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Protecting Assets Against Divorce

Agriculture.com Staff 03/16/2014 @ 9:58pm

Is it necessary to cut a spouse from ownership in order to protect business assets against divorce?

By Dr. Donald J. Jonovic

Submitted by K.F., via email:

My husband and his brother recently inherited their family farm and decided between themselves they wanted to incorporate – excluding their wives.

My husband and I have had our own farm for many years. Over that time, I’ve raised our children and have been deeply involved in the operation. It’s done well.

I’ve always known that my husband’s dream was to form this big, lovely, family corporation with his dad and brother, and that was OK with me. The surprise came after his father died, when he told me he intended to leave me off of it to protect everything for our kids. I wasn’t good enough to be included in the new corporation.

I understand that fear of divorce was the problem. My husband’s parents were divorced, and it was bad for him growing up. Still, that kind of family background is not the type I came from. My family has never experienced a divorce. What people brought into their marriages was always looked at 50-50.

Now the problem has spread to our own farming business, on which we both (along with our bank) took serious risk over the years. His family didn’t want us involved in their farm. Now my husband tells me he wants me left out of our farm, too.

I’m being punished for something that I had nothing to do with (his parents’ divorce), and it’s a horrible time for me right now. They see me as the family dream destroyer.

It’s pretty apparent to me that they are worried about protecting everything for themselves with no regard for me. My upbringing is telling me, “Stick by what your husband wants.” But I’m a stay-at-home mom with no income. My gut says, “Protect yourself – that’s just what he’s doing.”

I need advice from someone who can look at it from a business standpoint.

The solution:

Most states have laws regarding how assets accumulated during marriage will be divided in the event of divorce. Unless there’s a prenuptial agreement, both spouses usually have some claim on the value of marital assets. K.F.’s husband can’t simply declare her out of it.

Specific assets can be protected, through trusts, that allow a person to benefit (but not own or control) assets during life. Shareholder and LLC operating agreements define who can own shares or be members. If someone unqualified receives those assets through court judgments or divorce settlements, their only option then is to sell them back.

K.F. wasn’t involved in her husband’s family’s farm, so she has no voice in their decision to restrict land inheritance to their bloodline. Still, she can have a legitimate claim to part of the land value as a shared marital asset.

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