Divorce in a farming family can have devastating consequences. Ashford’s Jayne Turner discusses how to approach a divorce successfully.
Divorce in a farming family can have devastating consequences for the couple and their wider family, if it is not approached skilfully. The farm is not only a business but a home and a way of life.
Farms tend to be capital rich, with substantial value tied up in buildings and land, yet income poor. This provides its own challenges and there can be added complications, with ownership being shared with parents and siblings meaning that it can be difficult to sell or raise capital as their interests must be considered.
The starting point for a settlement on divorce, particularly with a long marriage, is an equal division of the assets. Frequently, the outcome in farming cases is different as farms can be passed down through the generations and hence treated by the courts as non-matrimonial assets and not shared equally.
The primary focus is on meeting the housing needs of the departing spouse and any children of the family, rather than seeking to provide a percentage division of the assets.
A balancing exercise must be carried out to meet needs and every effort will be made to ensure that a fair settlement is achieved without the farm being sold or its viability damaged. Consideration will be given to how capital can be raised by borrowing or exploring any development potential at the farm. Drawing on the services of other professionals such as an expert valuer, farming consultant and accountant will be vital.
An agreed outcome is always best and alternative dispute resolution, such as the collaborative law process can work well. This is where the parties and their respective solicitors sign an agreement committing to resolving the outstanding issues by a series of meetings, which maximises the chances of an amicable outcome and allows for greater flexibility as experts such as those referred to above can participate in the process.
The difficulties created by a potential divorce can result in reluctance to pass farming assets on and so careful consideration should be given to entering into a Pre-Nuptial Agreement before marriage. This will stipulate what should happen financially if the relationship ends and can help protect the family farm from the consequences of divorce and avoid a messy and expensive dispute later on.
While not currently binding on the courts, recent case law has shown that a Pre-Nuptial Agreement is likely to be upheld provided that the parties have entered into freely at least 28 days before the wedding, they have fully disclosed their financial circumstances, appreciate the implications of the Agreement and its terms are fair and do not prejudice the reasonable needs of any children.
The courts still retain discretion to make financial Orders on divorce but a Pre-Nuptial Agreement will be taken into account in all of the circumstances of the case and in the right case, will carry decisive weight when the court is determining the asset distribution.