Incorporating Family Money into Your Life

By Anna Nichols

When you are the recipient of family wealth, such as distributions from a family business or family trust, you are likely to find that uncertainty goes along with the enhanced opportunities. To mindfully incorporate family money into your life, you’ll need to know your role as the recipient of these assets and have clarity on any expectations and responsibilities that come with them. Only then can you make informed choices about what to do with them.

Learn the ‘why’ behind the money
It can feel awkward (or even seem ungrateful) to ask questions, but when communicated in the right way, your questions demonstrate that you take this gift seriously — that you not only acknowledge it but also want to understand and honor the intentions behind it.

Whom do you ask? The best place to start is with the source of the assets. For distributions from a family business, decisions are likely made by a board of directors with input from a family council or key family shareholders. If you are the beneficiary of a trust, you will want to set up time to meet with the trustee. For more direct, less structured monetary gifts, a conversation with the giver, likely your parents or grandparents, is best.

What you ask is up to you. What information do you need to know? What do you already know? You should recognize that the person you ask may not be able or ready to share answers on any and all questions, and you will need to respect that decision. The important thing is for you to learn about any expectations that come with receiving these assets so you can plan for how they will impact your financial life.

Here are some questions you might want to ask:

• Are there specific intentions about the uses for these funds?
• Does the grantor have hopes for how this money will affect my life?
• Am I free to deploy these assets as I see fit, and will my decisions about how to use this money be considered in future distributions?
• Will this distribution be the same every year or change over time? Could it be rescinded?
• Is there an adviser or mentor who can help me evaluate different options for putting this money to use? 

To ensure these conversations go well, give everyone involved plenty of time to review your questions in advance and be patient with the communications process. Money is an uncomfortable subject for many people, and it may take a while for family members or even outside trustees or board members to be ready for a meaningful conversation. Also recognize that you may not get all the answers you are seeking at once. What you are learning now may be the start of a much larger learning process in which more information will be shared over time. Focus on the questions that truly matter to your life at present (e.g., “Can I move forward on the purchase of a condo with the expectation that this gift/distribution will be an annual occurrence for the next five years?”) as opposed to demanding all financials on the family business and family trusts on Day One.

Also be sure to practice discretion and not share inappropriately what is discussed. These can be sensitive matters. If the person answering your questions is concerned that you won’t keep the information confidential, trust will be damaged and future communication will be hampered.

Consider the ways you can use family money
Once you know more about the intentions behind these assets, you can start to evaluate the different ways you could put them to use. Will your annual distribution pay your rent or mortgage so that you can go back to school full-time? Would this enable you to follow a career passion that might be lower paying but highly fulfilling? Are you hoping to buy a home or property or start a business on a set timeframe? Do you want to set up new investments that diversify your holdings outside a more concentrated position in a business or portfolio from a trust?

The options you consider will be specific to your individual situation. The important thing is to have some information about the intent and regularity of these gifts or distributions. This will enable you to think strategically about both the short- and long-term possibilities that these additional funds provide. For example, if you know you can expect a set distribution from a trust going forward, you can plan out the timeline for a down payment on a property, the ability to fully cover tuition, or the length of your grace period for finding a job after a move to a new city. These are the life-changing opportunities that family money can provide.

Family wealth is truly a gift. By taking the time to learn more about the assets you receive, you will not only become more informed about the people and decisions behind these gifts, but also feel more confident that you are making wise choices about how to put them to use.

Anna Nichols is director of communications at Altair Advisers LLC, a wealth advisory firm (altairadvisers.com).