Don't Give Away the Farm in Your Iowa Divorce

May 7th, 2013

With skyrocketing land prices and high commodity prices it's important for any landowner or farmer to know how to protect their farm in a divorce action. As the recent decision in In Re the Marriage of McDermott shows, poor planning may leave a century or family farm open to division in a divorce case in Iowa.

In McDermott the court had to deal with the issue of dividing a century farm in a divorce case. The parties in the matter had been married for approximately fifteen years. The husband was a farmer by trade and came into the marriage with approximately $600,000.00 of assets. The mother was a trained physical therapist and came into the marriage with approximately $30,000.00 of assets. During the course of the marriage the parties' purchased the family farm from the husband's parents at a steep discount. In addition, they purchased the husband's uncle's farm at a steep discount. At the time of the divorce both farms had a value of approximately 2 million dollars. The husband argued that the property was his separate property as it was gifted and inherited. On the other hand, the wife contended that it was marital property, as they had purchased it and both contributed to the maintenance of it.

Analyzing the equitable distribution factors, the District Court and Supreme Court sided with the wife and ordered that the husband pay the wife approximately half of the value of the land or $1,000,000.00. In reaching this decision the Court reasoned that the century farms constituted marital property, as they were gifted and left to both the husband and the wife. The Court made particular note of the fact that the farms were sold and given to the parties as joint tenants, with full rights of survivorship.

Although the McDermott's land was considered marital property, the court does give some direction on how you can make sure to keep your land or family farm your separate property, which is not subject to equitable distribution in a divorce. Here are some of the ways to protect your land or family farm:

1) All wills or trusts transferring ownership of the land should NOT give the land to both the husband and wife;

2) All purchase agreements for the succession of family land should NOT include both the husband and wife;

3) All gifts of land should be documented in writing and deeded solely in your child's name;

4) All gifts of land should comply with federal and state tax laws, and be evidenced by a gift tax return;

5) All gifts or transfers of land should not be made to your child and spouse as joint tenants with rights of survivorship.