Prenuptial Agreements Protect Farms

Prenuptial agreements are far from romantic. But they can prevent a farm from facing a devastating asset loss or long-term hard feelings. ( )

Prenuptial agreements are far from romantic. But they can prevent a farm from facing a devastating asset loss or long-term hard feelings. 

“I always tell people that nobody gets on an airplane thinking that it’s going to crash, but you still go over the safety instructions,” says Cari Rincker, principal attorney with Rincker Law in Champaign, Ill. “I look at prenups often the same way—they are the safety instructions for a marriage.”

Put simply, a prenuptial agreement is a pre-marital contract between two adults that details assets, obligations and future wishes. It puts, in writing, provisions for key decisions like how property owned by each of person prior to the marriage is to be divided, how property acquired during the marriage is to be divided, how income and earnings are treated during the marriage or payment of expenses for children and stepchildren.

No one wants to think about a potential divorce when beginning a new life together. But the fact remains that about half of all marriages end in divorce, which can be a financial nightmare or the end for a farming operation.

The prenup process centers on financial transparency, Rincker says, which is why she’s a big proponent for farm families.

“Sometimes I’m surprised when two people come in my office and they're about ready to get married in a month or two, and they have no idea how much the other person makes in a year,” she says. “They have no idea their assets and liabilities. I think there's something to be said for forcing people get financially naked, so to speak, and to really talk about those tough issues.”

Sabra Sasson, an attorney who specializes in premarital and matrimonial law and is with New York City-based Sabra Law Group, agrees. 

“I really view a prenuptial agreement as insurance against divorce,” Sasson says. “Because if people get more comfortable talking about money and these various issues that are really challenging and uncomfortable, they have a better way of communicating with each other during their marriage.”

Marriage is a financial arrangement, Sasson notes, which she knows is hard for people to accept. “But it becomes really evident when that relationship doesn't work out—it becomes all about money.”

One key component of a prenup is defining what is marital property and what is separate or non-marital property. Basically, non-marital property is what was owned separately before marriage and anything acquired after marriage is marital property.

This is especially important for farmers as most operations comingle assets. For instance, the farm may have started with nonmarital property (land, machinery or livestock owned by one party prior to the marriage). But over time, the farm may grow and include assets purchased during the marriage. This can be even more complicated for operations with multiple family members or non-related partners.

“A prenuptial agreement is a great way to protect the family agricultural business, and to ensure that it's not subject to equitable distribution,” Sasson says. “When you talk about it with your life partner, there may be other ways that you can provide for your spouse that doesn't include giving them a piece of the farm or equity in the business.”

For instance, if your spouse knows nothing about running the farm operation you can create provisions for your spouse to be financially protected, as other partners purchase his or her share. 

“Then, the business is protected and can continue operating without being caught up in litigation,” Sasson says. 

Start the prenup process early. “I wish people would come to me as soon as they are engaged,” Sasson says. “These are really hard issues to discuss, so I like a three-month timeframe, as I think that's a fair amount of time to get familiar and get comfortable talking about the numbers. A prenuptial agreement makes people talk about this while they are in love and are more likely to treat each other in fairness.”

Even though laws can change, Sasson says, prenups are one of the best ways to protect both parties entering into a marriage. Sasson and Rincker recommend finding an attorney to specializes in marital law and understands agriculture, since farm assets create specific challenges and opportunities. 

“A lot of time people hear that prenups are only for the rich and famous,” Sasson says. “Arguably, I think they are for anybody these days.”

“Prenups are not taboo—to the contrary,” Rincker adds. “I believe it is one of the most intelligent and responsible things that couples can do. It gives them autonomy by putting the law in their own plans.”

Want to learn more about prenuptial agreements? Watch this video podcast with Rincker and Sasson:

You can learn more about agricultural law issues on Rincker’s Ag Law Today podcast, which is available online or wherever you listen to podcasts.
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