Protecting the family farm with a pre-nuptial agreement
More and more farming couples are signing pre-nuptial agreements as a way to preserve wealth and ring-fence assets that have been in the family for generations.
Farms tend to be much more than a business. They also encompass the family home and a way of life with close as well as extended family, often with different strands of ownership, all involved in the day to day running.
Often capital rich, yet income poor, farms have a propensity to be particularly hard hit by the effects of divorce with livelihoods, as well as emotions, tied up in the shared assets.
How can a pre-nuptial agreement help?
The usual rule of thumb for the division of assets in a divorce is to split them down the middle which can be devastating for farming families - a pre-nuptial (pre-nup) agreement can stop this happening.
Although pre-nups are not legally binding in England and Wales, the courts are heavily influenced by the existence of a properly implemented agreement and view it as a demonstration of the intention of both parties to minimise disputes if the relationship breaks down at a later date.
What can farming pre-nups cover?
A pre-nup can give a couple, and their families, a transparent way of tackling difficult conversations and a means to proceed with succession plans - ensuring the farm can be passed to the next generation in the future - whilst managing the risk of a relationship breakdown.
They can cover aspects including:
- Who will retain the farm;
- How a spouse, and any children, can be fairly provided for in the event of a split and how their needs can be met without damaging the core viability of the farm as a business;
- What happens to assets like farmland and machinery or a party's interest in the farming business;
- How to protect other family members involved in the business as well as the spouse.
Making a Strong Pre-nuptial Agreement
Every pre-nup, whether ahead of a marriage or civil partnership, is tailor-made for the couple involved providing certainty and security for the future and avoiding increased legal fees if they split up.
It is vital to make sure that any pre-nuptial agreement is as likely to be upheld by the court as possible by:
- Taking independent legal advice and disclosing fully all assets and income to each other;
- Signing it at least 21 days before you get married and ideally with at least a couple of months to spare so you have time to take legal advice and consider the contents carefully first;
- Ensuring it is fair by giving sufficient thought and consideration, with the help of your solicitor, to the needs of your partner and any future children. For example, a pre-nup which leaves one party with virtually nothing and the other comfortably off, or does not make provision for children, is highly unlikely to be seen as reasonable;
- Keeping your pre-nuptial agreement current. Once drawn up and signed, this means reviewing it regularly - at least every five years and automatically on the birth of any children.
Post-nuptial agreements are also becoming more popular and couples who are already married can enter into one to set out exactly how assets should be distributed if the relationship breaks down.
Read When farming couples split - tackling the problems of a complex divorce to see what else we have written on this subject recently.
For more information, please see our Legal Guide: What is a pre-nuptial agreement and should we make one?