Why married farmers should consider legal protection

The current economic climate, as a result of the pandemic, has put farming families under increased pressure and pushed many to breaking point and even divorce.

Divorce is never easy, but for farming families it can be particularly traumatic and complex – particularly when it comes down to the division of assets required by law when a marriage breaks down.

Robert Bellhouse, family law specialist at Ware & Kay Solicitors in York & Wetherby, advises farmers about the legal protections they can put in place to ensure the survival of the farming business in the event of a divorce.

‘As the farm is usually the main source of income for the family, changes in your personal relationship may also dramatically affect your working relationships and the future of your livelihood,’ he explains.

Under section 25 of the Matrimonial Causes Act 1973, courts must take into account all of a couple’s financial resources when determining a fair split of assets on divorce – and like any business this would include the family farm. This can be problematic given farming businesses are often asset-rich but cash-poor, can be structured in a number of different ways, and ownership frequently shared among a variety of third parties, including extended family, trustees or outside partners.

A farm is often inherited too and serves as both the couple’s home and business, meaning it can be more difficult to divide on divorce without the business being adversely affected.

One way to stem disagreements over the division of assets is with a prenuptial or postnuptial agreement. These are legal devices which allow both parties to agree in writing how their assets should be divided in the event of a split.

A prenuptial agreement is made before a marriage is entered into, while a postnuptial agreement can be drawn up when a couple is already married. They can be a useful way of ensuring that each partner is adequately provided for financially, while safeguarding the continuation of the farming business – for example, by one party agreeing to pay the financial settlement off over a number of years.

The family court will decide whether a nuptial agreement should be upheld on a case-by-case basis, but since the landmark case of Radmacher v Grantatino (2010), the presumption is now that an agreement should be allowed to stand unless the court is persuaded otherwise.

Specific criteria must be met for them to be upheld, for example, both parties must receive independent legal advice before they are signed, and they must satisfy the three-stage fairness test set out in Radmacher. This means the parties must freely enter into the agreement, fully appreciate its implications, and the prevailing circumstances must be considered when deciding whether it is fair to uphold the agreement.

An important task for any farmer is to have a clear understanding of the current size and value of all your property and assets – an experienced land agent can be invaluable in this respect.

Understanding potential tax liabilities is also paramount – a tax expert can help you work out how your farming business is currently held and advise you how the structure of ownership could be changed or transferred to ensure all available inheritance, income and capital gains tax reliefs are taken advantage of.

Finally, an agricultural and private client law specialist can help you draw up a will to ensure that your assets are distributed as per your wishes when you pass on. They can also talk you through the creation of a lasting power of attorney which lets you choose people you trust to make decisions on your behalf if you should become incapacitated during your lifetime.

For more information on obtaining legal protection for farming families, or any other enquiries regarding family law, 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.