According to ONS data, a third of marriages over the past 50 years have ended in divorce. In addition to the stress and emotional pain a relationship breakup can cause, it also results in the need to detangle the complex web of marital assets that have often built up over the years.
For farming families, divorce can be even more complicated. In accordance with the outcome of a landmark farming divorce case (White v White, 2000), courts will strive for a 50/50 split of assets according to the following principle: “equality should be departed from only if, and to the extent that, there is good reason for doing so.”
But when that equality could result in the sale of a farming business that has been in the family for generations, the situation inevitably becomes more delicate. The wellbeing of other family members involved in the business, in addition to agricultural tenants and employees, all have to be considered.
A complex situation
There are many factors that make farming divorces unique. Farms will often (although not always) have been in one of the spouse’s families for generations, meaning that the owning spouse is often determined to keep it that way.
What is more, the majority of many farming families’ wealth is tied up in their farm, livestock and machinery, leaving very little liquidity with which to meet the non-farming spouse’s reasonable needs without selling all or part of the farm.
Coming to a decision
A court will carefully consider a wide variety of factors when coming to its decision, including:
- How the farm was acquired (i.e. is it matrimonial property acquired during the marriage, or non-matrimonial property acquired prior to the marriage)
- Duration of the marriage
- Ownership of the farm (i.e. whether other parties own a share)
- The existence of any pre- or post-nuptial agreement detailing how the farm should be divided up on divorce
- The existence and age of any children
- Whether income from the farm is sufficient to support a spouse’s financial needs.
It may be that the only option will be to sell some farming assets to raise capital for the divorce.
Protecting the farm
There are a range of legal methods which you can use to protect your farm in the event of divorce.
For example, a pre-nuptial agreement can be used to set out the assets to which you and your spouse will be entitled in the event of your divorce.
While these agreements aren’t legally binding in England and Wales, they will usually be upheld in a court of law if they have been correctly drafted, and provided that they are fair to and have been freely entered into by both parties.
It is highly advisable to instruct a firm that has specialists in both family and agricultural law to guide you in the drafting of such an agreement.
Partnership agreements and family trusts are other common ways to protect farming assets. Farming partnerships are a highly common ownership structure for agricultural businesses in the UK and, like a pre-nuptial agreement, set out the assets that are owned collectively and individually by each party.
Meanwhile, trusts are also a common method of ensuring that farms stay in the family; farming assets can be held in trust for one or a number of beneficiaries, enabling them to be passed down the generations with minimum tax liability.
However, a court will only uphold the trust’s ownership if it is clearly part of a long-term family wealth management strategy; a trust set up soon before the marriage breakdown, with the clear purpose of ensuring that the non-farming spouse will not be entitled to a share in the farm, is likely to be dismissed by a court of law.
Ask the experts
At Woodfines, our expert solicitors can help you put the mechanisms in place to protect your farm.
Nobody likes to think their marriage will end in divorce, but with the family farm at stake, we like to think of it as an insurance policy – just as you would take out contents insurance for your home.
To find out what we can do for you, contact us on 0344 967 2505 or email firstname.lastname@example.org.