Common law farming couples in Alberta face more complicated legal situations than married couples if they split up and have to figure out settlements involving the family farm.
There is no presumption of equal contribution to the farm and no automatic division of property for common law couples under Alberta law, said Kurt Schlachter, a partner with Stringam Denecky in Lethbridge who specializes in family law.
For married couples, federal law guides matters in the event of divorce. It allows for automatic division of property and presumes each partner makes an equal contribution to the operation after marriage.
That’s not the case for couples in common law relationships.
“There’s a distinction here and it’s a big one, probably the last area of law where there’s a big difference between married and non-married couples,” said Schlachter.
“Non-married, the big difference is currently in Alberta, there’s no legislation dealing with non-married couples and property so there’s no presumption of equal contribution. We have to take an entirely different approach legally.
“The law continues to evolve in this area,” said Schlachter, in reference to common law scenarios. He gave an overview of divorce and the family farm to the Lethbridge branch of the Canadian Association of Farm Advisors on May 22.
Essentially, settlement can be easier for married couples than those who live common law.
“I can tell you that these are the most complicated cases that I deal with, when we have non-marriage property, because we have to do much more digging and much more analysis about those contributions, unless someone’s prepared to accept that it should be equal, which sometimes happens.”
Schlachter said he recommends pre-nuptial or post-nuptial agreements to couples or some type of cohabitation agreement in the case of non-married couples.
He ack-nowledges that conversations about pre-nuptial agreements can be awkward but if a family farm is involved, it is wise.
“Pre-nuptial agreements I recommend in any scenario where either spouse is bringing an asset base or an income stream that they had before.”
Pre or post-nuptial agreements without full financial disclosure and independent legal advice can have value, but may not be binding should the parties separate later.
“If you do it on a napkin, you take your chances.”
In any split, provisions for dependent children always come first, but in the case of farm families, calculation of an appropriate amount may require the use of experts, said Schlachter.
Different legislation applies to spousal support, he said.
“If you have a very traditional marriage where one spouse has stayed home, primarily looked after the home and the children, it’s going to be a good case for spousal support because when the marriage breaks down, the primary income earner is going to carry on but that spouse needs to be able to survive and move on in their life as well.”
Factors affecting spousal support include length of the marriage, income, age, career history, needs and health issues.
“Generally, the longer the relationship or the marriage is, the more likely support is going to be an issue for the spouse.”
Specific to splits involving a farming couple, total property is considered: land, equipment, asset to debt ratio, investments, livestock and other property of value.
If the parties can’t agree, a court can direct that everything be sold, debts paid and the remainder divided. However, that has tax implications.
“You are generally well advised to try to come up with your own solution,” said Schlachter.
“Most commonly, what I call horse trading happens and that’s when we figure out a fair way to divvy up the property and debts based on the notion of equality.”
Sustainability of the farm must be carefully considered if one spouse plans to continue the operation. Schlachter said sometimes selling all or some of the land or assets is the only option, but those involved should always get expert tax advice first.
Gordon Colledge, a mediator with Advance Communications, said he has noticed a higher incidence of marriage breakdown in older couples in recent years.
“It got nicknamed ‘the grey divorce’ simply because of age,” he said.
“Simply because somebody is married a long time, 35, 38, 40 years or more, doesn’t guarantee that it’s going to survive and many times if there is not a shift in the couple relationship, the senior couple relationship on the farm, then you can almost expect that they’re going to go their separate ways.”
Colledge said he has seen scenarios where a younger farming couple, tied by blood to the older farming couple, is left in limbo when the parents divorce.
Suddenly the younger couple’s life plans on the farm are uncertain and they can’t fully commit to it.
That is one reason Colledge recommends careful succession planning that takes into account various scenarios.
“We need to get in there and have the courage to have that conversation,” he said.
Fortunately, the younger generation tends to be better communicators who are able to discuss their desires and feelings, he said.