The running of a farm is usually a family business. However, it is often much more than just an income for the family; it is a way of life. Therefore, if a farming family decides to get divorced it can often be more stressful than for non-farming families. This is because it comes with certain complexities, particularly if the farm has been in the family for multiple generations or there are other family members who have an interest in the farm either now or in the future.
So what can you do to protect your farm from the potential threat of a future divorce?
Careful planning in advance of marriage is highly recommended. Preparing for what may happen in the future allows you to structure arrangements from the outset in an effort to ensure your family business and individual family circumstances are well catered for.
There are several ways you can do this. Firstly, you should consider partnership agreements. Partnerships are the most common business structure in the farming industry. A partnership agreement can ensure that it is clearly recorded in writing exactly which assets belong to the partnership and which belong to individual partners. This makes identifying assets for division in any future divorce much simpler. There may also be agreements recorded about what happens in the event that one partner wishes to sell or dispose of some or all of their interests in the farm in an effort to prevent dispute on how this should be achieved in the future.
Another effective way of legally protecting your farming business, particularly if this was acquired, inherited or built up prior to the marriage, is to enter into a Pre-Nuptial Agreement. This kind of agreement will enable you and your future spouse to plan how you will divide current and future assets should your marriage end in divorce.
What if I do not have any formal plans in place when I get divorced?
If you have not had the benefit of forward planning and do not have any formal agreements in place prior to the breakdown of a marriage, then fear not, as there are still several solutions that can be used to try and achieve a fair outcome between divorcing spouses whilst allowing the farm to remain viable for the future.
Firstly, the primary aim in divorce is to establish what the needs of each party are and how these needs can be met. The court have a very wide discretion when it comes to dividing assets within a marriage to ensure both parties’, and their dependent children’s’ needs are met.
The first thing the court do is identify what the assets are of the marriage and how they should be shared. The courts look to achieve a ‘fair share’ of the matrimonial assets; however, you should not confuse a ‘fair share’ with an ‘equal share’ as fair does not always mean equal.
Whilst for non-farming divorces, an equal division of the assets and wealth accumulated during the marriage is often considered ‘fair’, this may not always be possible or achievable for farming families because of the need to preserve assets that were owned long before the marriage.
With farming cases, some land or interests in the business may have been inherited and inherited assets are not subject to the ‘sharing principle’ in the same way as other assets. Also, a farm, if owned by wider family members in addition to the divorcing couple i.e. brothers, sisters, parents or both, will require careful thought as to how a share should be achieved whilst imposing as little damage as possible to the livelihoods of other third parties. Finally, a share in the farm may be difficult to achieve if there are not sufficient liquid assets to fund settlement. These are just a few reasons as to why a court may determine that a share of the assets may be fairer if unequal.
Do I need to go to court
No, is the simple answer to this. You do not have to go to court to resolve financial settlement whether the divorce involves a family farm or not. Court should very much be considered a last resort and alternative ways of resolving the dispute should be attempted first i.e., negotiations through the parties with the assistance of solicitors or attendance at Mediation. If settlement can be achieved, there is no need to apply to the court to determine the settlement and instead, an agreed financial order can be filed with the court for approval to ensure that the settlement is then made legally binding and enforceable.
Solutions to achieve fairness in a farm divorce
There are several ways of trying to ensure the farm can remain viable after divorce yet enables a fair settlement to be achieved so as to meet both party’s needs.
Examples may include the transfer of ownership of some of the farming land to the spouse who is leaving the farming business so that the land may then be let back to the spouse who is retaining the farm. This then secures capital as well as an income for the non-farming spouse but retains the land for the benefit of the farm.
Another option would be for the farm or out-buildings to be developed in some way or the farm to be diversified to raise more income or capital. If this is a consideration, then advice from appropriate experts in agricultural planning would be essential.
Finally, it is not uncommon for several generations to be involved in a farm at the same time. For example, often elderly parents remain involved in the farm until their death at which time the farmland itself then passes to the other family members who may already be in partnership with each other.
If you have a farm to protect in the event of divorce or have an interest in a farming partnership and want to know your rights in divorce, we have a specialist family team who can assist you.
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