Farmers often do not get the credit they deserve. They grow the crops and raise the livestock that feed us all. Most of the farmers we meet work long hours, are exposed to the elements, and have reducing margins. Added to which, many farmers are custodians of land passed to them through the generations. They carry a heavy burden of responsibility.
Recent cases have highlighted the risk that a Divorce presents to family wealth for dynastic farming families. Although courts can take account of the source of the wealth, it is able to make awards that invade non-matrimonial assets. Divorces involving family farms are often complex and it is important that you seek advice from professionals experienced in this area.
Decisions made concerning the farm’s succession plan, development or structure, during or before marriage, can have significant (and often unforeseen at the time) negative consequences in a Divorce. We regularly provide farming families with advice that draws upon our specialist Private Client and Family Law teams to ensure that families fully appreciate and understand the wider effects of any decisions made by them concerning the family farm structure.
Here are six points to consider:
- Transferring land into joint names: often for perfectly sound estate planning reasons farmers are encouraged by professional advisers to transfer land or property assets to their adult children or to extended family. Please note however that these assets (once transferred) are then arguably ‘matrimonial’ in nature and therefore subject to the sharing principle in Divorce.
- Pre-nuptial agreements: pre-nuptial agreements can seek to protect the dynastic farm from claims in Divorce. The current custodians are often best placed to insist that their child or family member enter into a nuptial agreement to protect family assets.
- Making your spouse a Shareholder of a Limited Company or a Partner within a Partnership: for tax reasons you may be advised to appoint a spouse as a Shareholder or Partner in the family farm. Once that party has been given an interest in the business this may mean buying back their share or interest in any Divorce negotiations.
- Wills: it is essential that you make a Will, and review this throughout your lifetime, in order to ensure that your estate passes to your chosen beneficiaries in the event of death. Failure to have a Will means that your estate will pass in accordance with the rules on Intestacy and can lead to additional costs and delay in administering the estate. Within your Will you can name your executor and trustee. You can also consider succession planning for tax purposes and make reasonable financial provision for your dependents.
- Keep Records: having a record of how you acquired an asset and the contributions you have made prior to, and during, the marriage can assist with supporting or resisting any financial claims in a Divorce.
- Get Advice: in the event of an impending Divorce or separation, it is imperative that early professional advice is sought before any assets are distributed as part of a financial settlement. In these circumstances, we commonly liaise with other trusted advisors including accountants, land agents and financial advisors.
The Family team at Greene & Greene has a wealth of experience and a proven track record of success in farming cases. The team is also able to call upon specialists in the Agricultural Property and Estate Planning teams to deliver creative and bespoke solutions.
This article was first published in the EADT Rural Review – 29th September.