If you or someone in your farm family is getting married soon or considering marriage in the future, having the prenuptial (prenup) conversation can be helpful in providing peace of mind and legal protection if the marriage does not go as planned later down the road.
My goal here is to help you consider ways to approach the conversation about prenups, marriage contracts or interspousal agreements to protect your family’s expectations and the farm assets.
This quote from an article titled "Creating a prenup to protect farm property" sums it up well.
“So, you want to protect your farm in case of a divorce, understandably so! Can you do that with a prenup? Yes! If it’s valid and enforceable, and you include the right provisions, your farm can stay in your possession, even in the worst-case scenario of a divorce. Prenups can also supplement your estate planning documents and help to protect your farm in the event of death. With a well-crafted prenup, you can cultivate peace of mind and ensure that your farm continues to grow no matter the circumstances.”
I am not a lawyer, so you need to seek independent legal advice to draw up cohabitation agreements, marriage contracts, prenups or interspousal agreements. As you can already tell, these agreements clarify who owns what when two individuals join their lives and their farms together. In Australia, they call people who are living together but not married “almost married.” Many farm couples may not realize that after they have lived in common law for a few years, they are “married” in the eyes of the law. Many farm parents are nervous about what will happen if the next-generation couple splits.
An elderly farmer was quite panicked when he reached out to ask me to orchestrate a conversation with his successor son and daughter-in-law. The farm is worth millions, and the father was uneasy about the strength of the marriage, which had already born some children. Coaches can help you ask the hard questions and give you the language to come at the conversation from a place of curiosity. It took about four minutes to determine that both the successor and his spouse were happy to seek independent legal advice to draft and sign marriage contracts. It was intended for the protection and good of all. Crisis averted.
I had another case where parents, who were trying to groom their successor, went to a lawyer to get a marriage contract for their own union and model this for their successor and his spouse. The prenup agreement was a condition of the transfer of shares in the shareholders' agreement.
Are you willing to create an interspousal agreement/marriage contract as a risk management strategy for your farm? See below for tips for preparing this kind of agreement.
Here’s what you need to do to prepare to create an agreement:
- You need to know your farm and personal assets.
- You need to be clear about your intent and why this action is important to you for business reasons. Also, be aware of the emotions you are experiencing while creating the document. When we get married, we are not thinking of getting a divorce. We all realize that many marriages fail – not just the young couples. We had the “divorce conversation” as part of the coaching process with our son and daughter-in-law. You might want to have an outside facilitator to navigate this discussion.
- You need to seek independent legal advice. On behalf of a client, I asked my network for a great family lawyer who understood agriculture and was able to come up with two lawyers in two places, one for each spouse. A good place to start looking is the Canadian Association of Farm Advisors (CAFA) directory. Also, ask your peer network for referrals.
- Your language of approach with your partner, fiancé or spouse needs to be clear and respectful. Your goal is to have an alignment of understanding about your wishes for taxes, assets, financial well-being for all, goals for the children and success of your farm business – all while keeping family harmony. This seems like a tall order if you approach the conversation in a spirit of fear rather than collaboration for the good of the family and the farm. I once had a young fiancé in tears, as she did not understand the need for a prenup to get married to her dairy farming boyfriend. Once we framed the exercise of getting a prenup as a “business risk-management strategy” and not as blame or judgment of her from her future in-laws, she was able to wipe away the tears and take a different perspective. It was also helpful to the young farmer that his farming brother had just been married, and it is the business policy of the farm that everyone has prenups.
- Men with farms are dating women with farms. A young woman in my audience has a dairy farm with her dad and dates a man who has a farm with his family. People in agriculture are coming to their union as a family with many assets. This also happens with second marriages, when women like my friend Fran, a farm widow, married another farmer at age 77. We have “grey divorce,” and we have “grey second marriages,” as people live longer and still seek loving companionship as they age. Well-written legal agreements can prevent a lot of future pain and anger in court.
- Don’t be cheap. Create a will if you don’t already have one or update it if you do. You also need a power of attorney. Spend the appropriate amount of money to hire a great, reputable lawyer to draw up proper agreements. Ask to see a sample copy. A lawyer friend of mine gave me a sample prenup to share with farm families, just to get them acquainted with the language and format of the agreement. Other lawyers said they would never do this! Which lawyer do you think is serving their clients well? People don’t like to feel dumb, so it is helpful to do some research and find out what clauses are typical for farm situations.
- Pulling in the same direction is a beautiful thing. Two powerful draft horses pulling hard in tandem is a great visual for spouses in business being in alignment. Two are stronger than one! How you frame the exercise of getting spousal agreements in place is like life insurance. We use insurance as a tool to provide revenue when people die or property is damaged. We buy it and don’t dwell on it every day. The tearful bride-to-be realized she would be able to be a full business partner with a great attitude if she was not dwelling on the supposed judgment of her future in-laws. She could work with her husband, creating a great farm business and a strong marriage. Her documents would protect her but not define her.
This article is provided for informational purposes only. Readers should consult their own professional advisers for specific advice tailored to their needs. Information contained in this article may be subject to change without notice.
