Financial Complexities of a Troupled Household
A trouple is a three way couple in a long-term relationship and they have financial challenges just like people who co-mingle finances in a traditional marriage or domestic partnership. Watch an episode of Big Love and you’ll see that money issues aren’t really that different when two, three or four adults are involved in a committed relationship. This week we have a guest post written by Ceejay from Minneapolis where she’s interested in your input on their troupled finances. These are her words’¦
I’m a bisexual woman and make the financial decisions for my household (3 working adults). I think I’m on the right track, but I welcome any suggestions or input about how we are handling our money. We have a ton of debt: mortgage, student loan and personal/credit. We have no savings except our 401(k)s; but our net worth (calculating retirement + house values – debt) is $63,000. Our ages are: 33, 34 and 28.
Last March we got serious about our money situation, and have paid off over $15,000 of debt since July. My main goal is to eliminate almost $70,000 of remaining credit card and personal loan debt, after which we’ll start saving and investing, paying only a little more than the minimum on our $70,000 student loan debt and $300,000 in mortgage debt. With the probability of kids and an international move looming in the next 5 to 10 years, I really want to get us stable financially. I feel that investing and saving are more important than eliminating mortgage and education debt, but I do go back and forth on that.
Day-to-day, everything works quite smoothly: All our paychecks go into one account, and I dispense spending money, pay the bills and decide how the rest of the money is allocated. From a legal standpoint, though, our situation is quite thorny, should anything happen where courts would have to decide things:
My girlfriend, now wife (not legally) of 10.5 years and I co-own a condo and co-signed the mortgage. Our boyfriend, now husband (mine, legally) of 2.5 years owns a flat in England that he’s renting out. He lives with us in the U.S and I suppose we (he and I) own half of each other’s assets now that we’re married.
We would like to combine our finances completely, but since he is here on a marriage visa, we don’t want to confuse everything too much, lest our marriage look less legitimate. (Legally, we are in the clear, but we want to avoid the costly process of defending ourselves should the presence of a third, unmarried person cloud the issue in the minds of immigration officials.) So for the time being, I have him as the sole beneficiary of my work benefits (life insurance, disability, 401(k), etc.) We do have a joint checking account–my girlfriend and I joined ours when we bought our condo, so we added our husband’s name to the account when he moved in.
I’m indiscriminately paying the debts down based on interest rates and cost, regardless of whose name is on it. This means that my wife is technically credit-card debt-free, my husband will be there in less than a year, and I will be left carrying the only credit and personal debt. However, I have a plan to pay all of it off in two years, so assuming our relationship is as happy and stable as I think it is then this shouldn’t have any ramifications for me.
We have a long way to go, financially and legally, but hope to start having kids in a couple of years if we get everything straightened out. We’ve made a lot of financial mistakes, but having a TINK (triple income, no kids) lifestyle for a few more years should straighten us out a lot.
We’ve gotten plenty of cautionary criticism, and we know we have a lot to worry about. But we also feel we have a lot to be thankful for, and feel pretty optimistic about our futures. If anyone has any suggestions for better ways to handle our financial and legal issues, I would welcome the input below.
Wow, I’ve never thought of the dynamics of personal finance in relation to three people.
It sounds like you are being explicit about it and talking it out which is the most important thing.
I also think it’s great that you are writing down what you see as the agreement. You never know and it’s good to have on paper your current intentions in case it ever comes up.
Not every state in the US is a “community property” state, so just because you are married does not necessarily mean you each own half of the other’s debs/assets. Minnesota *is* a community property state, but there are at least several states left that are not.
Part of this week’s Carnival of the Insanities.
CJ–
I saw a post you wrote recently at savingadvice.com. I’m glad to hear more details here because I have a general interest in unmarried families and how they handle money. It sounds to me like you are doing great. As long as no courts get involved, your plan sounds good.
Once you have the debt paid off, though, perhaps you should start dividing savings 3 ways, putting an equal portion in each of your names. That way, if somebody gets sick or dies or leaves or whatever, the other two will be left with a neat two-thirds of your household net worth.
It also occurs to me that you and your wife are each taking a risk, while it’s not totally clear that your husband is risking much. If something bad happens before the debt is paid off, you’ll be left with the remainder of the household debt in your name. That’s the risk you’re taking. And if something bad happens to you, your wife won’t have your workplace benefits coming to her. And the condo she co-owns with you will also be co-owned with your husband, while she won’t legally co-own his UK house. Again, as long as you can get through the next couple of years without a disaster, then none of that is a problem. But I’m just observing that the risk isn’t very equally spread around.
Question–if you sold the UK house, would the proceeds pay off the debt? Maybe it’s worth considering if you don’t plan to move there for quite a long time.
That’s my two cents, but overall I think you’re in really good shape, at least as far is possible given the limitations of the system.
I think I know how to clear up the issue with asset division and ownership.
I think, if I was in this situation, I would create a trust. We would all transfer ownership of our assets into the trust. We would all be “big shots” in the trust – holding controlling shares. Then when something happened to one member, the others would free and clear take over the 3 members shares of assets. NO Probate. No explaining their personal life to those who don’t need to know. And no, tax consequences.
Especially when kids are thrown into the mix. All 3 parents need to make sure that the kids will be provided for.
Thank you guys; these are very interesting ideas. tiredbuthappy: It’s true that my wife and I have the greater risk on paper: me by carrying the greatest debt, her by not having the legal rights of marriage. But our husband risked the most of all by giving up his career, home, country, family and friends to live here in the U.S. (a country he loves in many ways but is deeply disturbed by in others). And, the whole reason we’ve got net worth at all, besides my debt repayment, is because of him: He had less debt and more home equity to begin with than we did.
Selling the UK house is also interesting. We would be able to clear up over half our total debt, including all our credit card debt. My main hesitations are: I like knowing we have that asset in England because we’ll need a bigger house when we move there and house prices in the areas we like are, frankly, through the roof. His tiny one-bedroom flat is conservatively worth US$260,000, and it’s not even in Oxford proper. The other hesitation is that I’d have to figure out the tax ramifications of any profit we made on the house. Currently we don’t make any profit on renting his flat, which I’m dreading because the taxes will get so complicated.
Dedicated: How would we look into the trust idea? Are there lawyers who specialize in that, or can you do it on your own? I think we’re doing OK at present, but when we start having kids we do want to make sure we have everything in place. We’ll want to take care of this legal stuff now, because the regular having-kids stuff will be intense enough on its own!
Again, thank you both for your advice.
Okay, this is wildly fascinating. Beyond the daunting finance triangle you’re navigating, you all three must be courageous and incredibly secure to make this work. I’m in awe. You are bookmarked. Here’s a thought: Why don’t y’all incorporate?