Shepherding a farm business through a second marriage

When someone finds love again and wants to remarry it is of course a cause for celebration. However, things can get complicated when a farming business is involved – particularly if you want to leave the farm to your children or other family members. So it is important to take time to think about the consequences before rushing into things.

Robert Bellhouse, agricultural law specialist at Ware & Kay Solicitors in York & Wetherby outlines measures farmers should take a moment to consider to ensure the continuing success of the family farm if they marry again.

Make a new Will

Remarriage revokes any previous Will making it invalid, so it is imperative to make a new Will if you are looking to tie the knot again – especially if you are looking to pass the farm to your children. If you do not the laws of intestacy apply, and your new spouse would stand to inherit the bulk of your assets (the first £250,000 of the estate and all your personal belongings; the remainder being split 50/50 between your spouse and your children).

This could mean the farming business having to be split up or sold to ensure all beneficiaries get their dues. Or it could fall to your new spouse who is then perfectly entitled to pass it on to his or her own children on their death – which may not be your intention.

A way round this is to make a new Will when you marry to ensure the farm passes according to your wishes. You need to ensure your new spouse is adequately provided for or the Will may be open to challenge but, for example, you could have a clause in the Will which allows your spouse to remain on the property and receive income from it until their death, at which point the farm passes to your children.

Have a prenuptial agreement

Another option is to enter into a prenuptial agreement with your new spouse (or a postnuptial agreement if you have already married). A nuptial agreement is a legal agreement between spouses which sets out in writing the terms of a financial settlement between the couple on divorce.

Recognised as potentially binding since the landmark Supreme Court case of Radmacher v Grantatino (2010), such an agreement can ensure your farming business survives for the benefit of your wider family if you and your new spouse split.

A nuptial agreement will only be enforced by the courts if it is freely entered into by both parties, with a full understanding of its consequences and that it is felt to be fair. Fairness will be decided on a case-by-case basis, but the court in Radmacher laid out criteria to help assess this, which includes ensuring that:

• each spouse has taken legal advice from different lawyers before the agreement is signed;
• there is a cooling off period of at least 28 days prior to the agreement being signed;
• children of the divorcing couple are reasonably provided for;
• the rudimentary reasonable financial needs of the less financially well-off spouse are met; and
• both spouses have made complete and honest disclosure of their financial situation.

Company structure

At the end of the day, honesty is the best policy, and you should have a frank discussion with your intended about your plans for the farming business before you tie the knot. Decide together what involvement, if any, they will have in the business and in what capacity: will they be an employee or have decision-making capabilities? Will they be entitled to a share of the profits?

If you currently run the farm with other family members on an informal basis, consider making their positions formal; a restructure of the business model to a partnership or limited company should also be considered to lessen the risk of the farm being broken up if you divorce.

Finally, draw up a succession plan to ensure the farm stays in the hands of your immediate family when you die – particularly if you run the farm under an Agricultural Holdings Act tenancy because your new spouse may otherwise be entitled to apply to take over on your passing.

We can help

For more information on protecting your farm business if you are entering into your second marriage, please contact Robert Bellhouse on York 01904 716000, Wetherby 01937 583210 or Malton 01653 692247 or email robert.bellhouse@warekay.co.uk to see how we can assist.