Although not a frequent topic of discussion, the Midwest of the United States supplies a significant amount of the world’s grain. There is also a significant amount of livestock raised in the Midwest. The farm divorce (crops or livestock) is no stranger to Indiana’s domestic attorneys and judges. When the farm divorce happens, it triggers unique considerations for the farmer and his or her spouse. This blog covers what you need to know about a farm divorce.
In Indiana, we follow the one-pot theory of division of the marital assets. This means that everything acquired before marriage brought into the marriage and acquired during the marriage is subject to a presumed equal division by the divorce court, no matter how titled or deeded.1 Again, the presumption is the court will divide the marital estate equally. Where a farm has been handed down generation after generation, this puts the farm at risk of division. For this reason, a prudent farmer would enter into prenuptial agreement before marriage to ensure upon divorce he or she retains the farm as his or whole separate property.
Where there is no prenuptial agreement, Indiana law generally recognizes the sanctity of the farm. If the farm operations have been kept separate by the farmer from his or her own spouse, and that spouse has not worked the farm, commingled monies of the farming operation with marital funds, the court has the discretion to deviate from the presumptive equal division and leave the farming operation to the farmer. However, if both spouses worked the farm, it is likely the court will divide the farm or allow the farmer who inherited the farm to buy out his or her spouse by a cash equalization payment.
That said, no matter what the court decides to do, the farm has to be valued like all significant assets in the marital estate (clothing, personal items, and the like rarely are individually valued). In most cases of active and farm operation, the sum is worth more than its individual parts. This means the farm should be valued as if it will continue as a farm, not the equipment being and the farmland sold off. Yet in some cases where major cities and suburbs have developed near or around the farming operation, the farm ground is worth more than the farm as a going concern, but maybe not to the farmer. Thus, there are many creative ways the respective counsels can have the farm valued and advocate for you position.
Even if the parties agree to what is to be valued (the farm as a going concern or being sold off), there are numerous unique aspects of farm valuation. For instance, with a crop farm, crops growing in the ground but not yet harvested as of the date a divorce is filed are marital assets.2 They will be harvested and likely sold for human and/or animal consumption and have additional value, unlike unplanted land. For this reason, it takes a skilled domestic attorney to properly understand and work on valuation of the farm with the appropriate expert to do the best for his or her client. There are a myriad of considerations when it comes to valuing any farming operation, whether it be a grain or livestock farm.
Ultimately, there are a wide range of parameters to consider when valuing a farm operation and arguments to be made for an unequal division if the farmer has kept the farm separate from his spouse, even in the absence of premarital agreement. What you by counsel have to show is what makes for a just and reasonable division as required by statute.3 Is it an equalization payment the farmer may have to make to “cash-out” his or her spouse to keep the farm in the family? Is there a basis for and unequal division because the farmer ran the farm independently of their domestic household? How is the farm valued, as a going-concern or sold off? These questions give seasoned divorce counsels powerful ways to advocate your position depending on if you are the farmer or the spouse. Ciyou & Dixon, P.C. have handled farm divorces throughout the state. This blog is written for general educational purposes only. It is not intended to be legal advice, nor a solicitation of services. It is an advertisement.