The Financial Guide
How to navigate finances and taxes in poly relationships
|Written by Tom Yeung, CFA | CDFA|
Investment Advisor & Fund Manager, Jurnex Financial Advisors
How to manage the finances and taxes of polyamorous relationships?
Polyamorous relationships are surprisingly common in both the LGBT and heterosexual communities. One estimate suggests 4-5% of Americans are polyamorous. Another study of 3,574 married couples found that between 15 to 28% of couples had “an understanding that allows nonmonogamy under some circumstances.” Among LGBT couples, the number can be as high as 68%
Yet, people rarely discuss the financial aspects of polyamorous relationships. Polyamory already tends to be a taboo subject in American society. Add the concerns of economic well-being, and you have a mix that few want to discuss.
However, there are few things more important than protecting those you love. And so, in this article, we cover the financial aspects of polyamorous relationships. How to manage family finances in polyamory?
As always, I strongly suggest you reach out to a financial professional before making any financial decisions. That’s because it’s vital to find an advisor who cares about your economic well-being. But to get you started, here are the essential elements of managing finances in polyamorous relationships.
What are polyamorous relationships?
Before we get started, let’s take a quick look at the definition of polyamory.
In short, polyamory is a combination of the Greek word poly (multiple) and the Latin word amor (love). The term means love between more than two people. Poly relationships are different from open ones, since love (and not just sex) is a key element.
Why are finances so essential to polyamorous relationships?
Proper financial planning lets you protect and care for those you love.
- Love is infinite. Giving your love to one individual doesn’t mean you have to love anyone else less. (Talk to any parent with more than one child.) In a similar sense, you can love two or more people equally.
- Money is finite. Unlike love, money is a limited resource. The more you give to one person, the less becomes available for yourself and your other partners.
Read about how Jurnex helps people in poly relationships
What are the laws surrounding polyamory?
Currently, US law disallows marriage to more than one person. That means polyamorous families have to navigate a thicket of financial, tax, and legal issues. These include:
- Tax filing status
- Gift taxes to unmarried family members
- Wills and durable healthcare proxy
- Hospital visitation rights
- Retirement planning and cash flow management
Some financial experts specialize in complex cases. If you’re in a polyamorous relationship, it’s crucial to contact an expert who can help you create a plan.
Common poly financial arrangements
I find that one of the surest reasons why polyamorous relationships fall apart is when one member feels removed from the rest of the family. And when it comes to finances, it can feel especially alienating for one member to receive less “love” than others.
In the section, we’ll examine the four financial arrangements of polyamorous relationships, and assess their advantages and disadvantages.
1. Every man (or woman) for themself
No economic ties between any family member
In this case, every person fends for themselves financially. No members own any joint bank accounts or co-own any property.Typically, a financially independent family will live together in the primary partner’s house. The primary would either let family members live there for free or charges them some amount of rent. Alternatively, some families choose to live apart to maintain total independence.
- A clear division between personal assets
- Financial independence among every family member
- No financial aid between family members
- Inability to take marital tax deductions
Assessment: In the short-term, staying financially independent comes with many benefits. But in the long run, the lack of money or property connection can put a strain on truly polyamorous families.
Read more about single-life retirement planning
2. Fully connected
All money gets pooled among all family members
Pooling all income can be typical among those in polyamorous religious communities. In these cases, all income from every member gets combined into a single entity. Often, the family patriarch ultimately decides how money gets spent.
- Clear rules for pooling money
- Financial unity among family members
- Unclear who makes spending decisions
- Gift tax issues from sharing your wealth
- Division of assets if one family member leaves
Assessment: While combining money is usual among married couples, the practice can create problems among three or more members. For instance, if one person goes, what’s considered their separate property to take? Managed well, however, pooled arrangements can create strong financial unity and trust for long-term relationships.
A “core” individual or couple providing for others
I typically see this happen when an older individual or couple “adopts” a younger family member who’s less established. Support often comes in the form of housing, but can be cash-based as well.
In heterosexual couples, the husband (it’s usually the man) would often provide financial help to a second lover.
- Ability to help family members in need
- Clear tax and property rights
- Possibility for members to feel like a “third wheel” or “mistress.”
- Property transfers triggering gift taxes
Assessment: For married couples, be careful of how you communicate spending decisions to your other half. There’s a temptation for the “primary” family member to make financial decisions unilaterally. For single people, don’t get taken as a “sugar daddy” if that’s not your ultimate goal.
4. Proportional contribution
Every member contributes an equal proportion of their income
With a proportional contribution, a family creates a pooled account for shared expenses (i.e., housing, utilities, travel, and food). Each member then contributes a certain percentage of his or her income to the pool (often 50-60%.) The leftover amount remains with them as separate property to save or spend.
- Fairness in percentage contributed
- Clear tax and property rights
- Complex accounting if one couple is married
Assessment: This is probably the best arrangement of the four financial possibilities since each member contributes an equal amount of effort to the pool. And since the pooled dollars benefit every member, you’re generally not at risk of triggering gift taxes.
Financial Readiness Checklist For Poly Relationships
Once you’ve decided on a financial plan between family members, it’s time to navigate the legal side of polyamorous relationships.
- Will. Because US law disallows marriage between more than two people, your assets won’t pass onto non-family members unless you have a will. If you pass away without a will, your assets will default to your next of kin.
- Durable Power of Attorney. A durable power of attorney enables a trusted person to handle your affairs if you become mentally incapable of making decisions. Without a PoA, even spouses have limited rights when it comes to managing your assets on your behalf.
- Health Care Proxy. This document allows your family to make medical decisions on your behalf if you become incapacitated. The paperwork can also let non-related family members visit and stay involved in your medical care.
Read about the top retirement mistakes high earners make
Next steps to financial readiness
1. Have A Family Meeting
Once you’ve chosen an executor and health care proxy to carry out your documents, it’s essential to discuss your wishes with them. Many people falsely assumed their loved ones know their intentions.
Have a facilitator run the meeting. Often, it makes sense to hire a third-party professional to conduct a meeting. Qualified advisors can provide a set agenda, checklist, and advice for people in polyamorous relationships, and can act as a mediator as well.
Read how to plan for long term care
2. Run through potential scenarios.
It often helps to quiz family members in certain situations. For example, what should your family do if you get into a coma, and the doctor says you have a 30% chance of a full recovery?
3. Conclude with an actionable list.
Your family meeting should have a clear action list at the end, whether editing a will or filing documents away. It’s tempting for these family meetings to run around in circles, but your job is to get things done.
Financial Planning for Polyamorous Families
Financial planning can already be difficult for individuals and couples. That’s because, when you add third or more family members, the number of connections goes up exponentially. Having three family members creates three distinct relationships, but having four family members creates six.
In a polyamorous family, it’s necessary to have a financial plan written for EACH family member. That’s because every member will have their own lives to consider. Even married couples within a polyamorous relationship should have a sense of their finances since differences in age, career, and goals will affect not just their primary partner, but everyone else in the family.
Read about how to start investing
It can feel overwhelming for a polyamorous family to navigate their financial lives. It’s hard to know where to begin. Fortunately, help is available. Here at Jurnex, we work with individuals and families to navigate these types of financial waters. Because when it comes to love, it a profoundly personal choice. Your happiness is in your hands.
Where to find more resources
If this seems like a lot of information, don’t worry. The great news is that help is available. That’s because here at Jurnex, we work with individuals and families just like you to make the most out of investing. I’ve helped invest client money for over a decade in the same old-fashioned way. And that’s to seek out great companies in great industries that can you can buy at a discount to their fair value. Sounds too simple to be true? Give me a call today, and I’ll show you that it’s still possible after all these years.
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