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Farms and Divorce

Anon

"It's not about how bad you want it, it's about how hard you are willing to work for it"

If you have a farm and are divorcing, you are likely to be very concerned about the impact this will have on your farm. The farm may have been in your family for several generations, with other members of your family being involved in the farm. Alternatively, it may be your spouse that owns the farm and you are concerned about losing your home and your source of income if you divorce.

Farms are treated the same as other businesses when a couple divorce. The value of the spouse’s interest in the farm will need to be valued and included as a matrimonial asset, unless there are goodlegal arguments for not including some or all of its value.

FAQs on farms and divorce

 

How are farms valued?

Farms are valued like other businesses on a net asset basis or on a profit earnings ratio basis, whichever gives the higher value. Many farms are valued on a net asset basis as many own land, buildings, livestock and dead stock (machinery), which often have a significant value but produce a relatively modest income by comparison.

An agricultural expert is usually instructed jointly by husband and wife as a ‘single joint expert’ to value the farm’s assets. An accountant, also instructed as a single joint expert, will also need to be instructed to value the spouse’s interest in the farm, how much money, if any, the spouse can raise through the farm, and the tax consequences of this.

What income does the farm produce?

Farms are sometimes referred to as lifestyle businesses, with the business providing a home, funding utility bills and other costs, such as the provision of motor vehicles, with the actual income paid to the farmer being relatively modest. The income and benefits that the farmer receives from the farm can be looked at by the single joint expert accountant. This will be particularly relevant in cases where the non-farming spouse is seeking spousal maintenance.

 

What if the farm is inherited, or is part of a trust?

Often farms are passed from one generation to the next. If part or all of the farm has been inherited by one spouse, it is likely that that part of the farm will not be subject to the sharing principle should there be a divorce. However, the needs of both spouses and the children of the family will still need to be taken into account.

Where the farm is part of a trust, if it is a “dynastic trust” that passes the farm down from generation to generation, the divorce court is likely to respect the trust, essentially ring-fencing the farm from the divorce when looking at how to divide the assets. With other trusts the spouse’s interest under the trust will need to be determined, with previous distributions to the spouse by the trust often being a relevant factor when considering how the farm is dealt with within the divorce.

What if the farm is owned with other family members?

Often a spouse will own a farm with other family members, or the spouse will own part of the farm and the other family members will own other parts of the farm. In either scenario the court cannot ignore the impact that a divorce settlement may have on them. It may be necessary for these family members to intervene in the divorce proceedings, in order to put forward their concerns regarding the impact upon them of any financial orders the non-farm owning spouse asks the court to make.

Will the court order the sale of a farm as part of a divorce?

It would be very unusual for a court to order the sale of a farm as part of a divorce settlement. Selling the farm would take away the farm owner’s source of income and often also their home. If other members of the family also own the farm, a sale of the spouse’s interest would impact them and therefore it is highly unlikely to be considered appropriate by the court.

If you or your spouse have an interest in a farm and are about to divorce, it is very important that you obtain advice from a solicitor that has experience dealing with farming divorces. Fiona Wood, a partner at McAlister Family Law has acted for both farmers and their spouses. In particular she acted for the wife in the reported High Court case of D V D(2010) EWHC138 which involved a farm, part of which the husband had inherited.

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For further information on farms and divorce, contact the dedicated McAlister Family Law team today.

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