Here's an email I recently received from a reader:
My girlfriend and I are planning to get married shortly. We are in our mid twenties and live in Boston. My girlfriend had a trust fund passed down to her from her father and she will get her first option to withdraw funds this fall. Both of us are extremely careful with our finances and she has no plans to touch any of those funds for frivolous expenses/luxuries. However, we would both like to purchase a house near Boston next summer. We would likely buy something small and cheap (possibly short sale or in foreclosure) and I am very handy with fixing up a property on my own and enjoy working on all sorts of home improvement projects (anything but electric or plumbing).
We are very open about our finances but I am not sure how to approach her and ask if she would consider using any money from the trust to help with a down payment. This can be a sensitive issue whenever it came up in the past and I usually avoid talking with her about it. As you know, Boston is a very expensive real estate market even in these tough times. I tried researching for any articles or books on how to approach these subjects with a spouse or significant other but could not find anything. Any advice would be greatly appreciated!
What would you tell him?
Can you guys afford it without dipping into it? If not, do you think she'd willingly bring it up on her own to help?
I'm not sure what good a trust fund does you if you can't use it for things like a house, etc... But I understand it is probably difficult convincing someone of that when you have your hand in the jar as well.
Posted by: t3ch | July 22, 2008 at 05:27 PM
It sounds like you're not comfortable asking this of her, therefore, don't. As you continue to discuss the purchase of a house, figure out how much you each will contribute towards the downpayment. If she decides to take money out of her trust, it should be her decision.
Posted by: Amy | July 22, 2008 at 05:30 PM
That's another question to ask. Are you splitting the down payments equally or do you already have joint accounts, etc.? If you're splitting it 50/50 then just let her get her half however she sees fit, since it's a hot topic.
Then again, I'd value financial stability in a pretty huge situation like that much more than hurt feelings over an argument or two. But that's just me; all relationships are different, and I just usually tend to be blunt and say what's on my mind if I think it will work out better in the end.
Posted by: t3ch | July 22, 2008 at 05:35 PM
perhaps try to convince her - reasonably - that she's just taking the money reinvesting it, as part of creating a balanced portfolio - securities, real estate, etc... diversifying is sensible from an investment point of view.
if you plan to live there over the long term, there will undoubtedly be appreciation in the property.
Posted by: anon | July 22, 2008 at 05:40 PM
You don't sound like you're ready to get married, to be honest. If you can't talk openly about these things, you have a ways to go.
Posted by: David | July 22, 2008 at 05:50 PM
There is a great rent vs buy calculator at the NYTimes website:
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html
You just need to do some research into the average home appreciation in your area. I believe the national average is 5%. Also, make sure you fill out the tabs under Advanced Settings to reflect what you expect in your area. If it's better for you to rent, then drop it. If it's better to buy, then show her the results (make sure you don't try to skew them).
But don't ever let money come between you two. Your marriage is more important than any house or trust fund.
Posted by: WiseMoneyMatters | July 22, 2008 at 05:54 PM
First, find out where she wants to live. That'll narrow things enormously - some areas of Boston, even in foreclosure aren't going to be cheap! But beyond that, sit down and discuss where and what type of house. Then bring up funding sources, list all that you bring to the table, and encourage her to do the same. See if she just brings it up. Since we don't know the size of the trust fund and the size of the down payment it's hard to give good advice beyond that. I'd probably set a threshold of say 10% or less of the trust fund might be worth asking for, especially if that 10% gets you 20%+ down for the house. I would begin talking about it now, and then find the place just after you get married so you can be focused on your wedding and relationship leading up to that point. No need to add more stress to her already stressful time. I speak from experience on this, as my wife and I bought two rental properties 45 days before we were married (one each, next door to each other). It adds a level of stress you probably DON'T want to introduce at that point. This is the voice of experience.
:-)
Chris Meirose
Posted by: Chris Meirose | July 22, 2008 at 05:55 PM
This could just be my slant on things but... The post says "My girlfriend and I are planning to get married shortly" - does that mean they are engaged? Is there a date set? It doesn't sound like it, and if their future plans as a couple are not clearly mapped out, I would not be surprised if she is hesitant to discuss committing any of her assets to a joint endeavor. Not that there's anything wrong with not getting married, but maybe she would feel more comfortable "sharing" if she felt sure of the future.
Posted by: Walden | July 22, 2008 at 06:30 PM
It says the trust fund has been "a sensitive issue whenever it came up in the past". Why is that, do you know? What has she said about the trust in the past?
Maybe there is a specific reason she's not really wanting to discuss the trust. If it was left as an inheritance then maybe thinking about that money is painful to her. Or maybe she simply doesn't want to pitch in her nest egg until after you've married.
I'd prefer the direct approach of asking her directly what she plans to do with the trust fund. If the money is earmarked for something specific then you ought to know. If not then she should be willing to explain her plans for the trust to you.
You are getting married soon so you should be able to have open discussions about this kind of thing.
If you know the subject is upsetting for her for some reason then you could skirt the issue by asking her instead how she thinks you two should make the downpayment on the house. Then if she has interest/plan to use the trust fund then she can tell you without you asking about the trust directly.
Jim
Posted by: Jim | July 22, 2008 at 07:23 PM
Its her money, not yours so leave it alone. Dont ask her, dont bring it up. Just think, Would you like someone asking you how your going to spend your money? If you cant come up with a down payment without dipping into a trust fund she got, then you shouldn't buy a house together.
Posted by: Rose | July 22, 2008 at 08:33 PM
I agree with a previous post about not being ready to get married. When you are married, two become one. There seems to be some kind of two way standard when a woman comes into a relationship with more money. If this had been an example where the man entered the relationship with more money, it probably would not even be discussed.
Having these funds separate then begins a whole new conversation. What about money you earn from a job? Are you going to say that she does not have access to this? Are both of you keeping your money separate and then splitting everything down the middle? If so, why even get married. This is not a true partnership.
If you have money issues now, it will only get worse when you get married. She will continue to call the financial shots and you will not have equal say in matters.
Posted by: Jim | July 22, 2008 at 08:41 PM
I agree with David. I am married and would feel comfortable having this conversation with my wife.
Posted by: aaktx | July 22, 2008 at 08:46 PM
My thoughts - Don't touch the issue. Until you are married and then remember it is something that is not an equal.
If she was my daughter I would advise her NOT to marry this guy. The trust is something for her and her future and for anyone to try and manipulate her decisions for it's use - as this seems, would just upset me and risk her future security.
Basically, because there is no marriage yet.
She would be best advised to NOT buy a house with anyone else. In fact, if she wants a home, she should buy it alone or wait until the marriage is complete.
Posted by: dedicated | July 22, 2008 at 08:47 PM
How about this:
I have $200,000 in savings. I make $100,000 a year. My wife to be has no savings and makes $50,000 a year. That must mean that during our marriage, twice as many things belong to me versus my wife. Also, if we get divorced, I get twice as much as her as well as my original $200,000. Does that make sense? Of course not. Once married, everything is equal and belongs to both of us.
Posted by: Jim | July 22, 2008 at 09:23 PM
Sit down with her over a listing of houses. Get out a legal pad and brainstorm with her what resources you have and what would be your max rice you are willing to meet. That way you can either chose to wait and see if she brings it up or you can build up the courage to ask her during the conversation (taking out that awkwardness). If any adverse reaction ensues, just let her know it was just an idea, you don't need to follow up on it, it was just brainstorming, nothing more. Then pray that she doesn't read this page. :)
Posted by: Amanda | July 22, 2008 at 09:42 PM
Just go ahead and talk to her about it. It might not be comfortable, but thats how you build trust.
Posted by: Chris | July 22, 2008 at 09:43 PM
Before you even start to tie yourselves together financially, you need to get married. Period. Until then, you shouldn't even discuss the issue, because it's her money. Once you do get married, rent for a year. Yeah, it's not what most engaged couples want to hear, but it takes living together for a year before you know what you'd like in a house together. It will also give you time to grow your marriage instead of working on your "fixer-upper."
Posted by: Tom | July 22, 2008 at 10:09 PM
I forgot to mention that you should seek premarital counseling. This counseling will cover many things, especially financial issues, at which time you can address the trust fund in more detail in a "safe" environment. You will likely also learn more about your mate in many areas. Every couple seeking to get married should do this, not just the two of you. The number one cause of divorce in America? Money fights and money problems. Be sure you address this issue BEFORE you get married.
Posted by: Tom | July 22, 2008 at 10:17 PM
I like dedicated's reply. I'll also advise my daughter to be a little wary of this guy.
Looks like he is more for buying the house than her. And if he can't afford the downpayment, then he should be looking at ways to improve his income. Certainly not to try to dip his fingers into her trust fund.
Posted by: fathersez | July 22, 2008 at 10:59 PM
Sounds like you need to pursue a healthy marriage more than the real estate. You are not married so her trust money is not yours. If I were in your shoes I would talk about this possibility of Boston Real Estate and liking to live there but not in correlation with her money, even if you are thinking of the money being in your name together someday.
Posted by: Ben | July 23, 2008 at 02:12 AM
I make and have saved much more than my girlfriend, who I will get married to very shortly. I feel perfectly comfortable talking to her about money issues and have no problem her asking me how we are going to split things up when we are going to get married. We have in fact talked about it and know how we would work our finances and how we would pay for a house when we eventually get one.
So I agree with posters who say, if you can't talk about it, then you might seriously want to consider if you are ready to get married. Financial disagreements is probably one of, if not the one, the main reasons people eventually get divorced. You should make sure you are on the same page when it comes to finances.
Posted by: Double Journey | July 23, 2008 at 03:23 AM
Perhaps the trust is a sensitive issue because of grief she has gotten about it in the past. I have a trust that my parents/grandparents set up for me to pay for me to go to college. Due to good money management it grew beyond that. However when people find out you have a trust fund they assume that means that you/your parents are loaded. In my case it just meant my parents were smart about how to save/handle a college fund. My husband and I have used it to help pay his law school tuition and for the down payment on the house. However this was a joint decision and I would have been very upset if I had been told how to use that money. We plan to leave this money in investments and let it grow. My suggestion would just be to simply ask her if she considers the trust money an option for a downpayment. She may already have a plan in her head to use that money for retirement savings or to pass on to her kids for college, etc. Basically it is her money (and yes I believe this even though my husband and I have completely combined finances and currently I am the only one with an income). Her father saved that money for her and ultimately it is her decision what she thinks is the best use for it. And quite frankly in the market today a house might seem like a bad investment to her.
Posted by: Kristen | July 23, 2008 at 07:34 AM
Just call in to Dr. Laura and Dave Ramsey. Chances are they'd say you're not ready to get married and you're not ready to buy that much house.
How about SHE buys the house if she can afford it, and when you get married, you just move in? Then if you end up not getting married for some reason, she doesn't lose part of her trust to you and you don't lose anything either. She can think of it as diversifying her investments.
Posted by: Andy | July 23, 2008 at 07:37 AM
I think it's a little odd that someone would feel uncomfortable talking about this with someone they plan to marry. I feel that spouses should be able to talk about anything openly... especially finances! Also, I would not recommend seeking out a short sale. I too live in the Boston area, and recently put an offer in on a short sale home. We are still waiting and the wait could take anywhere from a few weeks to a few months before we hear back on our offer.
Posted by: Laura | July 23, 2008 at 08:26 AM
If I were the girlfriend, I'd insist upon a prenupual agreement. Once you're married, everything is not equal. If the girlfriend has this passed down wealth, her spouse is not entitled to it. The boyfriend should engage his fiance in a conversation about financing the house, and see if she brings us using some of the dividends for the trust toward a house. I would be very surprised if she refuseed to use some of the money for a house.
Posted by: carol | July 23, 2008 at 08:59 AM
I am very surprised at the harsh comments here. Every couple has some sensitive issues and commenters who do not know this couple have no right to tell them whether they are or aren't ready to get married. And it isn't out of line at all for this man to be thinking about their financial future and to have an interest in her trust fund. He definitely does not sound like he's only after her money. In fact, I would be more wary of her. If she isn't willing to contribute her trust fund toward their goals as a couple, he should think twice about marrying her.
I would wait until you are married, then rent for awhile, and then discuss your plans for buying a house and coming up with the down payment. I would also suggest premarital counseling, which will get you talking about combining your money and future goals like where to live. I would bring it up in the middle of a more general conversation about finances, preferably after you have disclosed your assets and your plans for them.
All that being said, if you haven't reached a tenative agreement on what that trust fund money will be used for by a few months after you are engaged, I would postpone the wedding, even if it's just a vague, "it's for both of us" or "it's just for [the girlfriend]."
Posted by: Laura | July 23, 2008 at 09:07 AM
1) Echoing what others have said - if you're not ready to speak openly and honestly with her about this subject, then you're not ready for a marriage. If you can't simply ask her the question "Would you be willing to contribute funds from the trust towards a home?" some more work on your relationship needs to happen before that ring goes on her finger.
2) If she's not willing to share the money towards a home purchase you really have to question her commitment to you. Like someone else said above, what's the point of a trust fund if you can't use it for something as basic as a home.
Posted by: Kevin | July 23, 2008 at 09:13 AM
I agree with the harsher comments. The solution is pre-marital counseling, where they will force you to talk about it. It's not going to suddenly get easier when the rings are on.
Posted by: dogatemyfinances | July 23, 2008 at 09:16 AM
Ok - I am the reader who submitted this question and I thank FMF for posting this! First off, thanks to Laura for saying some comments by Fathersez and Dedicated were a little over the top. The rest of you had great suggestions! I do plan on speaking with her about this, but I am trying to get feedback on the best way to approach the issue. I think I should have written my email more carefully. Let's say the first funds available are $150k. This is not a $10M trust fund or some exorbidant figure. Her father passed away and left some money for each of the kids. We are not currently engaged although we have discussed our future wedding openly. We may be a little different than the "old-school" thought process and yes, there would be a pre-nup agreement (my suggestion to her, since if I was in her shoes I would feel more comfortable if something terrible were to ever happen which is highly unlikely). I am certainly not some greedy kid trying to get into my girlfriends trust fund. I am trying to help set us up for a happy future. If it helps you out in giving me suggestions, just pretend that we are already married. We currently live together in Cambridge so any of the weird quirks or anything have finally been figured out (she needs the closet doors closed when she sleeps). We have only grown closer in this process and are very open about everything else.
Now that you know I am not a sleezeball or one of your daughters' terrible ex-boyfriends, what are some other thoughts on how to approach this. If she does not want to use the trust I would be completely fine with that. I think she would regret moving into some crappy condo in a tough area when the extra $5-$10k could have put us in a nicer area. The only reason it is a sensitive subject is because it brings up her father's death. I make about $20k more per year and we will have close to $30k for a downpayment (separate from emergency fund, no credit card debt, etc.). We are in pretty good shape financially for 2 recent graduates living in Boston. For the Boston natives, we are looking at somewhere in Cambridge, Brighton, Newton - the inexpensive areas, etc. She works downtown, and I work about 10 miles outside of the city and need to drive to work. I hope this helps to clear up some of the issues.
The bottomline is if it was my trust fund I would feel silly if i didn't use some of the first available funds to get me in a decent, small, affordable house and jumpstart the rest of my financial life. We are not taking this money and trying to flip houses or anything, we are thinking long term 10+ years. I have not directly asked her how she feels about this because she gets saddened when we talk about her father's death.
I will definitely recommend the premarital counseling and I think she would certainly be open about that.
Posted by: Boston | July 23, 2008 at 09:47 AM
A few other things I may have missed...
-She always talks about how she wants us to buy a house together. I am not pushing this on her in anyway or trying to jump the gun. We hate wasting so much money on high rental fees near the city. We would likely save money by purchasing the house on a monthly cadh-flow basis (plus the extra money going to principal). In MA you can deduct your rent so the tax advantage is minimal to purchasing a house.
Thanks again for all your help! This site is tremendous and really helped me get my finances in order after I graduated from college and took my first job
Posted by: Boston | July 23, 2008 at 09:53 AM
1. The couple should not buy a home until they are married.
2. Enjoy your marriage the first year by renting a place.
Why add additional stress by trying to work out the logistics of how to get the numbers to work to buy a home.
My two cents.
Posted by: Manu | July 23, 2008 at 10:37 AM
Maybe one idea would be to talk to a financial advisor about where she should invest/save the money in the meantime. Then in future conversations it would just be her money in one of her funds and less attached to the memory of her fathers death.
Knowing the additional information (that you are living together and both want to buy a house), I would say to talk about saving up for a downpayment and how much you can afford, but I would still wait until after the wedding to start looking seriously at houses.
Posted by: Laura | July 23, 2008 at 10:41 AM
Hate to BLOW UP their bubbles.
Until you are both married .
Until you have both had 1- 2 yrs in your jobs/fields.
Until you both have 'earned' cash saved for the house.
Until you KNOW how far to live away from your in-laws.
Do NOT buy a 'house'.
Working as a foreclosure server (plenty of work) , I've asked the folks some of the causes (see above).
Most bought on the falsehoods of a house being correct for every one - Sorry IT ISN'T.
Do Not touch the 'trust fund' until u and she can real prove you both understand money - how to earn and how to lose it.
Posted by: Robert w | July 23, 2008 at 01:15 PM
I think going to see a financial advisor is a fantastic idea. It takes the focus off of her trust fund and puts it on the real issue - how they're going to afford a good home together. In fact, that's probably how he should approach the whole question. It's not up to him how she uses the trust fund, and if she's still emotional about her father's death, she's probably not going to make rational decisions about the money right now, and should put it off until she feels more balanced.
And isn't the whole point of being married to grow as a couple? Of course they're not going to be completely prepared for marriage - especially if they've never BEEN married before. Trial and error.
But at least get that girl a ring before you start asking specifically about her trust fund. Maybe she intends to use it to send your future children to college - you just don't know yet.
Posted by: Lana | July 23, 2008 at 01:55 PM
Boston,
ARe you planning to buy the house before or after marriage?
Is a marriage date set? Have you even proposed? She may simply be waiting for the actual proposal and commitment before taking further steps in discussing finances.
You talk about getting married 'shortly' and buying a house 'next summer'. Next summer is while away. I think theres plenty of time for you and your girlfriend to figure out the specifics of your house purchase.
I don't see a need to rush things here. If you start asking her about the trust fund too early then it might come across wrong (as some other commenters here have taken it). I think maybe you're probably just wanting to have a solid plan in place and know how to handle your money in the meantime. You might want to know if you should be saving money like mad for a year for a downpayment or if you can do other things with your current cash and expect to use the trust money for the downpayment. Since the trust fund is a sensitive subject for her I wouldn't push things. Just plan your finances as if the trust didn't exist and work towards your eventual marriage.
Jim
Posted by: Jim | July 23, 2008 at 02:38 PM
Amy and a few others are correct.
I married someone (a male) who had a trust fund that is run by his Dad. I am not sure even that he knew about it until his parents starting giving out money each year. How nice! It was like winning the lottery. I was asked if it would be okay to put the money against OUR house, jointly purchased, and naively said "okay." At the time, I had been told that it was a gift to both of us (the info about the trust fund came a few years later, but $10,000 cash gifts came for 3-4 years before that). This mattered when later we ended up in divorce court.
I share the points about the marriage prospects here as well (girlfriend? getting married soon? I think that is normally called a fiance).
My bottom line, particularly as you've noted that bringing up the subject is touchy to her (and to one of the fathers online here, who shares "The Family's" perspective of why the money exists in the first place) is to find someone in your own socio-economic class who shares your goals, drive, and values. Your values are off here, big-time, and I would think your drive is, too, and perhaps your life goals.
The trust fund is pre-marital and will always be hers (even after marriage and divorce) - same for all pre-marital assets.
If you insist to endure the pain this marriage will eventually cause you, follow the advice of the ones who said to share in the cost 50/50 and let her figure out how she will afford her half. If you can't afford YOUR half, then stop digging for gold in her backyard, and go earn it (or learn to live on less as you go thru the lean years of building yourself up the hard way, i.e., bootstrapping it, not marrying it).
Good luck!
Posted by: Di Eats the Elephant | July 23, 2008 at 02:44 PM
Holy moly. The people on this site can be so far over the top sometimes. Uh, Di esp. needs to relax and stop making such blatent judgments. Sheesh.
My husband and I purchased our 1st house before we were engaged and while I was also in law school (no income for me for 3 years). We also knew we were going to be married eventually. The difference is we weren't looking to buy at the time, but we became aware of an opporunity to buy a nice starter house from for $200k, when all other houses in the area were around $350k (sellers needed to sell quick). We took advantage of it, and it was the best financial move we've made to date, ultimately netting us $100k when we sold it 4 years later (at which point we were married). This allowed us to purchase our beautiful 2nd home, which we would not be able to afford for 5-10 more years if we didn't get the large return from our 1st house. Long story short - stop generalizing. These things can work out.
However, I say again to the reader (I was the 2nd commenter) that you don't need to bring this up with your GF if you're this uncomfortable about it. She sounds like she's smart enough to figure out that if she wants to tap into it for her 1/2, she will. I would worry about your 1/2 and ask her how much of a downpayment she can contribute. Let it be her idea to tap the trust (or not).
Also, as an aside, it's not necessarily true that the trust is automatically a "pre-marital asset." If she has any power of withdrawal over the trust during her lifetime, it can be brought into the marital estate in MA during a divorce proceeding if there is no prenup. (Every state is different on this).
Finally, I'm also in Boston, and the areas you listed, Cmabridge, Brighton, Newton, are HARDLY inexpensive! They are the most expensive areas close to Boston. Check out Medford (near the Winchester line), Melrose, Arlington, Natick, Needham and Milton (dependig on which direction you drive).
Posted by: Amy | July 23, 2008 at 05:35 PM
When you work out that prenup with your GF, make sure you also make sure that you get credit for the extra $20,000 you make per year and that it should come back to you before splitting proceeds after a divorce. Fair is fair, right????
Posted by: Jim | July 23, 2008 at 07:53 PM
Wow. I just wrote a long response but it was then lost? Sorry!
Quickly - Amy - I echo your thoughts exactly and think you gave some great advice. I think I will just wait for the right time to bring it up, if at all. I'm in no rush and she has been much more chatty about the trust/funds lately since she has some decisions to make on where/how to reinvest the first disbursement.
-Di eats elephant - wow. I'm sorry your relationship didn't work out but I'm pretty amazed you seem to think I am emminently headed for disaster. How are my drives/values off?? I bust my butt all week, work second jobs in the summer and save like a madman for emergency funds/ future house downpayments. Her family is very open about this with me unlike your ex-husband's family. There is no deceitfullness in our relationship. Assuming makes an A#% out of you and me...
Jim - Great point. We have also talked about this in the past. I think it's in both of our interest that she rightly would keep the trust and my extra income would be acknowledged in the document. I'm amazed how some people get married and should have a prenup, don't because someone's feelings will be hurt.
Thanks again for all of the help. I think the title that FMF gave the post may have been unintentionally misleading which spurred some negativity but I am certainly thankful he posted the question and I got a lot of good feedback.
Posted by: Boston | July 24, 2008 at 12:48 PM