Angela Moores
Formerly of Jarvis Family Law, Harrogate
Family & Divorce Solicitors Harrogate,Oldham,Ashton under Lyne,Stockport Menu

Divorce and the Farming Partnership

The financial issues that arise when a couple reach the stage of divorce are never easy to resolve. However when those issues involve a farm, the division of assets and the need to meet the financial requirements of both parties, can give rise to problems quite different to other divorces.

The start point for effective negotiation on any divorce settlement involving a farm is to clearly understand the business of the farm. The more questions that can be asked the greater the understandingFree consultation will be. These are numerous and the following represent a quick overview and for each question there are probably four more questions to follow when the reply is given.

Is there a formal partnership recorded in a partnership deed and properly reflected in the annual accounts including in respective capital accounts? Has the farm been in the family for generations or have the couple purchased and built up the farm (in whole or in part) during the marriage? Who takes what amount out of the farm income and is there an element of automatic reinvestment of capital or income into the farm which might affect whether the farm becomes a marital asset in part or in full? What items of live and dead stock need to be valued – can they be listed (along with details of any financial obligations relating to each) or is there a need to examine the stock movement books. Are there any intangiblecontact us assets to value such as a single farm payment and what is the up to date position given recent changes? What properties or land are to be valued, who owns them (bearing in mind a partnership is not a separate legal entity so cannot hold land itself) ie it will be in the names of individuals. What mortgages or borrowing facilities are secured against which assets and what are the balance fluctuations over an annual period? Are any of the properties subject to tenancies or agricultural restrictions, covenants or access issues? Are there other partners to the farming partnership to consider who might be adversely affected by the divorce and if so do they need separate legal advice as to their own position? Is there any diversification on the farm which constitutes a separate trading entity eg holiday lets? The list of questions is endless and proper advice is necessary at a very early stage.

Farms that have been passed down from generation to generation or between family members rarely have all the documentation and legalities in place such as to give an entirely clear picture. If there is any risk of future divorce it is imperative that the farm, and it’s partnership, is properly organised and documented in a legal sense. Sometime preventative legal advice and accountancy action is needed to avoid future claims on divorce. It can also save time, dispute and significant cost at a later date should a divorce arise. In the worst scenario family members may have to intervene in the divorce proceedings to safeguard assets for the future.

Given the value of farming assets, it is essential to consider the tax implications on divorce. Should land or buildings over and above the family residence need to be transferred between the spouses, there may be a benefit in delaying any separation or formal proceedings until the next tax year. It is often beneficial to everyone for there to be full co operation between the separating couple to mitigate taxation and claim all reliefs available. It may be the historic details of when assets were acquired and at what price is going to be needed so digging back over past documents might be necessary.

Before settlement is reached consideration will have to be given as to how monies can be raised to meet the claim on divorce. Can monies be raised from the bank against land? Will land have to be sold and if so will that effect the income of the partnership thus affecting the valuation? Can the settlement be structured so that payment is given over a number of years? Experienced accountancy advice alongside the legal advice prior to finalising the settlement is essential if tax is to be limited.

The manner in which the farm is operated, documented legally, and recorded in the accounts is important. Understanding in advance how the farm could be affected by a divorce is really useful ifcontact us claims are to be minimised and it is always worthwhile reviewing matters from time to time. It could be that not to do so could adversely affect the division of the assets of the marriage on any future breakdown. Equally instructing a divorce solicitor who does not understand the particular issues arising when there is a farm involved on the divorce could mean that the outcome is unfair, impractical or wrong for everyone.

Angela Moores has extensive experience is dealing with divorce concerning farms and farming partnerships. She has Resolution Accreditation for high value financial settlements on divorce. Please contact Angela for more information.