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NAVIGATING THE FARM AND RANCH DIVORCE

Bob Leonard Law Group, PLLC

Oct 12, 2021

Navigating The Farm and Ranch Divorce

Divorce is complicated for farmers and ranchers. Whether you have a hobby farm, a horse operation, an agricultural crop producing farm or a large cattle operation, when you begin looking at division of assets there are a number of unique factors to consider.


Here are some examples of divorce situations we see in our law office (the names have been changed to protect privacy and stories combined to make it more interesting):


Separate Property, Community Property, Economic Contribution, Intangible Assets:


Cathy and Bill have been married for 25 years. When Cathy’s parents died 20 years ago, Cathy inherited one-third of their ranch and then Cathy and Bill purchased the remaining shares of the property from Cathy’s sisters. Over the years,  Bill worked hard to develop premiere cattle operation while Cathy ran the house, raised their 4 children, taught school, served on the local chamber of commerce and is currently an elected member of the statewide Texas and Southwestern Cattle Raisers Association board. Now that the children are gone, Cathy wants a divorce. Bill wants to keep the ranch he has worked for 20 years but Cathy wants to keep it because she says it is her family ranch and her work in the community is why the ranch is successful today.   

Community Property, Business Valuation, Operating Agreements:


Jim and Susan own a successful cattle ranch and farm property, breeding and raising both cattle and horses. Susan is also a cutting horse trainer with a state-of-the-art horse facility. Jim and Susan just entered into a partnership with a veterinarian embryo transfer program for both horses and cattle. Jim and Susan agree it is time for a divorce. They each want to keep their business investment and they think they may be able to continue as business partners after their divorce because they work well together.


Property Characterization, Asset Valuation, Non-economic valuation


Linda and Joe have built their heirloom chicken and goat farm from the ground up. In addition to a successful internet chicken sales company, they invested a significant amount of their savings into an onsite manufacturing facility for goat milk products including soaps, lotions which is just beginning to take off. Joe has worked as an engineer throughout in order to provide a steady income stream, leaving Linda with much of the day- to-day operation of the farm. Joe spends his evenings, weekends and vacations improving the property. Joe developed and oversaw the goat milk manufacturing venture start-up. Linda says since she has been hands-on, the property and business are more hers, but she will need spousal support to keep the new business going. Joe says without his income and management the farm would not have succeeded and he believes it is more his; he says he can hire someone to do what Linda does. In addition, Jim says Melissa cannot afford to keep it going financially and she does not understand business.

 

Separate Property, Economic Contribution, Asset Division, Personal Goodwill:


Jerry and Melissa have a horse training facility and a large hay operation on acreage that was owned by Melissa prior to the marriage. As a former rodeo star, Jerry brings in lots of clients who want to learn from the best and he invested most of his considerable earnings in the facility and in the hay equipment. Melissa has a good head for business and handles that part of the operation. Melissa’s brothers run the hay operation. Melissa wants to travel and pursue other opportunities in a city, but she wants a share of the training facility and all of the hay operation. Jerry says the training facility would not be successful if he had not been well-known rodeo cowboy. 


Texas Family Code:


According to the Texas Family Code, the judge “shall order the division of the estate of the parties in a manner that the court deems just and right.”  Complex issues, including characterization of property (determining if property is separate of community), economic contribution, personal good-will and valuation are integral to most arguments. Your attorney can work with you to protect your interest in your farm or ranch.


Navigating Unique Factors, Farm and Ranch Divorce:


First of all, we can evaluate the business using specific business evaluation models and projections. Depending upon the nature of the business, this may require expert consultation. Next we can work with you to carefully review the business operations and the contributions made by each of the parties. This includes not only the livestock or facility valuations and day- to-day operations, but also the ‘back office’ business operations, the financial contributions and the intangibles such as customer base, name recognition and good will.


Once we have a clear picture of the community assets, we can work with you to ensure that your divorce property division is fair to you. Some couples choose to stay in business together and we can work to ensure that the divorce decree addresses all issues that could arise later. An additional agreement (operating agreement) incident to the divorce may be employed as well. Having a clear agreement saves litigation costs later on.


If staying in business together after a divorce is not possible, then we can work with the parties to find creative solutions to divide the community property. 


As a rancher or farmer, if you are considering divorce, be sure to contact an expert attorney in both business and property division. that can help you navigate these difficult community property questions and develop a solution for your future.  You work hard; let us work hard for you.


If our Board Certified Family Law Attorney at the Bob Leonard Law Group can help you resolve some of these issues and put your mind at ease, please give us a call at 817 336 8500.


This is for informational purposes only. Please know that your case is unique and you may need to hire an attorney to give you information specific to your situation.




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