Divorce and the Family Farm
Any divorce is traumatic, but it can be particularly tough in a farming family as the farm is both the source of the family income and the family home.
When you are trying to end your marriage and sort out the division of personal and business assets, it is especially important to choose a divorce solicitor with expertise in divorce in the farming community.
Family farms and divorce
Some people question why a divorce involving a family farm is different from any other type of divorce. Whilst every divorce is painful, one involving a family farm can be particularly complicated and emotive. Often, the farm has been in the family for generations. There is, therefore, a great sentimental attachment to the farmhouse and land. Not only that, the farm is normally both the family home and the source of income for the entire family, including extended family members such as grandparents and adult children.
Adding to the complexities, the farm, or part of the land, may be owned by the older generation, or one spouse’s parents may receive income from farm profits to provide a pension after they transferred ownership of the family farm to a son or daughter.
A divorce lawyer at Evolve Family Law can advise on the financial complexities of divorce involving a farm, explain your options, and help you negotiate and agree on a fair divorce financial settlement. If that is impossible, we can expertly represent you in a court application for a financial court order and present your case for why you need the order you are seeking.
Prenuptial agreements and farms
In an ideal world, a farming family will take private client advice before handing over ownership of the family farm to a son or daughter. Often, a farming family is told by an estate-planning solicitor that it is tax-efficient to transfer ownership of the farm to the younger generation to minimise inheritance tax. That is all very well, but unless specialist family legal advice is sought, the family may be reducing the risk of paying a large inheritance tax bill while exposing the family farm to divorce claims, because they did not receive advice on the benefits of a prenuptial or postnuptial agreement.
Is a farm a family asset whose value will be shared?
Some farming families believe that if the family farm has been gifted or inherited, it will automatically be protected or ring-fenced from any financial claims arising on divorce. That is not necessarily the case.
Divorce financial claims can be made against the assets even if an asset is:
- Owned in the sole name of one spouse, and
- Was owned by the spouse before the marriage, and
- It has been in family ownership for a long time.
When a couple gets divorced, all the assets they own, individually or jointly, are considered by divorce solicitors when negotiating a financial settlement or by the court when making a financial order. The court’s decision will depend on whether the asset is classified as a family or matrimonial asset, or a non-family or non-matrimonial asset. If a husband and wife cannot agree on whether an asset is a family asset or not, the court will decide.
If an asset is classified as a family asset, the court will treat its value as potentially divisible between the husband and wife. Alternatively, its value can be offset against other assets, such as land, investments, or pensions.
If land or property is classed as a non-family asset belonging to one spouse, the court will not share the non-matrimonial asset between the husband and wife unless the non-owning spouse’s and the children’s needs are such that they can not be met from them sharing all the family assets, including where needs are not met from one spouse getting 100% of all the family assets and the other spouse retaining their asset that has been held to be a non-matrimonial asset, such as a farm business.
Will a prenuptial agreement make a family farm a non-matrimonial asset?
If a family own a farm and wants to leave it as a legacy or gift to a son or daughter, the best option to protect the family farm from divorce claims is to sign a prenuptial agreement before the marriage.
Although a prenuptial agreement can try to ring-fence the family farm from any financial claims in divorce, whether it will work fully depends on the family’s needs at the time of the divorce and the availability of other assets to meet those claims.
In any family situation involving a family farm, divorce solicitors recommend seeking legal advice on the benefits and potential disadvantages of a gift or transfer before the farm is transferred to a son or daughter. Advice can then be taken on the option of a prenuptial agreement or, if they are already married, a post-nuptial agreement.
Divorce and the family farm
If you are getting divorced and one of you owns a family farm, then both husband and wife should take expert legal advice from specialist divorce and family finance solicitors.
The farm owner likely wants to keep the farm, while the spouse who does not own it wants it sold to raise money to buy a house to rehome them. There may be mention of the land’s increased value if farm buildings or land could potentially get outline planning permission, so it can be developed for housing or even get planning permission for a new town.
Valuing a family farm in divorce proceedings
In any divorce and financial proceedings, assets need to be valued. That applies just as much when the asset is a family farm. A specialist valuation will be needed to look at the value of the farm and land, as well as any ‘’hope’’ value in relation to planning permission and development opportunities or the sale of part of the acreage. In addition, the value of the farm asset will depend on the income generated and the value of the agricultural land.
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Selling part of a farm to fund a divorce financial settlement
If a farm is owned in the sole name of a husband or wife (rather than ownership being shared with parents and siblings), then it may be possible to sell part of the land or a farm building or to raise capital by mortgage to meet a husband or wife’s divorce financial claims.
When it comes to a family farm and divorce, the court may view the farm as a non-matrimonial asset and therefore will not order that its value be shared equally between the husband and wife. However, the bottom line is that a husband or wife may get an award that affects the family farm if it is the only way that their housing and other needs can be met.
Choosing Evolve Family Law
When a divorce solicitor is giving legal advice to either a farmer or their spouse, the aim is to achieve a financial solution that provides a home for the husband, wife, and children, and, ideally, does not affect the continued viability of the working farm. This can require creative resolutions to secure the family farm for future generations.
At Evolve Family Law, our specialist divorce lawyers are experienced in advising on prenuptial agreements and farms and on reaching divorce financial settlements where there is an owned or tenant farm and a creative divorce settlement is required to preserve the farm whilst also meeting the family’s need for rehousing and income.
