This would be a non-pecuniary interest, as the councillor's family would not benefit financially, so it should be declared as such and your code of conduct will specify whether or not the member should withdraw from the meeting.
You should also bear in mind the fact that the council may not have any legal power to give money to the PCC, due to a clause in the original Local Government Act of 1894 that hasn't been repealed. Many councils do fund the maintenance of churchyards and other items relating to the church, but the view of the NALC's legal experts is that there is no legal power to do so.