Keeping the Family Farm in the Family

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When passing an estate to the next generation, parents rarely intend for an in-law to receive half simply because he or she was married to their child at the time the inheritance was given. Before January 1, 2012, courts looked primarily at when property was acquired, not how it was acquired in dividing property in a divorce. However, as of January 1st a change in divorce law regarding how the courts handle the division of gifted or inherited property will help keep the family farm, or fortune, within the family.

Previously, any inheritance or gift acquired during the marriage was subject to the presumption of equal contribution. That is, the court presumed that both spouses equally contributed to the acquisition of the inheritance or gift. The recipient spouse therefore had to submit evidence to rebut this presumption, such as evidence of the donor’s intent. In cases where the donor had passed away, proving the donor’s intent was difficult, if not impossible, unless the donor left clear written evidence of his or her intent. If the recipient spouse failed to rebut the presumption or equal contribution, the gift or inheritance would likely be divided equally between both spouses.

With the new law, the legislature has changed that presumption of equal contribution. Now, separately held property acquired during a marriage by gift or inheritance is not subject to the presumption of equal contribution. In most cases that should result in the recipient being allocated the gift or inheritance in its entirety.

While this is good news for those trying to keep the family farm within the family, it is not a guarantee. If the recipient does not keep the gifted or inherited property separate, the protection afforded by the new law would be lost. For example, if the recipient inherits $50,000 and then puts it in a jointly held bank account, that inheritance would no longer be considered exempt from the presumption. Additionally, the law did not change the courts underlying equitable power to divide any property owned by a couple if it would be “just and proper” to do so.

If you are concerned about protecting an inheritance or gift and are considering setting up an estate plan, premarital agreement, or considering divorce, you should consult with an attorney. An attorney can answer questions about the risks you may face and advise you on the legal tools available to prevent the unintended division of the family farm or fortune.