Divorce and the family farm

Matthew Miles, an associate in the Family Law Department at Lupton Fawcett.

Matthew Miles, an associate in the Family Law Department at Lupton Fawcett.

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Yorkshire has a proud history of farming. A farm is more than merely assets and income. It’s usually a way of life.

Divorce can happen to anyone, and along with the emotional turmoil for farmers the outcome can be catastrophic for their business. If a divorce settlement is not handled correctly, the farm may cease to continue as a viable enterprise or even have to be sold. This could also have significant implications for the next generation who were intended to take over the farm in the future.

In non-farming cases, an equal division of assets accumulated during the marriage is considered a fair outcome in many divorce cases. Capital assets often have to be sold to ensure both parties receive their half share of the settlement.

In farming cases, such an outcome could sadly spell the end of the long family farming tradition, as the forced sale of land, livestock and machinery may not leave behind a viable business. This is not always practical and may require a different approach.

Typically, farms are income light and asset rich. The lack of liquidity means that raising cash to fund a divorce settlement can be much more difficult. Additional borrowing may need to be secured against the farm or new infrastructure installed to improve profitability.

The real value of the farm is usually the land itself. Consideration needs to be given about the most appropriate way of extracting capital from the farm to re-house an estranged spouse. This might involve selling off part of the farm or obtaining planning permission to convert some of the outbuildings.

The farm may not be owned by the couple personally. It is often the case that one spouse has inherited the farm which is tied up in a long-held family estate. The assets might be settled into a trust for the benefit of family beneficiaries, held though a partnership or operated as a limited company amongst siblings, parents and wider members of the family.

Farming families must also ensure successions are safeguarded for future generations. There is often a need to preserve assets that were inherited or owned long before the marriage, particularly if the divorce will lead to the loss of livelihood for children expected to work on the farm in future years.

Every case will turn on its own facts, but steps can be taken to limit the potential impact to the farm. Before embarking on marriage, consider making a pre-nuptial agreement setting out how the business and land should be divided on divorce. For existing marriages, a post-nuptial agreement can be put in place.

For specialist legal advice, please contact Matthew Miles, an associate in the Family Law Department at Lupton Fawcett on 0113 280 2261 or matthew.miles@luptonfawcett.law.