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Divorce legal advice: How to protect your farm if your marriage falls apart

Divorce figures may be falling, but that is little consolation for farmers struggling to retain control of their assets as their marriage crumbles.

 

Paul Hunt, family solicitor at Kirwans law firm, tells us more. 

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Legal advice: Protecting your farm if your marriage falls apart

For most people, going through a divorce is a difficult process. But for farmers, whose very livelihoods tend to be tied up in their shared assets, it can bring about the additional turmoil of threatening their business as well as their personal lives.

 

It is the sort of painful situation that solicitors see time and time again; farmers facing not only the dissolution of their marriage, but also a question mark over whether their very livelihood is at risk.

 

Paul Hunt, family law solicitor at Kirwans law firm says: “In the farming world, when divorce is on the cards there is the added complication and pressure of a wish to retain and keep on, as a going concern, a farm which might well have been in the family for several generations.

 

“Understandably, no farmer wants to preside over the break-up of this legacy, so it can be a very bitter pill to swallow if there is a suggestion that the farm be broken up to provide a mechanism for fair sharing of matrimonial assets.


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“Nevertheless, the reality is that the court will look at properties and assets which are no different in legal character from any other circumstances, even though the long-term repercussions may be greater.

 

“Even if your farm is a company structure, the family court can still order the transfer of a company asset to your spouse if it can be shown that you have an ‘entitlement’ to it – therefore making it effectively yours and able to be classed as such when the court takes assets into account.”

 

Some of the steps that can be taken before a marriage falls into difficulties are well known.

 

Agreements

Pre-nuptial agreements have, since the case of Radmacher-v-Granatino in 2010, become well-recognised as a credible way of setting out the division of assets should a couple decide to divorce, before bad feeling and animosity interfere with the decision-making process.

 

However, there is always the risk that these agreements will be successfully challenged, so expert advice is a must to ensure that if they’re ever needed, they hold firm as legally binding documents.

Other options include post-nuptial agreements, which can be equally effective, and Trusts, although these also need careful thought and financial advice before entering into in order to ensure they offer adequate protection for the needs of the family.

 

Paul says: “Prenuptial agreements are not absolutely binding upon the court; that would require legislation, but such agreements are regarded as persuasive evidence for what parties had agreed.

 

“They still, however, have to pass the court’s test of fairness and the arrival of children may well be sufficient to undermine a prenuptial agreement.”

 

What if, however, it is too late for a ‘what if’ agreement? If divorce is already on the table and your farm is forming part of the discussions?

 

“The court is under a duty where parties cannot agree terms, to achieve a fair sharing of matrimonial assets,” says Paul.

 

Decision-making

“The longer the marriage, the more difficult it is to resist an argument that pre-marital assets should be ring-fenced and safe from division by the court, however the court may look at the situation differently if the farm has been handed down through one spouse’s family for generations with the intention of it continuing to do so in future.

“On the other hand, assets may have been intermingled with the family finances, with the farm forming a home for both parties and possibly their children as well, rather than a separate entity.

 

“The court will look to find a solution that is fair, so if there are other assets available it will consider whether these can be used to provide a just outcome for both parties. It may also look at whether the sale of some of the land is a possible option if that still enables the farm as a whole to continue without disruption.”

 

While much of the decision-making will lie in the hands of the courts, if farmers and their spouses are open to discussing their options with each other, then alternative dispute resolution (ADR) could be their best possible chance of coming to a satisfactory resolution and ultimately protecting the farm, says Paul.

 

“There are various forms of ADR, but essentially it involves parties solving their own disputes with the help of a neutral third party,” he says. “Choosing mediation rather than litigation means more money stays in the hands of the former couple and focuses on finding a resolution that is acceptable to both rather than battling it out through the courts.”

 

Whichever option farmers choose, it is crucial not to forget Capital Gains Tax, which is payable on any assets transferred to an ex-partner after the relationship ends, or on assets transferred after the relationship has legally ended.

 

Paul says: “The amount of Capital Gains Tax farmers may have to pay could have a considerable impact on the assets that are actually available for sharing, so it is vital that they keep in touch with their accountant or financial adviser.

 

“By approaching divorce in an organised, calm manner, both parties have the best possible chance of achieving a satisfactory resolution which will allow them to move on with their lives as quickly as possible.”

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