Divorce and the valuation of farm assets
Providing a realistic valuation of farm assets in the case of divorce can be ‘tricky’ not only because of the inherent uncertainties farmers face such as weather, rising prices and subsidies but now also because of a seven-year Brexit transition rule, says family law specialist Philippa Yeo.
Philippa, a partner in our Bristol and Taunton offices, says changes to payment and support via the Agriculture Act 2020 that replaces the EU Common Agricultural Policy currently make it difficult to value the business in the event of marital breakdown.
“The transition period, and the change in payment criteria, are making it increasingly tricky to provide a reliable valuation of assets and income,” said Philippa.
“For a farm business, income in recent years cannot necessarily be relied upon as being indicative of future levels of income and this should be borne in mind in any current valuation.
“It is also still too early to estimate if a farm will meet the criteria or whether it is even possible to value such holdings at present, knowing that the income could drastically fall in the next few years.”
The seven-year transition period, which began in 2021 will lead to a scheme which is said to reward farmers and land managers with public money for ‘public goods’ such as better air and water quality, thriving wildlife, soil health or measures to reduce flooding and tackle the effects of climate change.
“Getting divorced is often referred to as one of the top five most stressful life events. And for farming families, the complexities of assets plus additional complications stemming from Brexit can lead to even higher levels of stress,” Philippa added.
“Complex, emotive and sometimes multi-generational assets such as farms highlight the benefit of marital agreements, such as pre and post-nuptials, in defining and ringfencing wealth. The benefits of alternative dispute resolution methods such as mediation and private financial dispute resolution hearings are also more pronounced as they allow families to be creative in ways in which the court’s more blunt approach would not provide for.”
The impact of Brexit specifically on farmers was highlighted by TV’s Jeremy Clarkson in the latest series of Clarkson’s Farm on Prime Video, who hit out at the government over the lack of EU subsidy for farmers following Brexit.
Clarke Willmott has an established reputation in the agriculture sector and specialises in helping farmers, landowners and their families plan and manage all aspects of their finances, including wills and probate, trusts and tax matters.