5 Key Questions in a Farming Divorce

1. What are the options?

Divorce or Separation Agreement? What are the pros and cons for each spouse in terms of timing and the overall farming family?

Divorce proceedings achieve finality but in certain circumstances, It may be preferable for the parties to separate in the first instance and have a Separation Agreement with Divorce proceedings starting at a later date. However, this does not achieve absolute certainty and the parties are still married.

How do the effects of the divorce impact on the rest of the farming family? Timing may be a significant issue with tax implications

2. Do we have to go to court?

No-there are other ways to resolve issues following the breakdown of a marriage which will not involve going to Court – in particular mediation or collaboration (Collaborative Family law) - and to do everything possible to keep matters as amicable as possible, saving both time and unnecessary acrimony.

Mediation – this involves both parties attending to discuss their finances upon separation and divorce before an independent mediator without a Solicitor.

Collaborative Family Law - as farms are frequently family concerns, using the collaborative process not only keeps matters out of Court but offers flexible and creative solutions which can be tailored to what the parties want rather than what a Court would impose. Options can be considered and discussed with help and advice from Solicitors in a round table setting, but with the parties keeping control of the process.

3. Will the farm and farming assets all have to be valued?

All assets on marriage breakdown have to be valued, and farming cases are no different. However, consideration of issues such as whether the farm was inherited or if it is currently owned by others or jointly with a 3^rd party creates potential difficulties and complexities.

It is worth considering whether there may be valuations already available which are sufficient. However, one Expert Valuer appointed by both parties to provide an independent valuation is usually the best option. Documents need to be made available to Solicitors explaining the full extent of the farm and the farming assets including Title Deeds, loans as well as copies of farming accounts for at least 3 years leading up to the separation/divorce.

4. What is the likelihood that the farm will have to be sold and the proceeds of sale divided equally between spouses?

Fairness is the overriding factor and for many years equality in division of assets accumulated during the marriage has been considered fair upon divorce. However, the need for the farmer to preserve long-standing and pre-marriage assets are likely to conflict with this, and both parties financial needs, including housing, needs to also have to be met. Ways in which these potentially opposing criteria can be resolved are of paramount importance.

There will be a number of issues which both spouses may wish to raise as relevant to division of the farming assets. The following list is not exhaustive:-

• Was there any form of agreement entered into before the marriage, such as a pre-nuptial agreement – if so, this may be of particular importance?
• Alternatively, has any agreement been entered into after the marriage – usually known as a post-nuptial agreement?
• What is the liquidity of the farm and the farming business? Is it capital rich and cash poor? How will this affect any financial settlement?
• Was the farm originally inherited by one of the parties? Has it been handed down the family for generations, or only more recently acquired?
• Does anybody else have a legal or beneficial interest in the farm or its assets, such as other family members? How are their interests to be considered and dealt with in the context of divorce and separation?
• What is the length of the marriage? Division of assets where it is a very short marriage are often treated differently from a longer marriage.
• Is the farm held in a trust or partnership? If so, these are of potential significance in dealing with division.
• What other assets are there within the marriage which are not directly related to the farm, such as pension schemes or properties elsewhere? Could any of those assets be sold or transferred to assist in achieving a fair settlement?

5. Will a separating farming couple need help and advice from other professionals?

Yes! It is crucial to obtain reliable expert assistance from Accountants and Agricultural Valuers. Potential tax implications must be considered when selling and dividing assets, and the right advice at the right time is a must.

AND…… encourage the next generation to consider Pre and Post-Nuptial Agreements! However, note that Pre-Nuptial Agreements must be completed at least 28 days before the wedding. It is never easy to contemplate a Pre-Nuptial Agreement when parties are in love and preparing for their wedding. However, they can offer valuable protection if it can be shown that both parties had full and appropriate information about their respective financial circumstances and entered into the agreement freely and with expert legal advice.

Agreements made after the wedding can also be of significant assistance, although as “stand alone” documents they are more unusual.

“Pre-Nups” and “Post-Nups” are now increasing in popularity and effectiveness and may protect assets.