Years ago, couples married, raised a family, and passed the farm from one generation to the next. Today, divorce and separation touch families all too often. And when divorce happens, you need to protect the business, your children — and your financial security.

Once a couple has decided to divorce, it should consider the following:

1. Passing on the family farm. In order to protect your children’s anticipated inheritance of the family farm, you and your former spouse can place the property into a trust. This will ensure that it continues to be passed down to future generations. Failure to place the property in trust could result in a second spouse (if you or your former spouse remarry) inheriting it before the children do. 

2. Insurance policies. Remember to change the beneficiaries listed on all insurance policies pending a divorce. If children are named as life insurance beneficiaries and one parent dies, the other parent usually gains custody of the children. If so, that surviving parent (ex-spouse) could control any money left to the children from life insurance. In order to prevent this, consider making the insurance policy payable to a trust for the children, or to a separate living trust that allows you to stipulate how the money can be used.

3. Retirement planning. When a spouse has not worked outside the home, the divorce agreement should spell out his or her share of a partner’s retirement and how it can be collected. Under certain circumstances, the non-working spouse may be entitled to receive Social Security insurance benefits accrued by the working spouse. But, hopefully, these Social Security benefits will be supplemental income — not a primary source of retirement income.  

Also remember that the family farm is a business. If you and your spouse have worked side-by-side on the family farm, be certain that fair value is considered in determining the “true” value of the farm and its assets.

Take your time and pull together all records relating to money, including investment information, bank statements, and mortgage and insurance documents. Obtain copies of your credit report and make sure that any errors are corrected before the divorce is final.

4. Monthly living. Before the divorce is final, review your budget and determine if you can cover monthly expenses or find ways to cut costs. If you have children, be sure that your divorce agreement spells out who will pay what portion of childcare, health care and education costs, including higher-education expenses.

As with any financial planning and marital changes, it is imperative to get help from legal and tax professionals who are familiar with the unique circumstances that can arise from the division of marital assets.

David Chlus is senior vice president of investments with Smith Barney, Inc., in Utica, N.Y., and a partner in a 90-cow dairy.

When you first get married

Don’t wait until a crisis arises to discuss money matters with your spouse. One of the first things you should do, preferably before marriage, is to find out your partner’s monetary philosophy and share yours. Then, after you’re married, decide together:

  • If you will have joint or separate checking and savings accounts.
  • Who will handle day-to-day money management. 

Even if your spouse pays the bills and balances the checkbook, you should know the account numbers and balances and know where the money goes. Develop credit in each of your own names and determine how much money each of you can spend without consulting the other. Doing these things at the beginning of a marriage can help you build a solid financial footing together.