Farms on divorce

For farming families, home and business can be inseparable, inheritance and succession key and the combination of high asset values and low liquidity challenging. So we understand why emotions can run high.

There is no particular difference between how the law treats a business and a farm on divorce. However, farms are a lot more complicated to deal with because:

Often assets held within a farm are tied up and illiquid
Farming families can be capital rich but income poor
Farms are frequently “lifestyle” businesses where much of the benefit of running a farm is the lifestyle that is supported by the farm
Often farm are inherited assets and are intended to be passed down to the next generation
Often there will be an impact on third parties such as parents, siblings and children who may live on or be involved in the ownership of running of the farm
often there will be a reliance upon farm subsidies that affect the revenue of the farm
there may be family trusts and/or complex ownership structures
there will be tax consequences to take into account

The starting point is to find out what the assets are and how much they are worth. Specialist valuations will be needed to value the farm business, the land and buildings, and any ‘’hope’’ value, for example, in relation to planning permission or development opportunities.

There is a common misconception that farms are ring-fenced and excluded from any financial settlement on divorce. This is not true. All assets – including the farm – will be taken into account when dividing the assets. However, the courts are reluctant to take action which is likely to damage the core activity or profitability of a farm, particularly when this could damage the livelihoods of other family members.

Although the court is unlikely to order the sale of the whole farm, it may be necessary to sell part of the farm or some of the surrounding buildings to release money to fund a financial settlement. Alternatively, it may be necessary to borrow against the farm to raise money.