Although about 40 percent of Canadian marriages end in divorce, no one goes into marriage planning for that particular plot twist. Nobody wakes up one morning and says, “It’s Tuesday; I think I’ll get a divorce.”
Nevertheless, divorce happens. It will have an emotional and financial impact and, if you’re a farmer, it will include a whole other layer of concerns.
“Divorces involving farmers are generally much more complicated than those for urban individuals, with the exception of those who are self-employed with their own companies,” says Amber Biemans, lawyer and partner at Behiel, Will & Biemans in Humboldt, Sask.
“The valuation of farm assets such as standing crops, grain in bins, animals, land and exemptions is more complicated than the valuation of assets that non-farming individuals typically have, which are usually shown on regular statements.”
And, while for urban residents division of assets does not generally affect their income, for farmers it’s all intertwined. Division of the land base, farm machinery and cash flow can affect the ongoing operation of the farm, and this reduction in income can affect other issues such as spousal and child support.
So, who gets what?
The specifics of separation law vary from province to province. For example, in British Columbia, and some other provinces, gifts or inheritances received by either spouse are off the table when it comes to divorce.
But in Saskatchewan, they are “generally shareable,” says Biemans. A possible exception would be if the gifts or inheritances were received at the end of the relationship or if a judge found that it would be inequitable to divide them.
The laws are complicated and each case is unique. But a guiding principle regarding divorce in Canada is that value created or property acquired during the relationship should be equally shared after separation.
Under the Saskatchewan Family Property Act, both partners get to keep the property they had when married, but not the property’s increase in value during the course of the marriage. The home quarter also gets split 50-50 even if owned before the marriage. In a typical long-term farm marriage, most of the land was bought after marriage, or increased greatly in value after marriage.
The Family Property Act applies to farmers and non-farmers, says Biemans.
“While it seems inequitable when a spouse receives half when they contributed little to the farm or family during the marriage, this is not usually the case in long-term marriages,” she says.
“The spouse receiving half of the home quarter or increase in value likely contributed to the payment of farm debt with their off-farm income. They probably also worked on the farm, raised a family, cared for the home and yard for years, etc.”
Can a settlement be reached that will allow the family farm to continue while still being fair to both spouses?
Biemans suggests mediation could help the parties reach agreement on asset valuation and division.
Mediators are neutral third parties who can help with a variety of issues, including support payments, the division of property or custody of and access to children.
You should review any agreement reached during mediation with a lawyer before you sign it. Mediation is not right for everyone, particularly in cases where there has been violence or abuse, according to the Ontario Ministry of the Attorney General.
“Not only would this process reduce stress and avoid unnecessary legal fees, the family farm has a better chance of surviving when the farmer participates in the creation of an agreement rather than having a decision given by a third party,” she says.
“Payment of an equalization payment over time is more likely to occur in an agreement than from a judgment.”
Another way to help unravel complicated divorce proceedings is to deal with key issues beforehand in a pre-nuptial agreement.
Prenuptial agreements should specify what assets are to remain separate and how assets are to be divided in the event of a breakdown of the relationship, says Biemans.
“For instance, that the farmer retains the farm assets and pays the other spouse out for their portion of the same within a specific period of time rather than having the land base or farm machinery divided immediately.”
As time goes by, more assets are acquired, perhaps children are born, and the terms of how assets are divided and what is exempt or separate may change. These agreements can be re-visited.
“If it is likely that a spouse will not contribute to the farm through work, their off-farm income, maintaining and improving the yard and home, or raising a family, then in that case the parties may have a prenuptial agreement that exempts both the farm assets acquired before the marriage, as well as the increase in their value, for the farming spouse while also exempting the non-farming spouse’s excess off-farm income, pension or investments from that income for them.”
As for non-married couples who live together, anything longer than two years of cohabitation is seen as a common-law marriage and they will likely be considered a legally married couple in the eyes of the law
“To reduce the stress of divorce, parties need to choose their battles,” Biemans said
“They should reconsider spending thousands in legal fees in an attempt to get an additional thousand dollars in the property division.
“Much can be said about mediation or good faith attempts to reach an equitable settlement without the intervention of a court. Applications are costly, often take a lengthy time to resolve issues and can be unsatisfactory when a third party who is unfamiliar with the parties’ specific needs, wishes and goals makes a decision for them.”