InsightsInsight - Family and Divorce - POSTED: July 13 2018
Divorce in farming families
Dealing with the division of assets following the breakdown of marriage is often far from straightforward; however, where divorce occurs within an agricultural setting matters can become far more complex than may otherwise be the case.
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As set out below, there are a number of factors to take into account and the Family Team here at Brachers have significant experience in advising on divorce in a rural setting to protect the farming business whilst balancing the needs of the family. In particular, our advice will include the following specific considerations:
Ownership of assets
One of the first stages in deciding the appropriate division of assets upon divorce is to determine what there is and who it is owned by. Whilst this may seem like a simple concept it is often the most difficult step in the process. Within a farming context, these questions becomes even more complicated. Often farming assets have been owned by the wider family for generations and may be held by a limited company or within a family trust or partnership consisting of multiple interested parties. Such ownership structures may include both of the divorcing couple or just one of them; either way it is likely that specialist advice will need to be obtained to determine what, if anything, should fall into the matrimonial ‘pot’ for division between the parties.
A central asset in nearly all cases of divorce is the family home. As well as the obvious financial investment, people often have strong emotional attachments to the place they have called home and dealing with this asset can be particularly sensitive. Again, within an agricultural context, the ‘family home’ may form part of the overall assets within the estate and sale or other disposal may not be the most achievable or attractive option to take. For example, often the house and associated land will have an agricultural occupancy restriction attached which in turn may impact upon the valuation of the property. Such considerations will be at the forefront of our minds as we approach a divorce involving a farming family.
Division of assets
When determining the appropriate division of assets upon divorce there are a number of factors to be taken into account. These include the parties’ respective needs, fairness and contributions (particularly from non-matrimonial, third-party sources). As touched upon above, frequently, farming assets have been owned within the family for a number of generations. Accordingly, there will likely be strong feelings towards preserving as much as possible within the wider estate for future generations. In addition, it can often be critical to the on-going viability and success of the farm to retain assets within the business.
Balancing these types of commercial considerations with the needs of both parties and any minor children is a challenging and specialist process which will require expert advice.
The issue of tax is commonly overlooked by parties considering the division of their assets upon divorce. The requirement to pay things such as Capital Gains Tax upon the sale or transfer of matrimonial assets can materially affect the overall, net settlement achieved by both parties. Accordingly, it is of vital importance to ensure that appropriate advice is obtained from the likes of specialist accountants and land agents to safeguard parties against unexpected and sometimes significant tax bills at some future date. Furthermore, taking the correct advice at an early stage can ensure that all relevant tax reliefs and legitimate planning strategies are employed to maximise the assets available to the parties to move forward with their lives.
Choice of venue
It is not necessary, or indeed desirable, for most cases to end up in Court in front of a judge. There are a number of alternative dispute resolution (ADR) processes which parties can employ to assist them to resolve the distribution of their matrimonial assets.
For example, the collaborative law process sees both parties appointing a collaboratively trained family solicitor to attend and guide them at four-way round table meetings to discuss and resolve any areas of concern over who should take what. At Brachers we have two senior collaborative lawyers who are able to guide clients through the process aimed at dealing with matters in a fair and conciliatory manner.
Arbitration is another form of ADR and is, essentially, akin to the Court process; however, the parties are afforded much more control over the process and can even choose their judge (arbitrator) the venue and the date upon which ‘hearings’ will be held. Arbitration has been described as “the parties’ process” and is seen as a flexible and frequently more affordable alternative to Court proceedings. Further information about arbitration and its advantages can be found here.
Whenever divorce involves business assets, cash-flow – and therefore funding – can become problematic. Provided certain qualifying criteria are met, those who are unable to meet the costs of divorcing on an on-going basis can access specialist litigation funding from third party lenders to assist in meeting monthly legal costs. If access to liquid assets is likely to prove difficult, we are able to assist our clients in seeking and obtaining such litigation loans and will liaise directly with the lender throughout the process to lessen the burden on clients where requested to do so.
Both during and after divorce it is important to give consideration to the ownership structure of business and other assets in order to protect both a party’s interests and those of future generations. Brachers are a full-service firm who are able to offer a raft of expert advice to our agricultural clients:
Our Private Client Team are able to offer bespoke and specialist advice on tax and estate planning as well as updating Wills to ensure that family wealth is protected in future.
Our Property Teams are on hand to advise on any matters relating to rural property, including business and residential leases, tenancy agreements and option agreements.
Our Corporate Team have a long track record in advising agricultural businesses and assisting them to run successfully. The team can assist on all legal aspects of business management including the preparation of shareholders’ and directors’ agreements, creating bespoke articles of association or restructuring and incorporation.
Our Family Team are well equipped to advise on how best to protect complex agricultural assets when embarking upon future relationships, post-divorce. Perhaps most widely known is the pre-nuptial agreement; less well-known, however, is a post-nuptial agreement. At Brachers we have extensive experience in drafting and negotiating nuptial agreements, particularly in an agricultural setting. In our experience, nuptial agreements generally can be employed to protect agricultural assets for second and third generations and beyond who may otherwise be prejudiced by an acrimonious divorce. Considering how assets should be divided in the unfortunate event of a relationship breakdown prior to problems arising within the said relationship can assist parties to approach matters in a reasonable and objective matter, which ultimately will serve to lessen the impact of the separation on the going concern. Further information on pre and post-nuptial agreements can be found here.
Even if remarriage is not on the horizon in future, a cohabitation agreement can prove invaluable to couples who are considering living together and pooling their resources to any extent. This is another matter upon which the Family Team at Brachers can advise.
Ultimately, whatever the context of a divorce and no matter the value of the assets involved it is imperative that the right experts are engaged from the start, therefore if you would like to discuss the services our Family Team or the wider firm offering please get in touch on 01622 690691 or by email with Mei-Ling McNab or Rhia Davis.
This content is correct at time of publication
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