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New Law Allows Trusts to Require Postnuptial Agreements
Ohio Ag Connection - 03/24/2023

A postnuptial contract would provide another layer of protection for family farm assets if the recipient and their spouse divorce down the road. During a farm transition, a trust can require the individual receiving the assets to execute a postnuptial agreement before joining the business or obtaining the gift.

On March 23, Ohio will join 48 other states with the implementation of a postnuptial agreements law. Senate Bill 210 will go into effect, resulting in a key development for legal practitioners and farm families.

Some readers might be familiar with prenuptial agreements, or prenups for short. Prenups are a contract that a couple executes before their marriage. The contract specifies the handling of separate property, marital property, child custody, debt and other subjects in case a couple separates.

A prenup is valid if the contract is in written form; does not encourage divorce through its terms; represents a full disclosure of financial information for both parties; is not signed under duress or through fraud or coercion; and is signed before two witnesses comfortably ahead of the wedding date. Although it is not a requirement, each party reviewing the agreement with counsel is strongly recommended.

Before Senate Bill 210, Ohio couples could not modify an existing prenup or enter into a property division agreement after marriage. As a result, couples could not adapt to changes in circumstances or asset accumulation.

Postnuptial agreements share many requirements with their prenuptial counterparts. The contracts must be in writing; executed free of duress, fraud or coercion; and must not promote divorce or financial gain from divorce. Also, the parties must make a full disclosure of their separate and marital property.

The last prong of that analysis presents a unique farm transition planning opportunity. Gifting or inheriting assets from family members is a common feature of farm succession plans. In the goal formation process, many farmers are worried about in-laws and the threat of divorce after a death in the family. Even though the family farm is important to protect, the ownership of that asset must be factored into a postnuptial agreement.

Pretend a family is admitting a new member into the farm business or passing assets through a trust. Before gaining admission or receiving those assets, the current owners or the trust can require the individual to execute a postnuptial agreement before joining the business or obtaining the gift. The contract would provide another layer of protection for family farm assets if the recipient and their spouse divorce down the road.



Source: farmprogress.com


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