Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help. Hannah Jenkins, a family solicitor at Thrings, sets out how assets are treated in divorce proceedings.
Q. Can the court force a sale of a farm in divorce proceedings, even if there are other family members/employees involved?
Divorce has become part of everyday life for many, with 42% of marriages currently ending this way. If predictions are correct, as we come out of a year of lockdowns this figure may well rise.
Farming families are just as susceptible to divorce as anyone else.
Any separation can be hard on those involved, but in farming cases the usual stresses are compounded by the fact other family individuals and their livelihoods are involved.
The courts’ starting point in any divorce is a 50/50 split of the matrimonial assets and they will only depart from this if there is a good reason for doing so.
Matrimonial assets include property that is acquired during the marriage such as inheritance, gifts and products of the parties’ own financial efforts. This will therefore include any interest in a farm that a spouse may have.
The main objective of the court is to ensure the needs of both parties are met, including rehousing, income and provisions for any children.
Matters can become more complex if, as is often the case in farming divorces, there are not enough assets available to meet one party’s needs. Consideration must therefore be given to whether all or part of the farm should be sold.
The courts appreciate the farm is not only the couple’s home, but also a business that is often supporting other employees and family members.
Courts are usually reluctant for there to be a sale, and very much see this as a last resort.
They will look at how the farm was acquired, who else owns a share, whether there is a partnership agreement in place, whether the farm is held in trust for anyone, how long the marriage lasted, the tax implications of a sale, and whether an agreement is in place detailing how the assets may be divided in the event of a separation.
The courts will consider all available options and may suggest only part of the farm can be sold or borrowed against to raise enough capital to meet one spouse’s needs.
Alternatively, they may consider whether there is enough income being generated by the farm to support the non-farming spouse.
There are several ways in which farming families can protect their assets. Partnership agreements can be entered into, which specify each individual’s share of the farm and what happens when new partners are brought in.
The family can also implement a trust, which would protect its assets and can divide income (which would minimise tax).
Many couples implement prenuptial or postnuptial agreements, which can be prepared before or after the marriage.
These agreements specify how the assets will be divided in the event of a divorce.
Although they are not automatically legally binding, the courts will usually look to implement the agreement provided specific criteria were met when the agreement was prepared.
The need to protect assets as a consequence of a divorce is a complex situation and both the law and procedure heavily depend on specific facts.
It is therefore recommended that you seek specialist independent legal advice to assess your situation.
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