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A marriage break up in any family is upsetting, but when divorce strikes in a farming family the consequences can often be far reaching.
Farming businesses may have been in a family for generations - with fathers, brothers, sons, mothers and daughters perhaps all having a share in the farming enterprise. This complex ownership means that dividing up assets on divorce can be extremely challenging. In a worst-case scenario, divorce can spell the break up of the business and a sale of land to meet the housing and the other needs of a spouse.Article continues below...
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It is an issue that concerns many owners of rural businesses, as evidenced by the impressive turnout at an event Silk Family Law ran earlier in the summer with the CLA, the membership organisation for farmers and landowners.
It is quite common for farming families to transfer property and other assets to the next farming generation to minimise their exposure to inheritance tax on death. These transfers are a common feature based on expert advice from tax planning lawyers. However, families should consider what will happen to those transferred assets if that next generation marries and then some time later that marriage fails.
When a couple divorces, all assets are taken into account regardless of where they came from. When a family court in England or Wales considers the assets of any divorcing person and how they should be divided, it cannot 'ring fence' those given to one party before the marriage through a lifetime gift or inheritance. How assets, including property, land and finances, will be used depends very much on the particular circumstances of the case – with particular regard given to the needs of both parties and any children.
Once there is a clear picture of the assets involved, a court considers how those assets should be redistributed to achieve a fair outcome. In a long marriage where all of the assets have been acquired as a result of the joint endeavours of the couple, the usual starting point (and often the appropriate finishing point) is an equal sharing of assets.
When considering housing needs of both parties, a court will decide whether the family home should be sold and how equity will be divided to ensure that the housing needs of both people are met. It may be that one person should retain a property with the other receiving a lump sum settlement. In a farming case, the family home is often central to the agricultural enterprise and the premises from which the business operates. In those circumstances, it is often the farming partner who intends to continue to operate the business who will retain the property as part of the overall settlement.
Consideration must also be given to the respective pension claims of a divorcing couple. Income will need to be looked at. The payment of maintenance from one spouse to the other is not limited to payments for the benefit of minor children, and the court has power to make an order for 'spousal maintenance'.
I frequently advise farming families to enter into pre-nuptial agreements as an effective way of legally protecting their agricultural business, together with property and money acquired before a marriage. Entering into such an agreement before marriage allows a couple to plan how they will divide current and future assets should they divorce in the future.
It is important to take advice from a family lawyer who specialises in dealing with farming assets on divorce to ensure that the terms of the pre-nuptial agreement are sufficiently robust to be upheld by a court.