Divorce could cost farmers dearly if they’re not prepared, warns agricultural accountant
PUBLISHED: 08:44 24 October 2018 | UPDATED: 09:17 24 October 2018
Family farm businesses need to take a rather unromantic stance towards marriage when it comes to safeguarding their financial future, says RYAN LINCOLN of the agriculture team at accountancy firm Lovewell Blake.
A family wedding is always a cause for celebration, and everyone wants to believe that every couple tying the knot will be together until death does them part.
But the reality is that around one in two marriages ends in divorce, and the stress-filled world of farming is not immune from that sober statistic.
Farming has a higher proportion of family businesses than most sectors. Many agricultural businesses have been successfully handed down the generations over the years – but due to their unique reliance on land assets, avoiding fragmentation in the event of a relationship breakdown requires careful planning.
It may seem rather hard-hearted to be planning for an outcome that no-one wants to think about when family members are planning the happiest days of their lives, but tackling that contingency – however remote you might hope it is – earlier rather than later can save a lot of hassle and heartache if the worst should happen.
In the worst-case scenario, a divorce court could allocate half the material assets of a farm – and in reality that means half the land – to a departing spouse.
For many farms this would destroy the viability of the whole business, forcing sale and bringing to an end the family’s tenure for ever; very few farms can generate the cash to buy out a departing spouse’s share of the assets.
It’s a situation few of us want to think about, but it can and does happen. Historically, families might have used trusts as a mechanism to protect assets. Trusts still have a significant role to play but increasingly need to be seen as part of a matrix of different solutions including partnership (or shareholder) agreements and nuptial agreements.
The concept of the nuptial agreement (whether pre-nuptial or post nuptial) is long-established across the Atlantic and is becoming increasingly common here in the UK.
Although strictly they are not binding in this country, judges must give them appropriate weight provided that they meet the relevant criteria so they are likely to be upheld provided that they are not unfair.
It is something that requires careful planning, but it is also something which many people shy away from talking about for fear of being seen as unromantic.
But there is very little romance involved in selling up a farm which has been in the family for generations to settle a divorce – so farm families’ wedding planning definitely should include planning for the worst-case scenario, however hard-hearted that may seem.
• Lovewell Blake’s Agriculture team, in conjunction with Durrants, Barclays and Greene & Greene, is hosting a farmers’ event looking at these issues at 7.30pm on November 14 at Halesworth Golf Club. To attend, contact email@example.com or 01986 873163.
If you value what this story gives you, please consider supporting the Eastern Daily Press. Click the link in the orange box below for details.