Power of the Pre-nup
Rachel Baul, a specialist in agricultural divorces for over 25 years looks at the complexities involved and how all parties can best reach an amicable solution when a marriage breaks down.
For anybody going through a divorce it can be a tough and challenging time but when it comes to agricultural divorces, they are usually far more complex.
The fact farms are typically income light and capital heavy creates a unique set of circumstances and coupled with the fact they are often handed down through the generations, means they might not even be considered a ‘matrimonial asset’.
The starting point is to define the assets that have been generated during the marriage. It is important for both parties to ensure specialist agricultural valuers are involved for land, stock, and machinery, as well as entitlement schemes.
Inherited assets are often treated differently upon divorce and not subject to the sharing principle. The court will ultimately strive to achieve a fair outcome, and this does not necessarily mean an equal split of assets.
A key factor is how the needs of both parties can be met. Consideration is given to how capital can be generated and perhaps land sold, or borrowing obtained to fund a settlement, whilst ensuring the business remains viable.
The court will consider whether the farm is deemed a matrimonial or non-matrimonial asset which will determine how assets are divided.
Liquidity can also be an issue because assets on the farm are not easily realisable. There might be an impact on third parties and family members involved in the ownership and running of the farm, who could also have a vested interest, and they may need to obtain their own independent advice.
There can be a reliance on farm subsidies, stewardship agreements and financial entitlements under the Basic Payment Scheme, which can be a valuable feature of any farm.
In some cases, land will be rented by a farmer rather than owned, and in these circumstances, the farming business needs to be valued like any other enterprise and an assessment made about whether it is feasible to extract capital.
Dealing with such complex cases requires careful, balanced judgments to secure a successful outcome and a settlement that will maintain the viability of the business and preserve it for future generations.