Divorce can happen to anyone, and along with the emotional turmoil for farmers the outcome can be catastrophic for their business. If a divorce settlement is not handled correctly, the farm may cease to continue as a viable enterprise or even have to be sold. This could also have significant implications for the next generation who were intended to take over the farm in the future.
In non-farming cases, an equal division of assets accumulated during the marriage is considered a fair outcome in many divorce cases. This is known as the sharing principle. Capital assets often have to be sold to ensure both parties receive their share of the settlement, the starting point being a 50/50 split.
In farming cases, such an outcome could sadly spell the end of the long family farming tradition, as the forced sale of land, livestock and machinery may not leave behind a viable business. This is not always practical and fairness may require a different approach.
Typically, farms are income light and asset rich. The lack of liquidity means that raising cash to fund a divorce settlement can be much more difficult. Consideration needs to be given about securing additional borrowing against the property on the farm or installing new infrastructure to undertake different types of work and improve profitability.
The real value of the farm is usually the land itself. Consideration needs to be given about the most appropriate way of extracting capital from the farm to re-house an estranged spouse. This might involve selling off part of the farm or obtaining planning permission to convert some of the peripheral outbuildings.
The farm may not be owned by the couple personally. There are often diverse forms of ownership amongst siblings, parents and wider members of the family. It is often the case that one spouse has inherited the farm which is tied up in a long-held family estate. The assets might be settled into a trust for the benefit of family beneficiaries, held though a family partnership or operated as a limited company.
Farming families must also look to the long term when considering divorce settlements, to ensure successions and inheritances are safeguarded for future generations. There is often a need to preserve assets that were inherited or owned long before the marriage, particularly if the divorce will lead to the loss of livelihood for children expected to inherit or work on the farm in future years.
Every case will turn on its own facts but it is imperative that specialist legal advice is taken from a lawyer who understands farming divorces. These cases are more complex than most, but steps can be taken in advance to limit the potential impact to the farm by a later divorce.
One option is to encourage future farming generations when embarking on marriage to consider wealth protection in the form of a pre-nuptial agreement. Alternatively, a post-nuptial agreement can be put in place for existing marriages. This type of agreement can set out how assets such as the farm business and land should be divided in the event of a divorce, to ensure they are safeguarded and remain in the family for generations to come.
If this has not been considered, there is a way the family law team at Lupton Fawcett can help you. We have a long history of providing personal legal services to farmers throughout the Yorkshire region, with offices in Leeds, York and Sheffield. Our solicitors understand that each situation is different and requires a personal approach that recognises your wishes and concerns, and the concerns of your family and loved ones.
For further help or advice, please contact Christopher Burns.
Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.