Family farms are more than just assets to be divided on divorce – they’re homes and livelihoods that have often been in families for generations. Siobhan Jeffels from Ramsdens Solicitors explores the nuances of divorce involving agrigultural assets and shares some advice for family lawyers negotiating this delicate landscape.
Dealing with matrimonial finances on divorce is a demanding and complicated process for many, whether it be agreeing a valuation of the family home, seeking full disclosure from a reluctant spouse, determining pension share, or determining how to meet the future income needs of the parties.
Given the nuances of agricultural assets and the need to ensure the long-term viability of the agricultural business, these issues can become magnified where one or both of the parties have farming assets.
As with any divorce settlement involving the division of a family owned business, negotiations will examine ownership structures and asset liquidity to meet the needs of both parties and a broader stakeholder base.
However, family farms are not just assets: they are livelihoods for multiple parties and family members. Amongst my clients, it’s not uncommon for farms to have complex ownership structures which are not always accurately recorded in writing, with assets and interests amongst several family members not directly involved in proceedings, passed down through multiple generations.
Settlement discussions involving farms aim to secure not only fair outcomes for the principal parties, but also consider wider family members and a desire not to break up farms unnecessarily.
What makes farming divorce cases complicated?
While the general process of dealing with farming assets on divorce is the same as any other, the complex ownership structures of many farms and the common illiquidity of assets can make the process daunting and almost inaccessible without the assistance of a specialist legal representatives.
Although divorces routinely examine the marital home, which is shareable by nature, in farming families the home is often the farmhouse and a core operational hub. Dividing it may impact the farm’s day-to-day operation and long-term viability.
Navigating this means discussing housing needs of different parties, especially when there are children involved. Common arguments often arise around whether the financial needs of parties outweigh the long-term viability of a farming business or the interests of wider family members. When this arises, alternative housing and income solutions may be required.
Valuation challenges
Asset valuation also poses another challenge for settlement negotiations. Agricultural estates often comprise high-value land, livestock, machinery and buildings, but a fluctuating cash flow. Sometimes, the only way to unlock value is through sales, which, again, impacts the long-term viability of the farming business while also potentially going against the wishes of wider family members.
The instruction of specialist surveyors to value agricultural land and specialist valuers of livestock, plant and machinery is often required, and other assets may be deemed unrealisable if they are essential to the continued running of the farming business.
In addition, a specialist valuation of the farming business is usually required to determine the effect of intangible assets such as farm subsidies.
Avoiding catastrophic outcomes
At the back of every family lawyer’s mind when navigating settlements is avoiding catastrophic outcomes. Arguments as to whether the housing needs of the parties outweigh the desire to avoid a result that ends the farming business or interferes with the inheritance and farming structure of the wider family, are often pervasive.
A break-up of the farming business can be a disastrous result not only for the owners but any other family members involved in running the business or living within the farm. In the event court proceedings are required, cases such as these also often require members of the family involved in the farm to be intervenors within the proceedings, leading to additional legal representation for the wider family and increased costs.
On the other hand, farming cases be catastrophic for the non-farming spouse, who after a long marriage, may find themselves with less capital on divorce than is expected or desired.
Entrenched inequalities
These competing needs potentially entrench wider inequalities which are seen in many other divorce proceedings, such as gender imbalances seen in pension wealth.
Although there is a duty to ensure fairness, this does not always mean that family farm assets should be split 50:50. Settlement discussions include whether inherited farming assets can be considered and treated differently, and the implications of the assets on any third parties are also important to consider. If the needs of both parties can be met adequately from matrimonial assets, the court will be reluctant to interfere with the inherited assets or any assets in which other members of the family have a vested interest.
Avoiding catastrophic outcomes may include allocating an appropriate share of the farm’s value or a lump sum to rehome a spouse.
Early mitigation
Helping mitigate these challenges early on is preferrable. Farming families should consider the benefits of a pre-nuptial agreement in anticipation of marriage, to ensure that the farm is protected as far as possible against the implications of a separation down the line.
Post-nuptial agreements are a good way to give protection after a marriage. They are often used when older generations are planning passing assets down the generations and want to protect the assets being lost due to a future divorce settlement.
When it comes to divorce proceedings, early advice is essential and instructing solicitors who are experienced in dealing with farms on divorce and who adopt a collaborative approach can be highly beneficial to help keep matters out of court while offering flexible, tailored and constructive solutions in line with what families want, rather than what courts impose.
Specialist advice
Farming divorce settlements also demonstrate the role of wider legal specialisms, which family law practitioners should factor in. Corporate specialists can support with partnership and shareholder agreements to define ownership plans, while private wealth specialists can advise on tax and estate planning and property specialist on how to maximise land investments.
Careful consideration of these factors, combined with specialist legal advice and the support of a wider pool of experts, can avoid catastrophic outcomes and lengthy, costly disputes.
About the author
Siobhan Jeffels is a partner in the Family team at Ramsdens Solicitors. She has more than 20 years’ experience supporting individuals and business owners in a broad range of complex and high-value financial matters involving businesses, farms, trusts, pensions and pre- and post-nuptial agreements.
