Farming Divorces
Complexities of a farming divorce
Farming isn’t just a business and a source of income, it’s a way of life. Farms tend to be passed down through the generations, so when a marriage breaks down, the resulting divorce is often complicated. Farming divorces are generally more complex for a number of reasons:
Higher value assets held in complex legal or financial structures
There tend to be higher value assets involved, frequently held within complex business structures such as trusts, limited companies, or partnerships. It is also not uncommon for farms to have multiple ownership with inter-generational business interests.
Interlinked livelihoods
Wider family members may work on the farm, so many other livelihoods could potentially be interlinked with the farm’s survival.
Asset rich but cash poor
Often farms are asset rich but cash poor, meaning that it is not necessarily a quick or easy process to realise these assets. Land, farm machinery and livestock may have to be valued in order to reach a settlement figure.
Emotional and sentimental ties
On top of that, if the farm was inherited and held within the same family for generations, it will have significant sentimental and emotional value, as well as providing a livelihood for the family.
Common worries in farming divorce
Will the farm have to be sold?
During the farming divorce process, the court will typically look at what was owned before the marriage, who contributes to the farm and how as well as what is necessary for each member to remain financially stable. The legal rights of a farming couple divorcing are the same as for any other divorcing couple i.e. each is entitled to a fair settlement which takes into account their individual contributions. Courts tend to try to avoid forcing the farm to be sold if this is at all possible, sometimes by making an order for the spouse who is leaving the farm to receive payments over a number of years rather than as a lump sum or to offset the value of the farm against other assets such as other properties and pensions.
What happens if the farm is owned jointly by several family members?
Where a farm is owned by several members of the family, the court will consider the position prior to the marriage and what income is required for each party to be financially secure, and ideally independent from one another.
Of course, there will be merit in the parties first ascertaining how the farm is currently being held. Some farms may be just an property asset rather than a business, others can be found to be a working farm which are run by way of a partnership, or a limited company with shareholders and directors.
On reviewing the way the farm is held, the Court will attempt to understand how much interest the party in question has in the farm. The value of that interest will be taken into account when the Court deals with separating the finances. It is common for the courts to evaluate how much each party has contributed towards the business as well as what each person need to maintain financial stability.
The Court is likely to be reluctant to make any order which will have a direct impact on other outside partners unless necessary. It is sometimes possible for this situation to be resolved by the setting up of a trust or formalising a partnership.
What is considered a marital asset vs a non-marital asset?
Assets which have been acquired during the marriage or which are owned as a couple, are called matrimonial assets. These assets can include assets which have been acquired from the date of cohabitation to date of separation, on the usual basis that there was a smooth transition from cohabitation to marriage before separation. It is likely that these assets that have been built up during the parties’ marriage and the court would apply the sharing principle in the first instance.
Assets which belong to one spouse prior to the relationship, bought into the marriage by one party, and property which they have acquired through gifts and / or inherited can be described as non-matrimonial assets. These assets will be scrutinised and defined as to whether they form part of the matrimonial pot or whether they are to remain outside any settlement reached. These assets are not directly subject to equal sharing, and it can often be the case that the spouse bringing the asset into the marriage can retain them. However, they can be taken into consideration if they are required to meet the needs to the other party for example such as rehousing them.
It is important to note that there is an exception to this presumption in the former matrimonial home, which is considered separate. This can be difficult when in relation to a farm because it can be usual for the farmhouse to be the family home, and the basis for all the business needs
Of course, like all matrimonial matters, the way in which the courts view non- matrimonial assets will be based on the facts of the case and depends on the circumstances. It is therefore extremely important that your case is framed in the best possible way from the start, and this is why it is so important that you have the right team on your side.
What happens if the farm is part of a Trust which was inherited?
It can be possible in some cases to ring fence inherited assets so that they are not considered by the court as marital assets.
Is it possible to protect the farm for future generations?
A deeply engrained sense of preserving a livelihood for future generations means that farming families dread divorce more than most. Not to take away from the romance of a wedding, a pre-nuptial or even a post-nuptial agreement can be drawn up to specifically protect the interests of future generations, such as ensuring that the farm remains in the family or that certain assets are preserved for the children’s benefit.
We keep our blog up to date with current information and we may well have blog posts that could help
