die with an estate of less than $5M each, then they don't have to worry about gift tax.
posted by melissasaurus at 12:22 PM on October 28, 2016

I don't think you should accept a large financial gift if you also can't be clear with the giver about where the gift will be used. You don't have to tell them your husband has a trust fund, but you should tell them you don't need the money to buy the house. (But also I think if you allow your family to be entangled in your finances by accepting a large financial gift from them, then you should also be honest with them about your finances. I don't understand feeling comfortable accepting cash but not feeling comfortable saying "trust fund.")
posted by areaperson at 12:25 PM on October 28, 2016

Your husband can afford a sufficient down-payment with funds that are likely ring-fenced for him. It seems reasonable and fair that you put in a similar amount with funds from "your side", as long as you make sure that the transaction is documented such that (in the event of divorce) you both get your fair share (i.e. he doesn't continue to be able to ring-fence that part of the asset).

The minimum down-payment is just that, not a recommended amount. You should put down the maximum down-payment you possibly can, as this will reduce your monthly mortgage payments and/or allow you to get to the stage when you own your house as soon as humanly possibly. If you can buy the house for cash by pooling both his trust fund and your "big check" then that would be the absolute ideal.
posted by tillsbury at 12:59 PM on October 28, 2016

You say that you "don't need" the money, but it's clear that you could use it (bigger down payment, renovations, emergency fund).

It seems like you also think that your parents could use it (their house could use repairs). But they think that you need it more.

But I've been embarrassed to mention the trust fund to my parents thus far. It's none of their business and I don't want them to judge my husband for it.

Free yourselves from this Guess Culture nightmare. Have an adult conversation with your parents, where you lay out exactly what you're thinking here: this is an amazingly generous gift, you could definitely use it, but because your husband's family was able to put this money aside (and because he is mature and responsible enough not to have needed it so far) you already have money budgeted for the down payment and you don't want them to be depriving themselves unnecessarily.

These are all true and loving and kind things. If your parents still want you to have the gift (I bet they will), then accept it graciously. If I were you though, I'd try to keep at least half of it in an index fund or something (without their knowledge) so that you have a fund to access when the time comes to help them in their retirement (but that's just what I would do, you should do what you want with the money that will be yours).

Do you honestly think your parents would "judge" your husband for having a trust fund? Would his parents judge you for getting a big check from the bank of Mom and Dad? Even if they did... would it matter? He's already your husband, and the both of you are obviously already living lives that make clear you don't believe you are entitled to gifts like this.
posted by sparklemotion at 1:12 PM on October 28, 2016

"Thanks, Mom & Dad, but we already have some help in the form of family money from Husband's side."

I mean, maybe all the cards are on the table in such a way that your parents will know that this has to be some kind of Trust Fund and not basically the exact check they handed you, but from his parents. And maybe there is some interfamily resentment where your family wouldn't be OK with you guys accepting similar help from his family. But that's the truest possible answer you could give them.

You don't really have to make a thing out of the trust fund, or like you think you're better than your parents for not needing the help, or like your husband is a rich trustafarian rolling in dough. Just, like... "we actually don't need this because of this perfectly valid reason."

Between cobbling together family help to plan a wedding and knowing a few people who've been able to afford to buy a home after coming into inheritances, none of this seems weird or snobby or whatever negative feelings you're weighting this with. To me, lying by omission and pocketing money you don't need is much more potentially offensive.
posted by Sara C. at 1:29 PM on October 28, 2016

You've got to talk to them. The fact that your husband has family money became their business as soon as they handed you a very large check, because they probably made a calculation based on a number of factors: how much they thought you needed the money, what they could afford to do without, what the financial consequences or benefits would be for them. Except they made that calculation with flawed information, so it's not really fair to just pocket the money and assume that they'd be okay with you using it for things that aren't strictly buying a house.

Conversations about money can be hard and awkward, but that doesn't mean you should just avoid them. Also, it's fairly likely that as your parents get older, you will have to talk to them about finances more, because there is a point when you start turning into the care-giver for your parents instead of vice-versa, and you guys will have to have some frank conversations about what they can afford and (if necessary) if you can afford to help them financially. So I would think of this conversation as the first of many, rather than a single incident that you can avoid and never have to deal with again.
posted by colfax at 1:48 PM on October 28, 2016

"Thanks mama and dad. We wanted to tell you that husband has inherited enough money to put down a decent down payment but not enough to buy the house outright. Your gift would be a huge help in terms of reducing the mortgage and saving for repairs. But I wanted to give you the clear situation before accepting the check from you guys. What do you want to do ?"
posted by pintapicasso at 4:55 PM on October 28, 2016

You HAVE to tell them. For all the reasons laid about above -- basically that they're giving you this gift without the full story -- but also because if they find out later that Husband has a trust fund and you didn't tell them and took money from them that they may have given you thinking you were in need, it is potentially be MEASURES more awkward than having that conversation now, from a place of real honesty and wanting to do the right thing.
posted by Countess Sandwich at 5:31 PM on October 28, 2016

Use it for additional down payment. Pay more up front. You'll lower your monthly bills and total amount eventually paid significantly.

They did this because they want to. I don't see any reason to doubt that.

Just say thank you and reduce the amount of the loan!
posted by J. Wilson at 1:16 PM on October 29, 2016

I would talk to them and make sure that they don't need the money themselves and that they understand that you and your husband do have money for a down payment. If they can afford to give you the money without any real privation on their part and still want you to have it regardless of the existence of your husband's trust fund, then I would thank them and go ahead and use the money to increase the size of the down payment, or to make needed repairs/renovations to the new house (there will always be things to be done, and take it from someone who knows, it sucks to still be living with a crappy kitchen ten years on).

When people honestly want to help out other people, it can feel like such a slap in the face to have the gift refused, and this is especially true in parental/offspring situations. Your only obligation is to make sure your parents aren't been too self-sacrificing and that they understand you are in a position to buy the house without their help. Once that requirement is satisfied, you can be the gracious and grateful recipient that loving and generous givers deserve as their counterpart.
posted by orange swan at 4:57 PM on October 29, 2016