What makes a farming divorce unique?
A ‘normal’ divorce may typically involve dividing the equity in the family home, savings and pensions. Farming businesses are unique for many reasons, for example it is not uncommon for farming businesses to be run as a partnership with your spouse or other family members.
Also, it is often the case that the farming business and assets have been passed down generations through inheritance. If you are the party in the divorce who has not inherited the farm, then your financial settlement may not be as straightforward as you would expect in a typical divorce.
Other important factors to consider that may make a farming divorce settlement more complex include:
- Liquidity of the farm/business: assets may not be easily realised and the business may be capital rich but income poor. Livestock and machinery might need to be valued along with the land itself.
- If the farm was inherited: inheritance in a divorce is a topic in its own right. Just because the farm has been inherited by one party does not automatically mean that your ex-spouse does not have a claim to it (known as non-matrimonial assets). This is made particularly more complex if the business arrangement is where both parties have worked or indeed improved the farm to make it a profitable business.
- Third parties: there may be third parties who could be impacted on divorce, such as other family members who have been involved with the running of the farm, or even live on the farm. If there are very complicated ownership structures in place it might become necessary for family members to join the divorce process (called intervenors).
- Trusts/ownership: again, if the farm was inherited it may be the case that for tax efficient purposes there have been certain trusts in place. Equally, the farm could have multiple owners in the family or family members with beneficial interests in the farm.
- Tax: this will have to be carefully considered, and in any event, you are strongly advised to seek specialist advice from a tax expert as to any taxes that could be triggered if you have to realise assets as part of the divorce settlement.
How are farms treated?
Despite farming assets being distinctive from the ‘normal’ divorce, the principles the court will apply are still the same. These come from section 25 of the Matrimonial Causes Act 1973:
- The income, earning capacity, property and other financial resources that each of the parties has or is likely to have in the foreseeable future, including any increase in that capacity.
- The financial needs, obligations, and responsibilities of each party and any children.
- The standard of living enjoyed by the family before the breakdown of the marriage.
- The age of each party and the duration of the marriage.
- Any physical or mental disability of either party.
- The contributions that each of the parties has made (this includes non-financial contributions).
- The conduct of each of the parties (but this is usually such unreasonable conduct it cannot be ignored).
Will I have to sell my farm?
Not necessarily, the court will be reluctant to order the sale of the farm if it produces an income for you to live on. However, if the farm has no cash flow and there are no other assets that can be utilized to meet the other party’s needs (and any children) this is a factor the court will consider. Remember, the needs of any children of the marriage are always the first priority of the court.
Where there is a long marriage, the starting point for the court is to divide the assets equally between the parties. But, as noted above, where inheritance is an argument raised by one party this does not mean it would be treated in the same manner as a pension, for example. Much will depend on your circumstances and if the needs of one party or any children can be adequately met by recourse to other assets within the marriage.
Can I protect my farm?
If you think you are likely to inherit an interest in farming land or business and you are not yet married it is worth considering a pre-nuptial agreement to protect your future interest from claims in a divorce. At Rothera Bray we have experienced solicitors who can assist in drafting pre-nuptial agreements, see our blog on pre-nuptial agreements and whether they are legally binding: https://rotherabray.co.uk/pre-nuptial-agreements/.
The bottom line is that the impact of your divorce on the farm will depend on your individual circumstances, no two divorces are the same. Read more about Farming Divorces here.
If you would like more advice on this or help with settling your agricultural divorce, speak to one of our family solicitors to find out how we can help. Contact us on 03456 465 465 or email enquiries@rotherabray.co.uk
Disclaimer: This blog is for information only and does not constitute legal advice. If you need legal advice please contact us on 03456 465 465 or email enquiries@rotherabray.co.uk to get tailored advice specific to your circumstances from our qualified lawyers
