Michael Rowlands, Family Partner at JMW Solicitors, gives his top tips on making plans
The first farmer that I helped divorce, back in the late 1980s, walked into my office, crushed my hand in his grip, looked me in the eye and said “I want you to make this as difficult as possible”. In the year or so that followed, I learned a lot about human nature, country and western music and farming in general but the most important thing was to get to know the farm itself because, without an understanding of what you were dealing with, you could only touch the edges of representation.
I grew up working on farms and have understood forever the reason why breakfast was invented and the need to keep my distance on the potato harvest, or run the risk of growing up fast. I learned that farmers often lived well, usually in beautiful environments, but rarely saw themselves as anything other than custodians.
Divorce in the early years rarely meant selling anything significant and the “’farmer`s wife’ as it so often was, moved from the farmhouse to a cottage on the land, a discrete distance away with logs playing an unusually important part in the divorce settlement based on need rather than entitlement.
Everything changed in 2001 when a ‘yardstick of equality’ introduced the idea of sharing, which could and has very often meant that after a long marriage, with equal contributions, a farm that has been in one family for generations has had to be sold if one spouse is unable to buy the other out.
Valuations became central to the divorce process and I have seen almost everything valued over the years from crops to cold stores, paddocks to pears and game parks to grouse moors.
My experience is that something will usually have to be sold, emotions will run very high, and planning for the (matrimonial) worst should be an important class at agricultural colleges across the country.
Divorce preparation for farmers takes two forms, pre and postnuptial settlements and trusts and estate planning.
The ‘prenup’ left Hollywood and officially came to England in 2010 and since then farming families have used them effectively to do everything from identifying and agreeing on what matrimonial assets are capable of distribution to pinpointing the extent of the entitlement of the, usually, non-farming spouse. These agreements, properly constructed and advised on can help avoid the wholesale destruction that the costs of litigation can have on a family. They are not binding but usually set the tone of a subsequent divorce if not the exact outcome.
Even if a prenup proves impossible to negotiate, it always makes sense for the landowner to provide his or her future spouse with a written summary of the assets that will be brought into the marriage, their origin and if possible, approximate value.
Postnuptial agreements work in the same way and I have often come across them when a farming family starts to think about the arrival of a new generation and how the farm can be future-proofed. My experience of such agreements has been that the negotiations behind them are far less dramatic than for a prenup; there is usually more time and the agreement is family rather than divorce focussed.
The final piece of the jigsaw to ensure ultimate protection is to insist that any family with farming assets review their wills, both pre and post-divorce, and whether married or not. The addition of Lasting Powers of Attorney, which can deal with capacity issues should also be included in any discussions concerning succession and tax.
Wills, if drafted correctly, can make good use of trusts to enable farming assets to be passed down to successive generations while limiting Inheritance Tax exposure. While it is still possible for divorce courts to intervene and negate the impact of a trust if it is considered to be a ’nuptial settlement’, the possibility of using a trust for asset protection for future generations on death should not be overlooked as a useful mechanism to provide protection generally.
Not all marriages end in divorce, of course, but death is unfortunately inevitable for us all.
My experience of farm work was that sleep came easy, but for the insomniac farmer, I always recommend a good textbook on agricultural property relief and for the super keen ‘Wills, Probate & Inheritance Made Easy.