Farming divorce: do we have to sell the farm?

According to ONS data, a third of marriages over the past 50 years ended in divorce. In addition to the stress and emotional pain of a break-up, it also results in the need to detangle the complex web of marital assets built up over the years.

For farming families, divorce can be even more complicated. In accordance with the outcome of a landmark farming divorce case (White v White, 2000), courts will strive for a 50/50 split of assets according to the principle: “Equality should be departed from only if, and to the extent that, there is good reason for doing so.”

But when that equality could result in the sale of a farming business that has been in the family for generations, the situation becomes more delicate. The wellbeing of other family members in the business, agricultural tenants and employee have to be considered.

A complex situation

Many factors make farming divorces unique. Farms will often (but not always) have been in one of the spouse’s families for generations, meaning the owning spouse is often determined to keep it that way.

The majority of many farming families’ wealth is tied up in their farm, livestock and machinery, leaving very little liquidity to meet the non-farming spouse’s reasonable needs without selling all or part of the farm.

Coming to a decision

A court will consider factors including:

• How the farm was acquired (ie prior to or during the marriage)
• Duration of the marriage
• Ownership of the farm (ie whether other parties own a share)
• The existence of any pre or post-nuptial agreement
• The existence and age of any children
• Whether income from the farm is sufficient to support a spouse’s financial needs
• It may be that the only option will be to sell some farming assets to raise capital for the divorce.

Protecting the farm

There are a range of legal methods to protect your farm in the event of divorce.

A pre-nuptial agreement can set out the assets to which you and your spouse will be entitled in the event of your divorce. While these agreements aren’t legally binding in England, they will usually be upheld in a court of law if correctly drafted, and are fair to, and have been freely entered into, by both parties. It is advisable to instruct a firm with specialists in both family and agricultural law in drafting such an agreement.

Partnership agreements and family trusts are common to protect farming assets. They set out assets owned collectively and individually. Trusts are also a common method of ensuring farms stay in the family; assets can be held in trust for one or more beneficiaries, enabling them to be passed down the generations with minimum tax liability.

However, a court will only uphold the trust’s ownership if it is clearly part of a long-term family wealth management strategy; a trust set up soon before the marriage breakdown, with the clear purpose of ensuring the non-farming spouse will not be entitled to a share, is likely to be dismissed by a court.

Ask the experts

Our expert solicitors can help you put the mechanisms in place to protect your farm. Contact us on 0344 967 2505 or email familylaw@woodfines.co.uk.

For more information, visit woodfines.co.uk.

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