The benefits of a Prenuptial Agreement
Protecting the family assets.
When farming couples divorce sorting out the financial settlement is notoriously difficult to resolve. The business and the family home need to be valued and there has to be an assessment of the share for each spouse. Farms are especially complex as often there are:-
- Multiple owners with family members having a stake in the business.
- Often inherited by one spouse.
- A higher standard of living than the farm income suggests.
- Ownership restrictions and conditions attached to the land.
A skilled matrimonial solicitor experienced in farm divorces is required (as well as accountant and a valuer)...
So how do you preserve a family farm or estate and try to avoid a possible future matrimonial dispute?
Before you (or your child) marry there are two possible options – prenuptial (or postnuptial) agreement and establishing a trust.
Prenuptial agreements can protect assets by setting out how the farm land and business and other assets are to be divided if a relationship permanently breaks down. The terms are not absolutely binding but English Courts are increasingly taking them into account. The agreement must be drawn up correctly with expert advice. If the prenuptial agreement is to be relied on :-
- Both parties should take independent legal advice.
- There must be full and frank disclosure of the parties’ finances before the agreement is signed.
- Each party must sign freely without pressure.
- The agreement must be signed at least 28 days before the marriage.
Although raising the issue may be tricky, if diplomatically handled, the process may flush out any unrealistic expectations and limit the risk of any reduction or break up of the farm on divorce.
The second way to minimise the impact of divorce involves investing assets to be protected into a trust or trusts. These are most effectively set up prior to the relationship so that the Court does not use its discretionary power to vary the trust, but as with negotiating a prenuptial agreement, specialist legal and tax advice must be taken.
Even if you do not enter into a prenuptial agreement or set up a trust it is often argued successfully that any premarital or inherited assets should be treated differently from other assets. The case of White v White (2000) established the principle that where there is inherited property, unless needed to meet both parties’ needs, it should be kept by the party who introduced it.
To conclude, obtain trust law advice, do not solely rely on inheritance arguments in any divorce as these may not succeed and if you marry, have a prenuptial agreement.
For more related articles on this topic click here.