“You picked a fine time to leave me Lucille
With four hungry children and a crop in the field”
– Rogers, Kenny. “Lucille.” Kenny Rogers, United Artists, 1977
My grandfather was a farmer in Saskatchewan, Canada. His brother and he owned an enormous winter wheat farm. One year, the crop was worth more than the ground under it. The next year, a hail storm destroyed their crops. Luckily, a bad storm was the worst thing that happened to my grandfather and grandmother. They stayed together for 50+ years until they both passed. Some farmers aren’t so lucky and must learn what happens to their farm in a divorce.
A Farm Appraisal Must Begin With Defining What Is Being Valued
“How much is the farm worth?” seems like a straightforward question. Yet, it is not.
A farm may consist of several parcels of land, a residence, barns, grain-storage facilities, livestock facilities, drainage systems, permanent plantings and other additions. It may also have machinery, stored grain, crops, livestock, accounts receivable or interests in a partnership, corporation or limited liability company.
A real-estate appraisal does not necessarily value all of these assets. Before determining the value of “the farm,” the appraiser must identify the exact property and property rights included in the assignment.
Illinois courts must “employ a fair market value standard” when valuing property. 750 ILCS 5/503(k). The valuation date is the date of trial unless the parties agree to another date or the court selects another date within its discretion. Id. The court must also make specific factual findings concerning the classification and value of the parties’ property and the facts supporting its ultimate property award. 750 ILCS 5/503(a).
A valuation cannot reliably help the court unless the appraisal first answers a more basic question: What, exactly, is being valued?
Defining The Farm Appraisal Problem
Valuing Rural America: Foundations of Data Analysis explains that “[t]he valuation process begins with a concise, understandable statement of the appraisal problem.” American Society of Farm Managers and Rural Appraisers, Valuing Rural America: Foundations of Data Analysis, 60 (2019-2022).
The appraisal problem should identify the subject property, the property rights being valued, the intended use and users of the appraisal, the applicable definition of value, the effective valuation date, the scope of work and any assumptions or limiting conditions. Id. at 60-65. These all can affect the resulting opinion of value.
Identifying The Subject Property
The subject property needs to be described clearly so that the appraiser, the parties, and the court are all discussing the same asset.
A street address may be insufficient for rural property. A farm may consist of several tracts acquired at different times, held under different deeds, or subject to different mortgages. One parcel may contain the residence and agricultural buildings, whereas another contains only pasture, cropland, timber or undeveloped acreage.
The appraisal should identify the relevant parcels and legal descriptions. It should state whether the assignment includes buildings, fixtures, site improvements, leased property, property owned by a separate business entity, or personal property used in the farming operation.
Material valuation errors may affect the entire marital-property distribution. In In re Marriage of Johnson, the appellate court held that the valuation of an oil lease was against the manifest weight of the evidence because “[n]o evidence was presented at trial” regarding its value, but the trial court relied on a valuation report attached to a posttrial closing argument that had not been admitted into evidence. 2016 IL App (5th) 140479, ¶ 89. The trial court further erred by awarding gold and silver coins to the husband “without assigning a value to them,” despite record evidence of their value. Id. ¶ 90. Since the value of the property awarded to each spouse impacts the ultimate distribution, the appellate court stated that “we also reverse the distribution of marital property” and remanded for a new trial. Id. ¶ 84.
Thus, a farm appraisal should identify the asset being valued with enough precision that the resulting opinion can be introduced and applied to that asset at trial.
Identifying The Property Rights Being Valued
An appraisal values an interest in property, not just the physical land.
The interest can be complete fee-simple ownership. However, it can instead be a fractional interest, a leasehold interest or property burdened by easements, rights-of-way, liens or other restrictions. Valuing Rural America cautions that an appraiser who does not identify the ownership rights being appraised may define the wrong problem and provide an opinion that does not answer the client’s true valuation question. Valuing Rural America: Foundations of Data Analysis, at 62-63.
In terms of family farms, this distinction really matters. A spouse may own the entire farm, a beneficial interest in a trust, an undivided interest with relatives, an interest in an LLC or corporation that owns the land, or only the right to operate land owned by someone else.
The market value of the entire farm is not automatically the value of one spouse’s particular ownership interest. Similarly, valuing the underlying acreage does not necessarily establish the fair market value of shares or membership interests in the entity that owns it. The appraisal needs to identify the physical property and also the legal interest being valued.
Defining The Intended Use, Value Standard And Valuation Date
An appraisal prepared for estate planning or financing may not answer the same questions as an appraisal prepared for an Illinois divorce trial.
The intended use of an appraisal affects the necessary analysis and investigation. For an Illinois divorce, the appraiser must understand that the opinion will be used to help the court in dividing property. The report should apply the Section 503(k) fair-market-value standard, not a different concept like investment value, use value, or value to a particular owner.
Additionally, the effective valuation date must be stated. An appraisal prepared as of an earlier refinancing, tax, or estate-planning date may not establish the farm’s fair market value on the valuation date applicable to the divorce. The date of inspection and the effective date of value can coincide, but they are not automatically identical.
The Scope Of Work Must Match The Farm
Not every rural appraisal needs the same investigation. For example, a vacant tract of uniform cropland typically presents a less complicated assignment than an improved farm that possesses several leases, land classes, agricultural buildings, drainage systems, and environmental concerns.
Depending on the property, the appraiser may be required to review deeds and surveys, examine leases and easements, review rental income, inspect the land and improvements, evaluate soil productivity, verify comparable sales, and look into zoning or environmental conditions.
Especially complex assignments may require assistance from engineers, soil scientists, or other specialists. An appraiser may also need to identify laws, assumptions, hypothetical conditions, and other assignment conditions impacting the scope of work.
Before the parties debate the appropriate valuation method or resulting number, the parties must make sure that the appraisers are answering the same question. So, the first step in valuing a farm in an Illinois divorce is not selecting a number. Rather, it is defining the property, ownership interest, value standard, effective date, and scope of work required to produce that number.
Is The Farm Marital Or Nonmarital Property?
Before an Illinois court can divide a farm, it must classify the property as marital or nonmarital. Under Illinois law, property acquired by either spouse after the marriage and before dissolution is presumed to be marital property. 750 ILCS 5/503(b)(1). Property acquired before the marriage, or acquired by gift, legacy, or descent, is generally nonmarital. 750 ILCS 5/503(a)(1), (6).
When And How The Farm Was Acquired
Under Illinois law, property acquired during the marriage through a loan secured solely by nonmarital property is classified as nonmarital, although marital funds used to repay the loan are treated as a contribution subject to reimbursement. 750 ILCS 5/503(a)(6.5).
The date of acquisition is typically the place to start. A farm purchased during the marriage is presumed marital even if only one spouse is on the deed. By contrast, farmland owned before the marriage or inherited from a parent usually stays as the owning spouse’s nonmarital property.
Title, by itself, does not always fix classification. The marital-property presumption includes nonmarital property transferred into a form of co-ownership between the spouses, but the presumption may be rebutted by clear and convincing evidence that the transfer was made for tax planning, estate planning, or another reason demonstrating that no gift was intended. 750 ILCS 5/503(b)(1).
In In re Marriage of James, the husband acquired real estate in his individual name almost ten years into the marriage and claimed that he purchased it with funds from his nonmarital business; however, because the property was acquired during the marriage, the appellate court held that “[i]t is therefore presumed to be marital property,” and the husband bore the burden of rebutting that presumption with clear and convincing evidence that the property was acquired through one of Section 503(a)’s statutory exceptions. 2018 IL App (2d) 170627, ¶¶ 28-29.
The court decided that he failed to meet that burden because his testimony concerning the source and amount of the purchase funds was “muddled and inconsistent at best,” the purported corroborating witnesses did not establish the source of the funds, and he provided no bank records, cancelled checks, tax returns, or other documents tracing the funds to his nonmarital business. Id. ¶¶ 30-33.
Tracing And Commingling
A spouse claiming that a farm or part of a farm is nonmarital must trace the asset to a qualifying nonmarital source. As the court in James explained, “‘[t]racing requires that the source of the funds be identified.’” Id. ¶ 32 (quoting In re Marriage of Davis, 215 Ill. App. 3d 763, 770 (1991)).
Deeds, closing statements, gift documents, bank records, loan histories, tax returns, and other related documents may be necessary.
Section 503 states that, when one estate is contributed into another, “[i]f the contributed property loses its identity,” it “transmutes to the estate receiving the property.” 750 ILCS 5/503(c)(1)(A)(i). Conversely, if the contributed property “retains its identity,” it “does not transmute and remains property of the contributing estate.” 750 ILCS 5/503(c)(1)(A)(ii). When marital and nonmarital property are commingled to acquire new property and the contributing estates lose their identities, “the commingled property shall be deemed transmuted to marital property,” subject to the contributing estate’s potential right to reimbursement under paragraph (2). 750 ILCS 5/503(c)(1)(B), (c)(2)(A).
Appreciation, Farm Income, And Reimbursement
Section 503 classifies “the increase in value of non-marital property” as nonmarital, regardless of whether the increase comes from marital funds, nonmarital funds, a spouse’s personal efforts, or some other source; however, the appreciation remains subject to the right of reimbursement under section 503(c). 750 ILCS 5/503(a)(7).
If one estate contributes property to another, the contributing estate “shall be reimbursed” from the receiving estate; reimbursement is unavailable, however, if the contribution “is not traceable by clear and convincing evidence” or “was a gift.” 750 ILCS 5/503(c)(2)(A). So, marital funds used to install drainage tile, construct a grain bin, reduce the mortgage on inherited farmland, or make another capital improvement may support a reimbursement claim without turning the entire farm into marital property. The reimbursement-seeking spouse must still establish the contribution and trace it to the receiving estate.
Personal effort is treated separately. A spouse’s labor devoted to nonmarital property is considered a contribution from the marital estate, which may receive reimbursement when the efforts are “significant and result in substantial appreciation.” 750 ILCS 5/503(c)(2)(B). Yet, reimbursement is not available when the marital estate “reasonably has been compensated” for those efforts. Id.
In In re Marriage of Werries, the husband’s 45% interest in a farm partnership was acquired in part before the marriage and in part by gift from his father, so it remained nonmarital; the court explained that “[t]he issue is not the business’ form,” but “whether there has been an actual segregation of the nonmarital estate from the marital and whether adequate proof of the separation of business from personal assets is offered.” 247 Ill. App. 3d 639, 646-47 (1993). Since the evidence showed that the nonmarital farm business had remained separate from the parties’ marital personal assets, the partnership’s growth during the marriage did not change its classification. Id. The court further affirmed the denial of reimbursement, as the alleged marital contributions were not traced by clear and convincing evidence and the parties had been reasonably compensated for the husband’s personal efforts. Id. at 647-49.
Additionally, farm income requires careful classification. Income from nonmarital property is nonmarital only when it is not attributable to a spouse’s personal effort. 750 ILCS 5/503(a)(8). Thus, passive cash rent from inherited farmland may be treated differently from earnings generated through a spouse’s active labor and management in the farming operation.
A farm can consequently be both partly marital and partly nonmarital. For example, the land may be inherited, while later-acquired parcels, crops, or business accounts may belong to the marital estate. Even when the land is nonmarital, the marital estate may have a reimbursement claim for traceable improvements, payments, or uncompensated labor. Rather than applying a single label to everything associated with “the farm,” classification must occur asset by asset.
What Makes A Farm Different From Other Real Estate?
Someone may think that a farm can be reliably valued by multiplying its total acreage by a single average price per acre. It cannot. Rural properties have different land uses, soils, buildings, improvements, drainage conditions, and productive capacities within the same legal description. Each characteristic can impact the property’s income potential, marketability, and highest and best use.
Soil Quality And Productive Capacity
Valuing Rural America starts its discussion of rural land with a basic premise: “Soil is the basic component of value in a rural property used for the production of agricultural commodities.” Valuing Rural America: Foundations of Data Analysis, at 132.
So, an appraiser should identify the soil types present, the acres associated with each type, and the characteristics impacting productivity. Soil structure, texture, depth, slope, erosion, drainage, fertility, and available water might influence which crops the land can support and the yields it may reasonably produce. Id. at 132-41. A tract with highly productive cropland is not automatically the same as an equally sized tract with poorer soils, steeper slopes, or non-tillable acreage.
Soil maps and productivity ratings often inform the valuation, but they do not complete it. USDA’s Natural Resources Conservation Service describes Web Soil Survey as the “single authoritative source of soil survey information” and publishes Illinois maps addressing drainage, floodplains, hydric soils, tile-drainage potential, prime farmland, productivity, and soil classifications. U.S. Dep’t of Agric., Natural Res. Conservation Serv., Web Soil Survey; U.S. Dep’t of Agric., Natural Res. Conservation Serv., Soils—Illinois. Since onsite investigation may still be required, the appraiser must relate the mapped data to the subject property and verify conditions the maps may not capture. U.S. Dep’t of Agric., Natural Res. Conservation Serv., Illinois Suite of Maps.
Illinois further uses two soil productivity indices. Bulletin 810 is used for farmland tax assessments, while Bulletin 811 is often used to compare soil productivity in farmland sales. Ill. Dep’t of Revenue, Farmland Assessments; Univ. of Ill. Extension, Ratings of Illinois Soils. Indices are not interchangeable, so an appraisal needs to specify which bulletin it uses rather than generically referring to a “soil rating.” Univ. of Ill. Extension, Ratings of Illinois Soils.
Land Mix, Topography, And Drainage
The number of deeded acres does not establish how many acres are tillable or equally productive. An appraisal needs to distinguish cropland from waterways, ponds, wetlands, pasture, timber, roads, building sites, and other non-tillable areas; it also needs to identify portions of the farm with materially different productivity or uses. See Univ. of Ill. Extension, Land Values and Cash Rents in Central Illinois (Apr. 10, 2026).
Topography may affect accessibility, drainage, erosion, field configuration, and the efficient operation of machinery. Poor drainage can reduce productivity or require ditches, pumps, tile, or other improvements. Flooding history also is important. A floodplain designation alone does not establish the frequency, extent, or economic effect of flooding on the farm. Illinois farmland-assessment guidance illustrates the distinction by requiring flood adjustments to be based on the site’s history and documented crop loss and by limiting adjustments to acreage suffering actual, rather than potential, crop loss. Ill. Dep’t of Revenue, Farmland Assessments.
Drainage systems should not merely be classified as present or absent. Their age, location, coverage, capacity, condition, and maintenance may impact their usefulness and the farm’s value. Farms may perform above or below their general soil ratings, so the appraisal should consider how the property’s drainage conditions actually affect productivity and yield. See Univ. of Ill. Extension, Illinois Farmland Values in 2026 Give Volatile Signals (May 1, 2026); Univ. of Ill. Extension, Farm Drainage Series—Part 1: The Need for Farm Drainage and the Current Problem (Aug. 18, 2025).
Site Improvements
Improvements may include irrigation systems, septic systems, water lines, drainage tile, wells, fencing, roads, utilities, and grain-handling components. Valuing Rural America states that “[l]and improvements typically reflect a regional level of agriculture” and may be necessary for the property’s intended use. Valuing Rural America: Foundations of Data Analysis, at 160-69.
To be clear, an improvement does not mean its original cost is added dollar-for-dollar to the farm’s market value. The appraiser should determine whether it is normal for the local market, whether it is functional, and whether buyers would pay more due to it.
Ownership must also be identified. Some improvements may be fixtures that belong to the landowner. Others may be personal property installed by a tenant. Before an appraiser assumes that all visible improvements are included in the ownership interest being valued, a review of the farm’s lease may be necessary.
Agricultural Buildings
Further, “[t]he buildings on rural properties take many forms and vary in importance.” Id. at 170. A farm can have a residence, barns, grain bins, livestock-confinement facilities, feed mills, cattle yards, specialized processing facilities, and more. Their contribution to value depends on their size, design, condition, remaining useful life, and compatibility with the farm’s present and reasonably anticipated use. Id. at 170-88.
The appraisal should describe specialized improvements with enough detail so that it is clear what exists and why it affects value. As Valuing Rural America concludes, “[t]he important features of specialized agricultural properties must be addressed.” Id. at 188. The relevant inquiry is not simply how much an improvement cost to build, but whether and to what extent it contributes to the fair market value of the farm on the applicable valuation date.
The Appraisal Must Determine The Farm’s Highest And Best Use
A farm’s current use does not necessarily establish its highest and best use. Valuing Rural America defines highest and best use through four factors: the use must be “legally permissible,” “physically possible,” “financially feasible,” and “maximally productive.” Valuing Rural America: Foundations of Data Analysis, at 308.
Legal permissibility needs more than determining how the property is currently zoned. The appraiser may be required to examine zoning ordinances, leases, easements, restrictive covenants, conservation restrictions, building regulations, and other limitations on use. Id. at 316-19. A possible future use can impact value. However, it cannot rest solely on the owner’s plans or speculation about eventual development.
Illinois eminent-domain decisions further illustrate when a prospective future use may impact market value. The Illinois Supreme Court explained that a prospective future use may affect valuation only if it “in fact enhanced the market value of the land in its present condition and state of improvement” and constituted “a present capacity for a use which may be anticipated with reasonable certainty and made the basis of an intelligent estimate of value.” City of Chicago v. Anthony, 136 Ill. 2d 169, 174-75 (1990) (quoting Crystal Lake Park District v. Consumers Co., 313 Ill. 395, 406 (1924)).
A potential rezoning may also affect valuation because “[i]t is proper to base value upon the highest and best use permitted, not only under existing but also under other zoning classifications where there is reasonable probability of the granting of such zoning in the near future.” Dep’t of Pub. Works & Bldgs. v. Ass’n of Franciscan Fathers, 69 Ill. 2d 308, 315 (1977).
Physical possibility depends on characteristics like acreage, access, shape, soils, topography, drainage, the availability of water, and utilities. Financial feasibility looks at whether the anticipated benefits of a use justify the costs necessary to develop and maintain it. Among the uses that satisfy those tests, the most productive use is the one that produces the highest property value. Valuing Rural America, at 320-25.
The analysis should think about both the land as though vacant and the property as presently improved. Existing residences, barns, grain facilities, or livestock buildings may support the farm’s highest and best use, have little effect on it, or detract from value if they are obsolete or inconsistent with the use preferred by market participants. Id. at 313-15, 324-29. In sum, the conclusion must be supported by market evidence, as it determines which comparable sales are relevant and how the appraiser applies the approaches to value. Id. at 332.
How Is A Farm’s Value Determined?
Once the appraisal problem is defined and the farm’s highest and best use is determined, the appraiser must choose and apply the appropriate valuation methods. The three traditional methods are the sales comparison approach, the income capitalization approach, and the cost approach. Valuing Rural America: Foundations of Data Analysis, at 334-35.
The sales comparison approach evaluates prices paid for comparable properties. The income capitalization approach converts anticipated income into an indication of present value. The cost approach estimates the value of the land and the contributory value of the improvements, accounting for depreciation and obsolescence. Id.
The approaches are related, but they should still be developed independently when applicable. An appraiser may omit an approach that does not produce a credible result for the assignment; yet, the appraisal should explain that decision. Id. at 335-47.
The Sales Comparison Approach
The sales comparison approach is “a set of procedures in which the appraiser derives a value by comparing the property being appraised to similar properties that have recently been sold,” applying appropriate units of comparison, and adjusting the sale prices for material differences. Id. at 348. It is often most helpful when enough reasonably comparable properties have sold in the relevant market to allow for meaningful comparison. Id. at 349.
For a farm, a price-per-acre calculation may be the starting point. However, it is not the end of the analysis. Two farms that sold for different amounts per acre may differ in size, location, access, soil productivity, or other important characteristics to buyers. In fact, Illinois farmland reports separately identify total acreage, percentage tillable, productivity index, and price per acre, which shows why a single average price does not fully describe a transaction. See Univ. of Ill. Extension, Land Values and Cash Rents in Central Illinois (Apr. 10, 2026).
Selecting And Verifying Comparable Sales
The appraiser must first research the market and identify sales with the most relevant similarity to the farm at hand. A nearby sale is not automatically comparable, and a sale should not be selected simply because it occurred recently. Considerations should include the property rights conveyed, conditions of sale, effective sale date, financing terms, location, land use, physical characteristics, income characteristics, and improvements. Valuing Rural America: Foundations of Data Analysis, at 350-52, 362-70.
The transaction information must be verified. The appraiser should determine whether the reported price was accurate, whether unusual financing affected the price, whether the sale included personal property or other assets, whether the parties were related or unusually motivated, and whether the transaction was an arm’s-length exchange. Id. at 352-55.
Appraisal Institute guidance states that appraisers “must consider all relevant transactions” in the market area and then select the sales most similar to the subject in the characteristics that buyers and sellers consider important. Appraisal Institute, Guide Note 11: Comparable Selection in a Declining Market, in Guide Notes to the Standards of Professional Practice of the Appraisal Institute, 39 (2025). The appraiser should evaluate each selected sale for material differences, including “atypical buyer/seller motivations and sales concessions,” and determine whether an adjustment is necessary. Id. at 39-40.
When few current comparable sales are available, the appraiser may need to “expand the geographic area” or “use less recent sales,” while making adjustments for location or market conditions. Id. at 44-45. The Appraisal Institute also explains that adjustments may be supported through recognized methods like interviews with market participants, net-income differentials, cost analysis, and the analysis of current listings. Id. at 44.
Adjusting The Comparable Sales
After appropriate sales are chosen, the appraiser adjusts them for material differences from the farm. These might include transaction-related differences like property rights, sale conditions, financing, post-purchase expenditures, market conditions, as well as property-related differences like location, size, access, physical characteristics, and income. Valuing Rural America: Foundations of Data Analysis, at 362-70.
The comparable sale is adjusted to the farm at hand; an inferior characteristic might require an upward adjustment, whereas a superior characteristic might require a downward adjustment. Since farms can contain different proportions of pasture, timber, cropland, waterways, building sites, and agricultural improvements, land and building components may need to be analyzed separately. Id. at 370-83.
The final value should not be a mechanical average of the adjusted sales. The appraiser must weigh the data’s reliability, each sale’s similarity to the farm, and the number and magnitude of the adjustments, then explain how the evidence supports the final opinion. Id. at 349-50, 385.
The Income Capitalization Approach
The income capitalization approach values a farm through its ability to produce economic benefits “in the form of income, or rent.” Valuing Rural America: Foundations of Data Analysis, at 437. The appraiser estimates the income that an ordinary owner could reasonably anticipate from the property and converts it into a present value indication. The approach can use direct capitalization, which converts one year’s representative income into value, or yield capitalization, which discounts a series of anticipated future benefits. Id. at 438, 455-57, 473-86.
The analysis usually starts by identifying the income arrangement typical in the relevant market. That may be a crop-share lease, market cash rent, or, less commonly for appraisal purposes, an owner-operated farming arrangement. A crop-share analysis may need estimates of the crops likely to be grown, probable yields, commodity prices, the landlord’s share of production, and the expenses allocated to the landowner. Id. at 441-48, 464-69.
Then, the appraiser develops a representative net operating income. The appraiser does this by adjusting gross income for applicable losses and deducting ordinary ownership expenses. Debt service, depreciation, and income taxes usually are excluded. The income should reflect the property’s expected performance. The appraiser converts that income into value using a capitalization rate supported, when possible, by comparable income-producing property sales. Valuing Rural America: Foundations of Data Analysis, at 450-61.
An appraisal should not automatically capitalize all profits from the farming operation. Owner-operator income may include returns attributable to management, labor, livestock, crops, machinery, and other business assets. The appraiser should isolate the income attributable to the real estate and improvements from income generated by the separate farming business. Id. at 439-40, 448-55.
The Cost Approach
The cost approach rests on the idea that an informed buyer likely will not pay more for a property than the cost of acquiring an equally desirable substitute. The appraiser typically values the land separately, estimates the reproduction or replacement cost of the improvements, subtracts depreciation, and adds the depreciated improvement value to the land value. Valuing Rural America: Foundations of Data Analysis, at 394-96.
Reproduction cost reflects the cost of constructing a duplicate. Replacement cost reflects a building with equivalent utility using current materials and design. Depreciation can come from physical deterioration, functional obsolescence, or external obsolescence. Id. at 395-408, 413-17.
The approach may be particularly helpful for newer residences, livestock facilities, grain-storage systems, and other specialized improvements. However, it is less reliable when depreciation or obsolescence is hard to measure. Further, construction cost does not necessarily equal contributory market value; an improvement may contribute less than its remaining cost if buyers do not need or value it. Appraisal Institute guidance thus cautions that the cost approach should be “developed with the same rigor as the sales comparison and income approaches.” Appraisal Institute, Site Valuation and the Cost Approach: Where Real General Appraisal Work Lives (May 29, 2026).
Reconciling The Approaches Into A Final Value
The appraiser should not just average the values produced by the sales comparison, income capitalization, and cost approaches. Rather, the appraiser should think about the reliability of the data supporting each approach and explain why one receives greater or lesser weight.
If an approach is not applicable or cannot produce a credible result, it may be excluded, but the exclusion should be explained. Valuing Rural America: Foundations of Data Analysis, at 334-47. The final report needs to demonstrate how the appraiser moved from the individual value indications to the ultimate opinion of value.
The Farm Real Estate And The Farming Business Are Different Assets
A working farm may involve real estate and a separate operating business. Those assets should not be treated as interchangeable.
The land, residence, buildings, fixtures, and permanent site improvements can belong to one individual, but the machinery, inventory, livestock, crops, and farming operation belong to another. A real-estate appraisal values just the property and property rights included in its assignment.
Valuing Rural America distinguishes the real estate from personal property. Personal property includes “movable items on the property that are not permanently affixed to, or part of, the real estate,” including farm machinery and livestock. Valuing Rural America: Foundations of Data Analysis, at 168. Fixtures require a deeper analysis, as an item attached to the property may become part of the real estate, while a tenant’s trade fixture may stay as the tenant’s personal property. Id. at 168-69. So, the appraiser needs to determine whether irrigation components, grain-handling systems, refrigeration equipment, livestock equipment, and other visible items are fixtures included with the land or separately owned personal property. Id. at 160-69, 170-88.
Illinois divorce courts similarly classify and value farm-related assets separately. Under Section 503, specific factual findings concerning the classification and value of the parties’ assets are required. 750 ILCS 5/503(a). Thus, an appraisal of the acreage does not eliminate the need to identify livestock, crops, machinery, farm accounts, operating debt, or an ownership interest in the entity that conducts the farming business.
“The farm” therefore may consist of multiple distinct assets that must be identified, classified, and valued separately. A real-estate appraisal of the land and improvements does not establish the value of the operating business or the personal property used to run it. Once those components are separated, the court can make the asset-specific classification and valuation findings required by Section 503.
How The Farm’s Value Affects The Property Division
Determining the farm’s fair market value does not determine who will actually receive it. In Illinois, the court must assign each spouse’s nonmarital property to that spouse and divide the marital property “in just proportions,” and in doing so, the court considers the parties’ contributions, the value of the property assigned to each spouse, their economic circumstances, occupations, income, liabilities, needs, opportunities to acquire future assets and income, and the tax consequences of the division. 750 ILCS 5/503(d)(1), (3), (5), (8), (11), (12).
An equitable division does not mean every asset has to be divided physically or sold. A court can award an indivisible farm or closely held business to one spouse and compensate the other spouse through different marital assets or an equalization payment. In In re Marriage of Price, the trial court awarded the husband all of the parties’ businesses and ordered him to pay the wife $330,275.10 within 90 days. 2013 IL App (4th) 120155, ¶¶ 35, 41, 47. The appellate court explained that installment payments may be appropriate sometimes but are not required and pointed to the principle that, “where it has been necessary to award large assets to one spouse, the trial court is in a position to fashion offsetting payments flexibly.” Id. ¶ 47 (quoting In re Marriage of Rosen, 126 Ill. App. 3d 766, 778 (1984)).
The ability to fund an equalization payment may determine whether a farm can stay intact. In In re Marriage of Warner, the trial court awarded the parties’ 80-acre farm to the wife but required her to pay the husband $200,000 by obtaining a loan or partially selling the property. If neither option was feasible, the entire farm was required to be sold. 2020 IL App (3d) 190198, ¶¶ 4-7. When neither option proved feasible, the appellate court affirmed subsequent orders compelling the sale since those orders enforced, rather than modified, the original property division. Id. ¶¶ 21-24.
Warner illustrates that a farm’s appraised value is not necessarily cash immediately available for distribution. In structuring the division, a court may be required to consider the outstanding mortgage, anticipated transaction costs, the owner’s ability to get financing, and the tax consequences of selling the property. The trial court in Warner calculated the parties’ distributable equity after deducting the broker’s commission, mortgage, and costs of sale, and separately addressed the allocation of capital gains if acreage had to be sold. Id. ¶¶ 5-7.
Thus, a helpful appraisal provides the court with a defensible value for the property and, when appropriate, its component parts. The parties may require more evidence concerning mortgages, operating debt, financing, transaction costs, and taxes before the court is able to determine whether the farm may be awarded intact, divided, refinanced, or sold. The appraisal informs those decisions, yet the equitable-distribution factors under Section 503 determine the result.
The Bottom Line About Valuing And Dividing A Farm In An Illinois Divorce
“How much is the farm worth?” cannot be answered by multiplying the deeded acreage by an average price per acre. It must begin by identifying the property and ownership interest being appraised, classifying each farm-related asset, and analyzing the land’s soils, productivity, drainage, improvements, buildings, and highest and best use.
Then, the appraiser must apply the appropriate valuation approaches and explain how the available evidence supports the final opinion.
Even then, valuation is only one part of the divorce analysis. The court needs to translate the appraised value into an equitable property division that accounts for ownership, debt, liquidity, taxes, and the practical consequences of preserving, dividing, refinancing, or selling the farm.
If you own a farm or your spouse owns a farm, see my Illinois business owner divorce page and contact my Illinois divorce law firm.
Russell D. Knight is a Chicago divorce and family law attorney who has practiced family law since 2006. He represents clients in complex Illinois divorce matters involving high-net-worth marital estates, real estate, closely held businesses, business valuations, and other difficult-to-value assets. His Chicago practice focuses on Illinois divorce and family law.
CASES, STATUTES, AND OTHER SOURCES REFERENCED IN THE FARM APPRAISALS AND DIVORCE IN ILLINOIS ARTICLE
750 ILCS 5/503(a) — Definition And Classification Of Marital And Nonmarital Property
750 ILCS 5/503(a)(1), (6), And (6.5) — Property Acquired By Gift, Inheritance, Before Marriage, Or Through Nonmarital Collateral
750 ILCS 5/503(a)(7) And (8) — Appreciation Of And Income From Nonmarital Property
750 ILCS 5/503(b)(1) — Presumption Of Marital Property And Transfers Into Co-Ownership
750 ILCS 5/503(c)(1) — Commingling And Transmutation Of Property
750 ILCS 5/503(c)(2) — Reimbursement For Contributions Between Estates And Personal Efforts
750 ILCS 5/503(d) — Factors Governing The Division Of Marital Property
750 ILCS 5/503(k) — Fair Market Value Standard And Valuation Date
The linked Illinois General Assembly page contains the current consolidated text of section 503. (Illinois General Assembly)
In re Marriage of Johnson, 2016 IL App (5th) 140479
In re Marriage of James, 2018 IL App (2d) 170627
In re Marriage of Davis, 215 Ill. App. 3d 763 (1st Dist. 1991)
In re Marriage of Werries, 247 Ill. App. 3d 639 (4th Dist. 1993)
City of Chicago v. Anthony, 136 Ill. 2d 169 (1990)
Crystal Lake Park District v. Consumers Co., 313 Ill. 395 (1924)
Department of Public Works & Buildings v. Association of Franciscan Fathers, 69 Ill. 2d 308 (1977)
In re Marriage of Price, 2013 IL App (4th) 120155
In re Marriage of Rosen, 126 Ill. App. 3d 766 (1st Dist. 1984)
In re Marriage of Warner, 2020 IL App (3d) 190198
American Society of Farm Managers and Rural Appraisers, Valuing Rural America: Foundations of Data Analysis (2019–2022).
U.S. Department of Agriculture, Natural Resources Conservation Service, Web Soil Survey
U.S. Department of Agriculture, Natural Resources Conservation Service, Soils—Illinois
U.S. Department of Agriculture, Natural Resources Conservation Service, Illinois Suite of Maps
Illinois Department of Revenue, Farmland Assessments
K.R. Olson & J.M. Lang, Bulletin 811: Optimum Crop Productivity Ratings for Illinois Soils
University of Illinois Extension, Ratings of Illinois Soils
FREQUENTLY ASKED QUESTIONS ABOUT FARM APPRAISALS AND DIVORCE IN ILLINOIS
Is a farm marital property in an Illinois divorce? This depends on when and how the farm was acquired. Farmland purchased during the marriage is usually presumed to be marital property. Farmland owned before the marriage or received by gift or inheritance is usually nonmarital; however, tracing, commingling, transfers between spouses, and reimbursement claims may complicate the classification.
Does inherited farmland become marital property when marital money is spent on it? Not automatically. The increase in value of nonmarital property typically stays nonmarital, but the marital estate may receive reimbursement for traceable contributions that were not gifts.
Can a spouse receive reimbursement for working on a nonmarital farm? Potentially. A spouse’s personal effort is viewed as a contribution from the marital estate when the effort is significant and results in substantial appreciation of the nonmarital property. Yet, reimbursement may be denied when the marital estate was reasonably compensated for that work.
How is a farm valued in an Illinois divorce? In Illinois, courts use fair market value, generally as of the date of trial unless the parties agree to another date or the court selects another date within its discretion. A farm appraisal can consider anticipated income, comparable sales, land and improvement costs, soil productivity, tillable acreage, drainage, buildings, highest and best use, and the ownership interest being valued.
Can an appraiser value a farm by multiplying the acreage by an average price per acre? A price-per-acre figure can be a starting point. However, it generally is not enough by itself. Farms of equal size can still substantially differ. Comparable sales should be adjusted for differences that matter to buyers and sellers.
