Financial Planning for Polyamorous Families
If you're in a polyamorous relationship, you know that managing your finances can be a whole other level of complexity, but the good news is that there is help for you! In this article, I'll explore some of the unique financial planning challenges that polyam families might face and provide some tips and resources to help you navigate them.
For the purposes of this article, I'll be talking about what I like to call "financial planning polyam." Those are arrangements where multiple people have made a long-term commitment to each other and are ready to plan their finances together for the long-term future. These “polycules” can take all sorts of shapes and involve any number of people, be open or closed or anything else, but if there is a group of people within it resolved to plan together then this article is for them. A closed Triad, a pair of married couples, a committed cluster, they all can navigate the challenges, and take advantage of the opportunities of financial planning.
I'll touch on multi-income households, life insurance, retirement planning, estate planning, home ownership, and taxes. By the end, you'll have a better idea of how to handle the complexities of polyam planning and build a solid financial foundation for your family.
Let's start with the biggest potential opportunity. Having more potential income streams than a traditional couple can be a total game-changer. Not only does it make you more financially stable (hello, less reliance on any single job!), it also means you can save and invest more, afford a better lifestyle, and have more flexibility with work and family.
Speaking of increased financial stability, while having more people in your household does mean more expenses, there are also some economies of scale at play. A house that fits three people isn't 50% more expensive than a house for two, and utility bills aren't going to skyrocket either. Plus, you can share things like Netflix subscriptions and board games, and you may carpool which saves on gas. Ultimately, each additional person costs less as part of a group than they do on their own. Which is maybe the least romantic and sexy description of poly ever, but it's something handy to keep in mind if you're wondering if you should have a group discussion about finances.
As for a better lifestyle, that might be higher quality clothes and food, more frequent travel, or pricier recreational activities. It could also be more money to charities you care about or just be more freedom to read a book by the window on a rainy day. Or collect antique clocks, I suppose. Whatever works for you, I'm not here to judge.
Lastly, the flexibility is important to really fully appreciate. It can make it a lot more affordable to have one person stay home to care for kids, for example, while the others bring in money to the household. Or if someone needs to take a sabbatical for health, or any other, reasons. It's potentially a huge benefit for everyone in the group!
Life Insurance Considerations
Life insurance is primarily there to protect your loved ones if something happens to you. It's something everyone should think about in general, but in a polyam relationship, there might be multiple partners who are financially tied to each other and would be affected if one of them died. Plus, there might be kids in a polyam family. In all those cases, it's often a good idea for everyone to have their own policy, just in case.
Here are a few things to think about when it comes to life insurance in a polyam family:
How much coverage:
Each person in the family should think about their own financial obligations and how their death would affect their loved ones and use that to help determine how much life insurance coverage they need. One helpful consideration is that the existence of multiple other partners may lessen the financial impact if someone dies. A sole surviving spouse in a traditional marriage has to afford and manage everything on their own, but in a polyam relationship other partners are there to help share the burden. And finances aside, to hopefully grieve together and help each other through the emotional devastation of a partner passing away.
Other things to think about include the cost of final expenses, paying off a mortgage or other debt, whether there will be new childcare costs or help with future college funding for kids, and helping to support the general lifestyle of the partners left behind.
Choose the right policy:
There are different types of life insurance policies out there, like term life insurance, whole life insurance, and universal life insurance (plus others, it's kind of a lot). Pick the one, or combination of several, that meets your needs and fits your budget. A good agent or planner can help sort through this sort of thing.
Name your beneficiaries:
Who gets the money if the person dies? It could be their partners, kids, or other loved ones. Just keep in mind that the life insurance benefits go to whoever is named as beneficiaries, regardless of any other financial arrangements within the family or “unspoken agreements”. Consider getting a trust to be the beneficiary and have it manage some or all of the payouts (see estate planning section in this article).
Review and update your policies regularly:
Life insurance needs usually change over time, so it's important to review and update your policies regularly. This is especially important in a polyam family, where relationships and financial circumstances can change even moreso than in a traditional couple.
All in all, it's important for a polyam family to carefully consider life insurance needs and choose policies that fit their unique situation and protect everyone in case the worst happens.
Retirement planning can be tricky for polycules. Here are just a few of the things you might run into, good and bad:
Polyamorous relationships are not recognized by the Social Security system, which can cause various problems. For example, unmarried partners don't qualify for survivor benefits if one of them dies. Or, if someone stays home to raise the kids, but isn't legally married to anyone, that parent winds up not being able to collect Spousal benefits even if their own benefit is potentially very small due to the years out of the workforce. These are factors that can be planned around in various ways to make sure the family is ok in retirement, but you have to be aware of them.
Long-term care and Medicaid:
Similarly, relationship status can affect your eligibility for long-term care and Medicaid benefits. Being legally married can often make it easier to qualify for various long term care programs. If both people in a marriage need nursing home care, they can usually stay together. But if you have unmarried people in the mix, they aren't going to get those same considerations. Though it is also important to note that there are also ways to leverage having people in the relationship who aren't legally married and those should be taken into account as well.
Inheritance and legacy planning can be a challenge in the polyam world. This is the second time it's come up just in this article! And it will again! Anyway, the default state and federal laws for a lot of these issues will not line up with how a polyam family would want to handle things. Meanwhile, leaving behind a legacy is a common retirement goal so it takes extra consideration to make it work despite the existing legal frameworks.
More resources for a better retirement lifestyle:
Pretty simple, more people saving and investing for retirement means there's more money to fund your lives together later on. Those same economies of scale that helped during your working lives will continue to help in this phase of life. You still need to carefully plan out how to spend down and manage investments to make sure you don't run out of money in your final years, but your chances are obviously better with more money there to start with.
More people to manage things:
One handy thing about being in polyam families in general is that there are more people to help with the tasks and responsibilities of managing the household and finances. The necessary energy to check the boxes and handle the to-do list items can be spread out farther so no one person is as overwhelmed. That can make it easier to handle doing actual retirement planning in the first place. Plus other stuff like healthcare, coordinating benefits, and paying bills once you've actually retired and still need to keep the lights on, Netflix happy, and your medications refilled.
Please keep well in mind that these are just some highlights. Full on retirement planning for a polycule is much more complicated and detailed and deserves serious time and focus and professional help. But overall, while retirement can be a bit of a minefield for polyam families, with some careful planning and consideration, you can navigate the challenges and take advantage of the opportunities to create a secure foundation for your future together.
Estate planning can be especially tough for polycules and has a number of issues to keep in mind:
One of the main issues for estate planning is the people in the relationship actually deciding who they want to get what if someone dies. In a traditional marriage, a spouse is usually the main beneficiary. But in a polyamorous relationship, it can be harder to figure out who should inherit things like a home, personal property, or investments. The family needs to come together to make a plan that takes into account the wishes and contributions of all members of the household.
Aside from property inheritance, matters like child custody will be much more complicated when someone dies. You really want to talk to a good family law attorney if your polycule has kids to make sure all the parents (as the family defines them) have the necessary rights and responsibilities. Imagine three adults raising children together and then one of the biological parents dies. The kids think of them all as their parents, but the law might draw different distinctions based on biology or legal marriages, and the results can be heartbreaking without preplanning.
Another issue is that most legal systems don't recognize polyam relationships. This can make it harder to implement their wishes since the relevant laws and procedures aren't set up for it. A good estate planning lawyer becomes a critical resource to include in your planning team to make sure everything is arranged properly. For example, you may need a trust to own property and then manage it for beneficiaries as a way to bypass the probate system and keep things fair and ensure that the surviving family thrives.
Finally, polycules may need to consider how to protect everyone in the relationship in case of a breakup. This could mean creating legal documents like cohabitation agreements or domestic partnerships to outline the terms of the relationship and deal with disputes. Or, for example, I had clients who formed a family company to own their house to make managing new partners or break ups easier. Remember, the law will not protect unmarried members of a polyam relationship the way it will seek to protect married couples.
In short, estate planning is important for polycules. But one thing they share in common with traditional couples is a reluctance to actually do it despite how important it is. It's also really important to get good legal advice here, this is not something you want to DIY and find out decades later you didn't handle it correctly.
Yup, some stuff comes up with owning a home if you're a polycule. One of them is deciding who owns what share of the house. In a couple's marriage, both partners usually have equal ownership, but in a polyam relationship, it might not be so clearcut. For example, three people in a committed triad might all want equal ownership, or one person might want to be the main owner with the others having a smaller share. Or two people already owned the house and are now adding more people to the mix. It's important to figure this out for legal and financial reasons such as how the house is titled, how it's taxed along the way, and how is it split up if the relationship ends or someone dies.
Another home issue is handling financial contributions and responsibilities. In many married couples, both partners contribute to the household income and expenses. In a polyam relationship, there might be more than two people contributing and it might be necessary to figure out how those contributions are divided and how expenses are shared. Really, this is an “everyone who owns a house” problem, but as is so often the case, polyam households have fewer societal defaults to rely on and really need to talk through it all together. Of course, this can also be a significant advantage as the polycule avoids misunderstandings and makes sure expenses are taken care of.
Lastly, polyam families may face societal or cultural challenges when owning a house. It might be tough for a family with a non-traditional relationship structure to find or finance a home, and they might face discrimination from neighbors or others in the community. It'll probably be necessary for the family to be proactive in addressing these challenges and finding ways to support and protect each other.
Taxes are a real pain for a polyamorous family. For example:
Only married couples are allowed to file their taxes together, which can save money and help you claim credits and deductions. A polyam household can't do this, unless two of the people are also legally married. Which can then create a lot of complicated scenarios to sort through in terms of who is married to who and earns what and owns what and how that all interrelates. A really good tax accountant is incredibly helpful here. Really, this is a requirement, you need one.
Credits and Deductions, the return: Imagine three adults and two kids living in a blended polyam family. Now imagine that parents can potentially qualify for tax credits based on their income, tax filing status, and how many kids they have. Now imagine figuring that mess out. I'll repeat; you need a good tax accountant. Not only to do your taxes, but to help advise you on how to structure things ahead of time to hopefully owe less in the first place.
Those are just a couple of examples out of a million others. To hammer home the theme of the article once more; the systems of our society are not set up for polyam people and you need to spend some careful time and consideration to avoid countless pitfalls when dealing with your taxes.
Financial planning can be a tough task for anyone, but it can be especially challenging and complex for polyam folks. Retirement planning, life insurance, estate planning, parenting, and so much more can all fold into it. I didn't even mention health insurance, which is a tangled maze in the best of times, but even more so with more people in the mix!
But at the end of the day, no matter what your family looks like, whether it's a triad, quad, or something else, this article will hopefully help you handle the financial complexities of your polyam relationship. At the very least, I hope it provided you some starting points on asking the right questions to investigate further. Just remember that once you do have a financial plan it is important to review and update it regularly to make sure it's still meeting your family's needs. With some careful planning and attention, you can create a financially secure and fulfilling future for everyone in your polyam relationship, however it looks.
Owner, Champion Financial Strategies & Insurance Solutions
The ideas, opinions and concepts expressed should not be construed as specific family planning advice. You should
consult your own tax, legal, or accounting professionals before making any decisions regarding your particular situation
or any situations referenced in this article.
The opinions reflected in this article do not represent the opinions or views of New York Life Insurance Company or any of its affiliates.
Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.