When couples marry, they do so with the outlook that it’s a life-long commitment. Have you considered what might happen to the assets you and your family have worked hard to accumulate if that commitment is broken?
Farm and agricultural businesses often have high capital investments in land, machinery, livestock, and miscellaneous equipment.
The typical Ohio farm has over $1 million in capital assets. These assets are usually owned and held by multiple members of a family. With the rising divorce rate (over 50 percent), it is in the long-term financial interest of the business to protect their business assets from a divorce of one of the business partners.
A prenuptial agreement is something many couples do not discuss (or dare to discuss) as they make their wedding plans. However, such an agreement can help minimize the financial stress on a family business in the event of a divorce.
This agreement can also help determine the disbursement of assets, responsibilities for liabilities, and care of minor children.
As farms increase in size and new family members become a part of the business, either directly or indirectly, there becomes a real need to discuss how assets and liabilities will be divided.
What is a Prenuptial Agreement?
A prenuptial agreement (prenup) in its simplest form is a written contract between two people before they are married. This agreement typically lists all of the property each person owns, along with all debts and specifies the rights each will have if the marriage ends in divorce, dissolution, or death of a spouse.
Without an agreement
In the event of a divorce, dissolution, or death, and without a prenuptial agreement, state law will determine who owns property acquired during marriage (known as marital or community property) and what happens to the property.
Marriage is viewed by the court as a contractual relationship and with it comes certain rights for each spouse. In the absence of a prenuptial agreement, a spouse usually has the right to:
• Share ownership of property accumulated during the marriage with the expectation that such property will be divided between the spouses in the event of a death, dissolution, or divorce.
• Incur debts during marriage the other spouse may have to pay.
• Share in management and control of any marital or community property.
Preparing a prenup
A prenuptial agreement should be discussed and completed well before the wedding day. This will require the couple fully discuss their present finances and future goals.
In order for the agreement to be enforced, each party must completely and accurately disclose all assets and liabilities assumed prior to the marriage. Once the agreement is written, copies of tax returns and balance sheets should be attached to the agreement as an appendix.
The completed agreement should be reviewed by separate attorneys to add validity and because one attorney can not represent both parties in the event of a divorce or dissolution of marriage. Ohio law also requires there to be two witnesses present for the signing of the prenuptial agreement.
Only in cases of divorce or dissolution will the court enforce a premarital agreement. In these instances, either party can ask the domestic relations division of the common pleas court to enforce the agreement.
Factors that may impact enforcement include: if either party failed to fully disclose information prior to the signing of the agreement or where there is fraud or the terms of the agreement are contrary to law or against public policy.
Interestingly, the court is not likely to enforce agreements presented and signed the eve of the marriage.
Sample prenuptial agreement forms are available online for you to complete yourself. Simply type “prenuptial agreements” into any search engine and you will locate several resources.
Once the agreement is written, it should be reviewed by an attorney. It is important that all parties be aware of all the facets of the agreement prior to signing the agreement. No agreement should be signed unless she or he truly agrees with the terms.
A prenuptial agreement can help farm and agricultural businesses protect their business assets from a costly divorce.
Many businesses are including in their business organization agreements a clause that states a prenuptial agreement is required for any partner in the family business. This will allow the partners to be assured that a separation or death does not interfere with the future success of the business.
It is crucial this planning is done in consultation with an attorney.
No one likes to believe their marriage will end in a divorce. Writing a prenuptial agreement does not mean one believes their marriage will fail but rather they are planning for the continued success of their agricultural business.
(The author is an agricultural extension educator in Tuscarawas and Holmes counties and a member of the OSU Extension DairyExcel team. Questions or comments can be sent in care of Farm and Dairy, P.O. Box 38, Salem, OH 44460. David Marrison co-authored this information. He is an assistant professor and Agricultural and Natural Resources Extension educator in Ashtabula County.)