These agreements are not just for the rich and famous
Prenuptial agreements are far from romantic. But, about half of marriages end in divorce, which can be a financial nightmare for a farming operation.
“Nobody gets on an airplane thinking it’s going to crash, but you still go over the safety instructions,” says Cari Rincker, principal attorney with Rincker Law in Champaign, Ill. “I look at prenups the same
way; they are the safety instructions for a marriage.”
A prenup is a premarital contract between two adults detailing assets, obligations and future wishes. It details pro-visions for decisions such as how property is to be divided or how income is used during the marriage.
The prenup process centers on financial transparency, Rincker says.
“I’m surprised when two people about to get married come in my office and have no idea how much the other per-son makes in a year,” she says. “There's something to be said for forcing people to get financially naked and talk about tough issues.”
“A prenup is insurance against divorce,” adds Sabra Sasson, an attorney based in New York City who specializes in premarital and matrimonial law.
Marriage is a financial arrangement, Sasson notes, which she knows is hard for people to accept.
“But it becomes evident when that relationship doesn't work out; it becomes all about money,” she says. “People hear prenups are only for the rich and famous. I think they are for anybody these days.”
One key component of a prenup is defining the types of property each person owns.
- Non-marital property is owned separately before marriage.
- Marital property is anything acquired after marriage.
This is important for farmers as most operations commingle assets. For instance, the farm might have started with non-marital property (land, livestock or machinery). But over time, the farm adds assets.
This becomes even more complicated and vital for farm businesses with multiple family members or non-related partners.
A prenup can protect the family farm and ensure it's not subject to equitable distribution, Sasson says. For example, if your spouse knows nothing about running the farm operation, you can create provisions for financial protection, as other partners purchase his or her share.
When Should You Start The Prenup Process?
As soon as you pop the question, suggests Sabra Sasson, an attorney who specializes in premarital and matrimo-nial law.
“These are really hard issues to discuss, so I like a three-month time frame, which is a fair amount of time to get comfortable talking about the numbers,” she says. “A prenuptial agreement makes people talk about this while they are in love and are more likely to treat each other in fairness.”