The end of the summer holidays is often a trigger for a disgruntled spouse to start divorce proceedings. Unfortunately farmers are increasingly on the receiving end of this. Daniel comments on how to protect against the effects of divorce.
The value of farmland has never been higher and yet farmers all over the country are not prepared when it comes to protecting themselves from divorce.
How many farming families have come unstuck when faced with divorce? It usually comes as a shock to the family when property that has been owned for generations is part of the matrimonial ‘pot’ for division. Often families themselves are unclear as to who owns a piece of land, is it owned by them personally or is it owned by the partnership/company? Letting land to the farming partnership or company can often provide protection to the ultimate owner but only if the proper legal formalities are put in place.
How to protect from the effects of divorce:
- Make sure your paperwork is clear. If property is owned beneficially by a partnership, is that apparent from the partnership accounts? What about the partner’s respective shares to capital or income? If there are holes in the accounts, these will be exposed in divorce. If the family farming partnership or company pays rent to one of the partners/shareholders who owns the land personally, make sure a formal tenancy is in place (e.g. an FBT). A partnership agreement is always advisable.
- Prenuptial/Postnuptial Agreement. A well drafted prenup or postnup can provide genuine protection from divorce. Where there are children, the Court’s starting point is a 50:50 division regardless of the source of the assets. Instead of paying out a large lump sum, a prenup or postnup agreement can limit a spouse’s rights to occupation of a farmhouse/farm cottage until the children leave home. When looking at succession planning, a prenup or postnup should always be considered.
- Use the right lawyer. Most family lawyers will take on your case but do they understand farming? Have they got colleagues who can advise on the other legal aspects (property, partnership etc) which are particular to farming.
- Use the right process. Litigation is expensive and often can be ruinous for a farming family. Not engaging with the legal process is only likely to cause suspicion and lead to increased legal costs. However, options such as mediation and collaborative law can produce more tailored outcomes which can take into account the wider interests of the family and/or the desire to preserve a way of life for the couple’s children whilst still meeting the needs of both spouses. If you do decide to use mediation, make sure your mediator is an experienced family lawyer who is used to dealing with farming divorces.
Unfortunately divorce is now commonplace and therefore it is important that you put in place whatever protection you can to preserve the family farm in the event the worst does happen.
For more information on any of the issues raised in this article please contact Daniel Eames