Business owners who go through a divorce have to figure out how their split will impact their business, in addition to their personal life. For example, while spousal interests in some businesses are fairly easy to divide, that’s not the case for others.
One specific type of business that’s often difficult to address during a divorce is a family farm. Family members likely have emotional ties to their farm, and the unique operations of a farm can make it difficult to address effectively during a divorce.
Dividing interests in a farm is often challenging
A farm is likely integrated with other assets, such as a marital home. A farm’s property may also include equipment, land, livestock and other assets that all have to be divided. The division process must consider both the value of the physical assets and the ongoing business operations, which complicate valuations and settlements. In many cases, one spouse will want to continue farming. They will likely have to buy out the other spouse’s share, but that comes with financial challenges because it’s highly unlikely that the farm’s assets are liquid.
Key factors to consider
The valuation of a family farm can be complex because it requires very detailed appraisals and financial analysis. This will likely mean that a comprehensive inventory needs to be taken of everything that’s considered assets that belong to the family farm. Any debts, including operating loans or vendor invoices related to a farm must also be factored into its value.
Another consideration is the presence of any prenuptial agreement or trust related to the farm. These influences may be factors if a farm has been in the family for multiple generations and may protect it from being divided as marital property, at least, to a degree.
Because a family farm is likely only one of the assets that has to be divided in a divorce, it’s best to have a legal representative who can assist with taking everything related to this division one step at a time. This includes determining what happens with the farm, other assets and marital debts.