There are a variety of scenarios that could put a family farm at risk in North Dakota. For example, when agricultural families have multiple bad seasons back-to-back, they might find themselves in a scenario where they struggle to pay their bills and afford the necessary machinery to keep their farm operating. Legal and familial challenges can also put the ownership stake in the farm at risk.
At a multi-generational farm, the divorce of any family members who have an interest in the farm could lead to the forced sale or refinancing of the property. How can someone trying to engage their adult children in the family farm protect it from or liquidation should one of their children divorce?
Use a trust to hold the land
One of the simplest and most common ways that people protect farmland from the ravages of divorce is by changing the ownership of the farmland. When it does not belong to individual family members but rather a trust operated by or for them, then they have protection from claims made in the North Dakota family courts. Even if someone divorces after their parents and all the current owners retire or die, a trust can protect the property indefinitely and ensure that it remains in the family.
Create clear employment agreements
Children working on a farm often feel like owners and may live on buildings on the land. They may accept certain forms of support, including the farm paying their utility bills, as a justification for a low salary. Unfortunately, unofficial employment arrangements within a family could potentially put the farm at risk, as the other spouse might claim that it technically belongs to the whole family and is part of their compensation for employment.
Having very clear employment contracts that indicate that work on the farm does not translate to an ownership interest in the land can reduce the likelihood of a spouse trying to force the sale of the property for their own selfish gain. Ideally, parents with children who are about to become adults or begin working on the farm can proactively protect themselves and the farmland that could be the biggest component of their personal legacy.
Thinking about the possibility of future legal challenges for not just the current owners but also the next generation of owners may help people preserve a family farm for the indefinite future.