Keeping Farming Assets Within the Family With a Prenuptial or Postnuptial Agreement

Many of our offices sit within the nation’s farming counties. We regularly receive enquiries from spouses-to-be, and often their parents, as to how their farm can be protected in the event of a future breakdown of a marriage. This is understandable as many farms have been in the family for generations and often, other family members are involved in the running of the farm. Family members often want protection for not only the spouse-to-be, but also the other family members.

Prenuptial agreements and postnuptial agreements can be decisive in farming cases. Protection of a farming business upon divorce can be extremely important, not least, because the land usually provides the income and includes the family home. Often the farming business has been in existence for many generations, and it is wished to be preserved for future generations.

Prenuptial agreements are entered into before the marriage and set out what should happen in the event of a future marriage breakdown. Postnuptial agreements are entered into after the marriage and are often instigated by a parent who wishes to transfer land and assets for tax planning purposes. Whilst a prenuptial agreement and postnuptial agreement are not binding on the Court it is a highly persuasive document if the terms are fair and both parties have taken independent legal advice and exchanged full and frank financial disclosure etc. Prenuptial and postnuptial agreements are a relevant factor that will be taken into account when looking at financial settlements upon divorce and the terms can be decisive. A prenuptial agreement or postnuptial agreement could mean the difference between the farm business continuing or being sold upon any future divorce.

Prenuptial agreements may be helpful in dealing with the following:

1. Identifying ‘separate property’ and ‘matrimonial property’ and the parties’ intentions in relation to each asset. The agreement may set out the different treatment of:

   • Inherited assets acquired prior to or during the marriage.

   • Gifts acquired prior to or during the marriage.

   • Matrimonial property.

   • Property and investments excluding the farm.

   • Assets generated solely by the efforts generated by one spouse.

   • Assets generate by the efforts of both parties.

2. What will happen in different circumstances, for example, if it is a short or long marriage or if there are children or no children.
3. Provision for housing i.e., at what level and whether it is to be index linked or perhaps based on a percentage of the marital property or all assets.
4. Provision of other capital, and again, whether it is to be index linked or based on a percentage of the marital or all assets.
5. Maintenance i.e., whether there should be any at all or only if dependent children. Whether maintenance should be a fixed percentage or perhaps capitalised and if so, how this should be calculated.
6. Whether there should be a review after the marriage. This should be considered in every case.

The general safeguards that might enhance or detract from the weight of such an agreement include: -

• Both parties should have been separately advised on the agreement.
• The parties must enter the agreement without undue pressure or influence.
• The agreement should be finalised at least 28 days before the wedding, but ideally 3 months before.
• There must have been full and frank financial disclosure of the parties' assets.
• The Court will look to see whether there are any vitiating factors, for example, fraud or misrepresentation.
• The circumstances of the parties at the time will be relevant, i.e., their age, maturity, previous marriages etc.
• If the terms of agreement are unfair from the start this may reduce the weight of it in the future.

Prenuptial and postnuptial agreements are often seen as a form of insurance. Hopefully they prepare for the never to occur future separation of the parties just as insurance policies may deal with the hopefully never to occur, fatal accident or fire. In the event of this event occurring, however, they can assist the parties in sorting out their financial affairs without emotionally and financially costly legal proceedings.

It is important that parties seek advice from a solicitor well in advance of the wedding to allow time for consideration and negotiation.

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