Despite a recent case where a pre-nuptial agreement was not taken into account when considering the final financial award, pre-nuptial agreements continue to serve a very useful purpose for many families. For farming businesses in particular, these agreements, despite not being legally binding, can provide greater certainty about maintaining the integrity of the farm in the event of divorce. However, although judges will give them weight when determining financial settlements, they must have been drafted and signed correctly otherwise they will not hold water.

Pre-nuptial agreement: practical solution to perennial problem

The main stumbling block for most people is broaching the subject of pre-nuptial agreements in the first place. To do so, may seem to be the opposite of the romantic commitment traditionally considered the foundation of marriage. However, more and more people, parents especially, are encouraging the affianced to consider drawing up a pre-nuptial agreement in order to protect farm assets.  Indeed, any such discussion is relevant for all members of the farming partnership – all of whom could be affected by one partner getting divorced and the non-farming spouse claiming a substantial share of their joint assets – which could include farming assets.

Bearing in mind that the starting point for an equitable financial outcome in any divorce is the equal division of assets in which husband and wife have a joint interest, there is always a danger that key assets such as land, have to be sold in order to fund the final, financial settlement. Take a farm that has been in the family for generations. One of the partners is getting divorced and their spouse is entitled to half their joint assets – which include the farmhouse. Although inherited assets are, by and large, excluded from the pot of shared assets, it is difficult to separate inherited assets from joint assets when business and life are so intertwined.  In this case, the farming spouse may well have to sell land or borrow money to fund the final settlement – and both courses of action have a potentially deleterious effect on the farm’s future and that of the wider partnership.

Certainty can secure farm’s future

Entering into pre-nuptial or, in some cases, post-nuptial agreement will go some way to mitigating the financial fall out from divorce. A correctly drafted agreement should detail what will happen financially if the marriage ends, and can exclude certain assets, such as the farmhouse, from any future settlement. These agreements should provide a degree of certainty for both husband and wife, and for other family members involved in the farming business. In order to secure the future of the farm, all farming families should treat pre- and post-nuptial agreements as an active part of their business and wealth protection planning. 

Of course, these agreements will only be considered by a court if they are entered into freely and willingly by both parties, and each must seek independent legal advice before signing them. The outcome must meet the needs of both spouses and not result in an unfair settlement for either, and they must be signed at least one month before the wedding. Once signed, couples should review them regularly (we think every two years is sensible) and particularly once children have arrived. What might have seemed a reasonable settlement when first married may not seem so reasonable ten years down the line – and the courts will take note.

 Conclusion

It is fair to say that many people may baulk at the prospect of bringing up the subject of a pre-nuptial agreement but, tackled sensitively with the future of the farm driving the conversation, most couples in our experience have found it is a cathartic way of addressing a potentially difficult topic. As a means of protecting a farming business, and a family’s livelihood, pre- and post-nuptial agreements must be considered a practical, pragmatic business tool for most farming families.

About the authors

Justin Creed Head of the family team

Justin is a family and divorce lawyer, experienced in all aspects of family, divorce & matrimonial law. As a qualified collaborative lawyer and a member of Resolution, he actively seeks the resolution of disputes without involving the courts.

Dal Heran Partner

Dal is experienced in all aspects of family law which include complex financial disputes in a wide range of cases from high net worth business, substantial pensions and cases with significant pre-marital assets.