December 10th, 2018
Divorce is never easy, no matter what the circumstances may be. Nevertheless, divorce happens in about 38 percent of all marriages according to Statistics Canada. Dividing assets and property following a divorce or separation is a difficult challenge, and when a farm is involved, there is even greater complexity. In this article, we will provide answers to some of the most common questions when farm property is subject to a divorce.
What assets are part of the divorce valuation?
The laws for separation of property involving a farm are similar to all other types of property. Essentially, the value of property acquired during the marriage will generally be equally split between the separating spouses. The value of the property a spouse owns on the date they get married is not part of the net family property, just the increase in value during the marriage. Gifts and inheritances received during the marriage may also be excluded.
Farm assets include shares of a family farm corporation, inventory, quota, land, crops, equipment, homes and livestock. Where farm assets are divided or forced to be sold to equalize net family property between spouses, the viability of the farm to continue after divorce may be negatively impacted.
How can a farmer proactively protect his or her assets and property from divorce?
While it’s never a heartwarming topic to discuss the possibility of divorce before marriage, a prenuptial agreement is highly recommended for farmers and their children who are soon to be married as it’s the only way to proactively protect assets in the event of a divorce. For farmers who are operating a family farm, this is all the more important not only for financial reasons, but also for emotional reasons. A farm that has stayed in the family for generations is not something you would want to see torn apart in a divorce.
Prenuptial agreements negotiate a divorce settlement ahead of time, before you even get married. The agreement should specify what assets are to remain separate and how assets are to be divided in the event of a breakdown of the relationship. The agreement can then be revisited as more assets are acquired and children are born.
Measures can also be taken by parents as part of a farm succession plan to reduce the ability of a spouse of a child to force the sale of farm assets in the event of a divorce. Please see our article on succession planning, for more information.
Is a farmhouse a matrimonial home?
According to the Family Law Act, the matrimonial home is every property in which either spouse has an interest and which is currently, or was at the time of separation, “ordinarily occupied by the person and his or her spouse as their family residence.” A separating spouse may have a possessory right to live in the farmhouse after separation, despite not being involved in the farm’s operations.
Consult with a Lerners Agricultural Lawyer
Whether it’s a divorce or a prenuptial agreement, the Lerners LLP Agricultural Law Group can work with you on the best solution for your needs and create the necessary legal documents to protect your farm assets.
For more information, please contact us at 519-672-4510.