Wallaces Farmer

Divorce, disability and disagreement: How to plan for them on the farm

Legal Issues: Farmers know to plan for the first D — death — but how about three more: divorce, disability and disagreement? Here’s what to consider.

Erin Herbold-Swalwell

December 22, 2023

4 Min Read
snow-covered farm field
BIG D: As the new year approaches, attorney Erin Herbold-Swalwell recommends farmers take a look at whether their farm family is prepared for big disruptions to the business — such as death, divorce, disability or disagreement. Holly Spangler

We know we need to plan for the end of our lives, but what about other life events that could dramatically impact the farming business — like divorce, disability and disagreement? Oftentimes, the conversation regarding estate and succession planning focuses on death.

In the new year, another area to focus on is whether you and your farm family are prepared for disability or the end of a marriage. Let’s take them one at a time:

Divorce. No one likes to discuss what happens when one farm business partner goes through a divorce. Aside from the family disruption and emotional turmoil, some spouses may rely on outside farm income from the other spouse, or have commingled their assets in a way that they are tremendously difficult to divide. You can’t ignore the impact this life event can have on a farming operation.

So, what can be done prior to a marriage to prevent some of these impacts? Some experts encourage members of the family entering into marriage to negotiate premarital agreements to deal with inherited assets, and how property is divided in the event of a divorce. To be enforceable in a court of law, these agreements need to be entered into in a thoughtful manner and reviewed by each of the parties’ separate attorneys.

If a premarital agreement is not an option, it may be up to the more senior generation to examine their overall succession plan and make changes or adjustments to their plan if this is a concern for the family.  The goal, of course, is to have these discussions with your heirs and their spouses, if you can.

Disability, accident or illness. One of the most devastating life events is when an accident occurs, or an unforeseen illness hits the family. Who will pick up the extra workload and how do you fill in the cracks of an important member of the business being unavailable? This could be a short-term or long-term issue, and thinking through those scenarios is important.

Every farm family should think through income protection for the family in the event of an injury or illness of a farming member. Ask yourself: Are you adequately and properly insured for a loss in income, or a disability? It is important to consult your financial adviser and insurance adviser on these issues, and see what options are available.

Bonus D. Disagreement among members of the farming business can destroy our best-laid plans. Most farming operations are more than a business and have been in the family for many generations, which makes legacy planning all the more important. We all know that it can be difficult to navigate complex family relationships and expectations during the planning process.

Put it in writing

If you are doing business as a family or with nonrelated business partners, consider starting a farm business entity and creating a road map, or set of rules, for what happens if any of the life events above occur. As you might suspect, there is no “magic” or one-size-fits-all entity. The most important benefit in using an entity in a family farming operation, especially if siblings are farming together or own land together, is the establishment of a road map, or operating agreement, that addresses important topics such as buyouts, life events like death and divorce, voting, and dispute resolution.

Every family member has a different personality, perspective and experience. Sibling relationships especially change over time with life events, including marriage, careers, education and distance. Succession planning and navigating these dynamics is not easy, but it is rewarding, important and absolutely essential if the goal is to continue the operation and continue a family farming legacy.

So, how do you resolve disagreements? Communicate well and do it often. I have found that families that include spouses in conversations about legacy planning seem to achieve a different level of success because the likelihood of a misunderstanding down the road declines.

Disagreements between family members or business partners can arise over the timing of asset transfer, level of debt the operation carries, division of the workload and other outside influences. In any good agreement, there needs to be a way for the parties to resolve their disagreements if they are at an impasse, and there should be an exit plan if the agreement is no longer working for a party.

When the conversation has reached a stalling point, it may be a good idea to hire an outside mediator who is experienced in the area of transition planning, and can help move along the conversation and bring the dispute to a resolution that everyone can live with.

About the Author

Erin Herbold-Swalwell

Erin Herbold-Swalwell is an attorney with Wickham & Geadelmann PLLC.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like