List of various legal documents for poly cohabitation and "marriage"

breathemusic

Active member
Hi all,

I did a quick search and wasn't really able to find any sort of comprehensive thread that really lists out all of the various legal documents to consider in one place. I just found a bunch of threads with individual topics like child custody agreements, and house stuff, etc.

I was hoping that for those who are experienced with dealing with these issues I could try to put together a fairly comprehensive list of all the ducks to get in a row when a polycule plans to cohabitate together. Obviously there will be some variation from state to state (sorry international peeps, I'm in the US, so I'm looking at it from that perspective) so in the end I will definitely consult a lawyer when the time comes, but I'd like to at least be able to do some of the research and prep work myself!

Here's what I've got so far:

Relationship stuff between my partner and I:

-Living Will and/or Will
-Power of Attorney
-beneficiary on various policies like insurance, etc.
-Is there something else needed that would allow things like visitation in a hospital, etc.?

Group owned/shared property:
-Cohabitation agreement (maybe)
-LLC for ownership of house possibly?
-buy/sell agreement
-discussion/negotiation on level of entangled finances such as bank accounts


Am I missing anything or is there any other documentation/steps that people recommend looking into?

For my particular scenario, my partner is already legally married. The 3 of us, along with a very good friend who isn't poly, just a friend, are all looking at buying a house together, so part of what we need to consider is who all should own vs. some owning and some renting. If we all own, do we decide to create an LLC? Even so, we need to draw up potential personal loan paperwork in the even that parties put down different amounts of cash toward the downpayment so that things eventually even out. We need to have an agreement in place to address what must happen if any party wants to ever move out and the other parties need to buy out their share of the house, etc. From the more personal side, since I will never be legally married to my partner I want to make sure that he still has the ability to make important decisions if something happens to me medically. I'd want to make sure he was included in my will, etc. We would also need to figure out how things would work between his wife and I if anything ever happened to him. I'm not really in a huge rush on this since we're all just now in the discussion and planning stages on house stuff, and I'm in no rush to have a "commitment ceremony" or handle the other legal stuff on the relationship side until we either live together or have gotten "engaged." But I at least want to start thinking about it and have a general idea of the path forward!

From a state law perspective, we'll most likely be living in MD once all of this happens.
 
Have a read through Bluebird's blog, she seems to have it all in hand. I remember that she has life insurance on all her guys, and a bunch of other stuff set up. Also (as an aside) make sure you insure the non-income earners too. If something happens to them you have to pay someone to do all the things they did for free (childcare, house keeping, etc) and I've read that to pay people to do what a stay at home parent does would cost $130k/year!
 
One big one, that was easy peasy for us, was paperwork at the bank that would allow me to withdraw money from my guys' accounts if they died suddenly. Rather than having to wait to access funds in their individual, personal accounts - wills can take months to process - I can now show up with a death certificate and the contents of the named accounts can be used by me. Even though I don't have that access day-to-day, it would be mine if they passed away, right away. This would be a necessity - especially since DarkKnight and PunkRock produce more income and their pay checks are direct deposited into those personal accounts. I don't want my electric shut off because they're dead and can't transfer the money!

Medical power of attorney is very important - don't ignore that! Depending on the area, some living wills let you name it within that document, others you need a separate form. In Maryland, it doesn't need to be notarized, but it does need to be witnessed, and if I am remembering correctly, it needs to be updated every year. Medical power of attorney gives the right to someone to make those big decisions - pull the plug, administer certain meds, etc if you can't speak for yourself. Default is the spouse. Mine is PunkRock, as that allows for him to then be present in my hospital room, in addition to DarkKnight. No one could block him from being by my side.

Edited to add - life insurance is just the start. Make sure you each have a policy to cover burial/funeral expenses. Then make sure you have enough to cover joint bills, like the mortgage. Life insurance shouldn't be a windfall for your heirs, it should be closure. Since you don't own property together now, smaller policies should be fine. When you buy a house - it needs to be enough to pay off their portion. Retirement and investment accounts too - 401(k) accounts default to the spouse. What if your guy passed away after you were with him for 25 years? Shouldn't you be entitled to some of that? Right now we have life insurance for everyone, mine pays out 50/50 to each husband. I am sole beneficiary on each of theirs, but if we pass together, then the other guy gets the payout. DarkKnight's retirement is mine solely, but if we both pass, it gets split between our daughter and my two older kiddos - not PunkRock. PunkRock's retirement - again, mine solely, but if we both pass, I believe his brother is named beneficiary. Actually, I should probably check on that - I don't remember. I tend to think of the retirement accounts as more of the windfall for the people left behind, and insurance as the get-out-of-shared-debt card.
 
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I just know about the power of attorney and living will; Snowbunny has taken care of all of that.

Seems like this is an important topic, I wonder if the mods could make it sticky?
 
Thanks all! The beneficiary type stuff seems to get discussed more often so I'm a bit more familiar with that.... The things we should prepare for when it comes to crowning property while also being a mix of married and non-married people is the thing I've found the least about (though I guess this could be treated as similar to buying property with a friend or anyone else you're not legally married to in terms of what documentation is important).
 
We are doing the house buying thing too - we have yet to search out a mortgage broker since we are not at that stage yet. I've heard that banks don't like lending to LLCs. Whether or not that is true, I have no idea. I figured later this summer I will sit down and take a long hard look at what exactly we will need to do. It's still up in the air though, who will be primary on our note - my hubby with good credit doesn't have high income, and my hubby with semi-stinky credit has both the income and down payment. So we are going to have to do some talking to see how best to structure things. What if someone dies? What if someone wants out? What if someone puts up more money but someone else puts in tons of sweat equity? We will definitely need something written so others can buy out the estate at a fair price, and not find themselves homeless. It won't be easy, I don't think, but it certainly shouldn't be impossible.
 
We just got our wills done the other day, and one thing I remember the lawyer saying was that in 90% of cases, it's better to just do things as individuals rather than trusts or corporations. Otherwise you basically create a ton of extra headaches (i.e. extra costs) and paperwork with no real advantage.

My understanding of LLC's (based on a quick Google, since we don't have them in Canada) is that they're for business partners to purchase property. It doesn't seem like partners, friends, and roommates are the target audience. But I don't actually know anything about them.

All you should need is a "tenancy in common" title. In any case, make sure you all get wills done up when you buy the land, and include "right to first refusal" for the sale of that person's share to the remaining people. Also make sure that whatever house you buy, you're not reliant on all 4 people to cover the costs. If one person leaves, the other 3 need to have the assets and cashflow to pay them out and pick up their cut of the monthly payments.
 
I haven't run this past my bookkeeper, so I might be off-base (or even in the wrong stadium ;)), but I have a few cavils (for starters) about "form an LLC to own our house."
  • doesn't an LLC need to have an actual business?
  • how will that house provide income to the LLC?
  • how will you add/remove owners?
  • will tax liability equally divided, or split according to invidual incomes?
  • individuals who haven't bought a house in years can find down-payments at 5% or lower; a commercial loan is at best 10% down & as high as 40%
  • wouldn't a partnership be much easier?
  • don't overlook legal fees, at least to thoroughly vet any agreement, which I'd guess might cost a couple grand
 
All you should need is a "tenancy in common" title. In any case, make sure you all get wills done up when you buy the land, and include "right to first refusal" for the sale of that person's share to the remaining people.

Tenancy in Common may not be the best approach to cover various contingencies - in the event of the death of one of the co-owners, their share of the property would be subject to probate before being passed to any heirs, and their portion of the property could be sold in order to pay off a remaining debt. That could definitely be a problem, especially if they each maintain a 25% stake - if Bluebird buys a four-unit apartment building, that's a quarter of it that could be sold to someone else if one of them were to die, without the rest of the family having any kind of say.

In Bluebird's situation, either Joint Tenancy or Tenancy by Entirety might be better options. They both avoid the probate process, though the former has some of the same problems when it comes to being held for a deceased's debts. The latter is only an option for married people, but if one spouse dies the other takes ownership of their share of the property free and clear, without the risk of their home being sold off by another party. She and DarkKnight could get this, and establish long-term rental contracts with PunkRock and WarMan that guaranteed their stake in the property and their right to ownership of it if Bluebird and DarkKnight were to pass away.

Certainly, this is something best talked over with a lawyer, which I am not (nor do I play one on TV), and the best approach would likely depend on what type of dwelling they end up deciding to purchase.
 
In our V, I own our residence and had it before we all met. I have both a will and life insurance in place where my partners are considered.

I also have a Roommate Agreement for each of them which is primarily for their protection that protects their legal status at the home.

Owning property with someone else is not simple. I own land with my ex-wife and trying to sell it is a nightmare and will likely involve the courts.

And LLC is an option and is a low overhead way of forming a group financial entity. You don't have to be conducting business to make one and the cost of forming it relatively minor. You might lose some tax advantages when the home is sold. An LLC might be a good option to clearly define different percentages of ownership vs an equal 1/3 or 1/4 arrangement.

When considering a group property purchase spend serious time considering these factors:
1) What do we buy -- do you all have to agree on the home, how much do you want to spend, what features are must haves, what happens when one person isn't happy and the rest are in love with it. Talk about this before you find a house someone is in love with.

2) Why would we sell -- this is super important and the below situations will explain why.

3) Where does the money come from -- Most families will need a loan. In the US, the people on the mortgage don't have to be the same as those on the deed of ownership. Generally, it will be simpler to have the mortgagees be on the deed and then use a quitclaim deed to modify the ownership.

4) Equality. How do you determine each person's ownership stake? Day one might be simple -- we three each put in the same down payment and agree to split the monthly bills. But what happens if someone is a skilled carpenter and does some amazing home improvements? Do they get an upgraded share? Or someone loves to cook and pays to remodel the kitchen?

5) Adding partners. This will generally be simple from a logistical standpoint, just update with a quitclaim deed and perhaps draw up a lease or other contract about what the contribution to the expenses are and perhaps how they "buy in" to the existing home equity.

6) Removing partners. This is probably the biggest issue and I'll break it up into two sections:
6a) Partners that aren't on the mortgage. How do you deal with your partner's stake in the property? Hopefully, they have some equity that should be paid to them. What if you can't raise that capital to buy them out? Can they force you to sell the family home? Do they have to wait until you can get the money? What about money invested in improvements? How about time & energy someone provides to home improvements? And what happens if the property has declined in value?

6b) Partners that are on the mortgage. Take everything from 5a and add: do we need to remove them from the mortgage? How do we refinance? What happens if we can't get a new mortgage without that partner's income?

7) the worst case. Everyone that is contributing to the cost of the home should have savings or life insurance to ensure that their share is covered. Everyone on the mortgage should have life insurance that covers that debt.
 
And LLC is an option and is a low overhead way of forming a group financial entity. You don't have to be conducting business to make one
Not so: owning a property is considered a business.

I'm edgy about pushing an LLC as either simple or easy. Sure, anyone can fill out the short form & pay a filing fee or three... which pretty much describes marriage. :eek: And in like manner, it is NOT something that ought to be undertaken lightly.

Then there are the associated tax & insurance liabilities.

How much did it cost you to retain a real estate lawyer to draft this? This can run $1,000+ quite easily. And of course, as situational circumstances change, the documents should be reviewed.

Anyone interested in this path needs to not only hire a lawyer, but do some reading. Here's a few suggestions, for starters --
https://www.realtor.com/advice/buy/how-to-buy-a-home-with-friends-and-why-you-probably-shouldnt/
https://www.zillow.com/advice-threa...a-home-together-as-an-investment-home/468899/
https://www.landlordology.com/hidden-dangers-of-co-owning-property/
http://realestate.findlaw.com/buying-a-home/buying-a-house-with-someone.html
https://www.forbes.com/sites/northw...couples-buying-a-house-together/#219afecb2ba0
http://www.nytimes.com/2007/01/21/realestate/21home.html
 
Not so: owning a property is considered a business.

If this your residence it would not be considered a business. You could not deduct most of the expenses that you could do so were it a business. There are some tax manipulations (USA rules) you could do between unrelated partners that are an option but not worth the extra stress it would probably put on a relationship.

I'm edgy about pushing an LLC as either simple or easy. Sure, anyone can fill out the short form & pay a filing fee or three... which pretty much describes marriage. :eek: And in like manner, it is NOT something that ought to be undertaken lightly.

Then there are the associated tax & insurance liabilities.

I totally agree. It introduces complications. I personally believe that these would be less so than personal ownership outside of an LLC or Corp.

Personally, I will only own property individually. I am privileged in the fact that I can do so and we don't have to pool our incomes to be able to qualify for a mortgage.

I do take great care to ensure my partners have legal rights to their home and that they would not lose that home -- whether it is a health event or a relationship failure. When each of them moved in, we had a discussion about these things and I adjusted my legal documents accordingly.

In my opinion, your will & life insurance should be up there with discussions about safer sex. Actually, if you are in a committed poly relationship, the former probably requires a lot more time and negotiation that the latter.
 
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