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Protecting your family farm from the damage of divorce

On Behalf of | Jan 19, 2023 | Real estate

Maybe you and your spouse dream of a pastoral lifestyle and so the two of you pooled your resources to purchase land and start your own small farm. Perhaps you are a third-generation farmer who already has teenage children, and you worry about what may happen to your family legacy years from now.

You very likely would prefer to keep your farm in the family, ensuring that it passes down to your children and the generation after them. Unfortunately, if you file for divorce or if one of your children who decides to work on the farm later divorces, years of investment in the farm could be at risk.

How do you protect your agricultural property from the devastation commonly associated with a divorce?

Change how you hold the property

One of the most straightforward and effective means of protecting your financial and legal interest in agricultural land is by changing the ownership. Instead of having your name on the deed for the property, you move the land into a trust. Property held by a trust will have protection from creditor claims in civil court or in probate court after you die. It will also have protection from claims by a spouse during the property division process in a Minnesota divorce.

Typically, unless couples sign prenuptial agreements before they get married, any property acquired during the marriage is potentially vulnerable to claim by either spouse in divorce proceedings. The same is true of family farmland maintained with marital income.

However, when the property doesn’t belong directly to either spouse but is instead part of a trust, it will typically not be subject to division. That protection persists even when your children are the ones taking care of the farm. When they work or live on the farm property and are not direct owners of the property, the potential for their spouse to make a claim against that real property in a divorce decreases substantially.

Recognizing your risks is key to protecting your property

Needing to refinance your farmland during a divorce could prove financially devastating for your operation based on soaring property values and high interest rates. Even if the divorce occurs at a time when the market is supportive, the farm operations may not be sustainable if you have to liquidate some of your land to comply with court orders.

Addressing future issues that could affect your property ownership rights as an agricultural professional will help reduce the likelihood of personal issues damaging professional aspirations or the legacy you leave for your children when you die.

Embracing estate planning as a means of protecting your real estate can benefit you and anyone else in your family who hopes to eventually work on the family farm.