Today it's not uncommon for land values to be in the six or seven figure range. That's why Ag Web's article, "Do Farm Kids Need a Prenup?" says that as kids get married and spouses come on board, it may be time to consider protecting that asset. The article illustrates this problem with a story about the Brooks dairy farm in Waupaca, Wisconsin. It's a busy operation and fortunately still running, but a tough family transition forced owner Ron Brooks to make some tough choices.
"We had to put Zoey in an equity position immediately," Brooks says. His daughter Zoey and her sisters are now full owners. "To save the farm, I now work for my daughters. My daughters own all the land. It's in a separate LLC."
When there's a child getting married, it may be the right time to protect the farm with a prenuptial agreement. It's a good move for anyone, and if you want to keep the farm in the blood, a prenuptial agreement is helpful. It's not just something that's reserved for Hollywood celebrities!
While a trust can be used to transfer restrictions and buy-sell agreements to protect the farm, including keeping the farm out of a divorce, an ex-spouse could still get other assets. That's why before the wedding, a prenuptial agreement can say that the farm will be treated differently than the wealth the couple accumulates during the marriage.
Of course, prenuptial agreements can be a difficult topic, and some describe them as marriage insurance. You hope you never ever need it. However, if you do, then it's in the drawer.
Mr. Brooks says this type of estate planning and strategies saved the farm. Two of his daughters are married, and after what he experienced himself in succession planning, they've learned that they really need marital property agreements in place.
These arrangements are giving the Brooks family an opportunity to create a new legacy on their family's farm.
"One hundred years from now when there's 50 decedents, there will still only be four member groups," Brooks remarked. "Being a part of that member group allows you to decide if you're a granddaughter or son and wants to work on the farm, that's your ticket in. It's not an automatic ticket. Just because your name is Brooks doesn't make you qualified to operate or be a part of the operation."
Reference: Ag Web (December 30, 2015) "Do Farm Kids Need a Prenup?"