Prenuptial agreements for farmers: are they worth it?

Why is a farming prenuptial agreement important?

As farms are often both a family home and a working business, with land, buildings and income closely interconnected it is particularly important to put in place strong succession plans. Creating a prenuptial agreement does not mean a relationship is set to fail. For many farming and rural families, a carefully prepared agreement gives the couple and wider family greater clarity. It can reduce uncertainty for everyone impacted if the marriage does break down.

A prenuptial agreement for farmers can help protect wealth that has taken decades (or generations) to build. My experience shows this can include agricultural land, a farmhouse, commercial buildings, machinery, shares in a family farming business, investment property or assets held in a family trust. An agreement can also support wider farm succession planning when parents or grandparents intend to pass assets to the next generation.

Such concerns are real: what would happen to the farm or family business if a marriage ended? A prenup cannot remove every risk, but it can record the couple’s intentions, bring greater certainty and help to ring-fence inherited assets or property gifted by the wider family.

Are prenuptial agreements legally binding in England and Wales?

Today, a prenuptial agreement is not automatically binding in England and Wales, and the Court has the final say over financial arrangements on divorce. In 2010, the Supreme Court said that judges should take a prenuptial agreement seriously provided certain conditions were followed, if both people signed it freely and understood what it meant (but the Court can decide not to follow it if doing so would be unfair).

This is where you can put a quote in from a client, or a quote from a member of the HM3 team

You can enter here the person that is quoted (either client or team member)

5 points that make a prenuptial agreement more likely to carry weight

1. Full and frank financial disclosure. Each person should provide an honest picture of their finances. For a farm or rural business, consider land, buildings, borrowing, For a farm or rural business, consider land, buildings, borrowing, stock and machinery, partnership interests, company shares, trusts and other assets. Accountants, land agents and commercial advisers can help prepare an accurate schedule.
2. Independent family law advice. Each person should instruct a separate lawyer who can demonstrate real experience of negotiating prenuptial agreements, particularly where farming assets, trusts or family businesses are involved. Be wary of websites advertising this service when the lawyers do not actually have the necessary expertise.
3. Plenty of time before the wedding. Do not leave the agreement until the final weeks as it will not hold any weight. Starting early reduces pressure, gives everyone time to take advice and allows complex assets to be considered properly. The Law Commission recommends 28 days, but if there is an overseas element I would recommend beginning months ahead of the big day.
4. Specialist advice for overseas connections. If either person has foreign assets, lives abroad or plans to marry overseas, advice may also be needed in the other country as local arrangements can vary. In some cases, a corresponding agreement may be needed.
5. A ‘fair’ outcome. An agreement is more likely to carry weight if it meets both parties’ reasonable needs and is fair in the circumstances. Fair does not have to mean dividing every asset equally. It may be possible to protect a farm, an inheritance or an asset gifted by parents while providing for both people.

Of course, the law can change. The UK Government is currently considering proposals that could make some prenuptial agreements legally binding, provided those criteria are followed. For now, it remains important that the agreement is carefully prepared and that both people enter the contract freely, with a clear understanding of what it means.

How can a prenup help a rural family?

A well-drafted farming prenuptial agreement can sit alongside your Will, trusts, partnership or shareholders’ agreement and wider agricultural asset protection plan. It can help couples discuss difficult issues calmly before getting married, giving the wider family reassurance and reducing uncertainty if the relationship does end.

Prenups can be particularly helpful for second marriages, couples marrying later in life, families wishing to provide for children from an earlier relationship, or relationships where one person brings substantially more wealth. The agreement should also be reviewed after major life changes such as:

• the birth of a child
• buying and selling property or other assets
• an inheritance
• a significant change in the farm business or a move overseas.

Speak to a specialist family lawyer

Talking about a prenup does not mean that you expect your marriage to fail. It is a practical part of inheritance and wealth planning for farming families, helping everyone understand where they stand. If you are planning a wedding, transferring family wealth or reviewing the future of a farm or rural business, our specialist Family Law team can help you begin the conversation and prepare an agreement tailored to your circumstances.

There is no obligation to get in touch with Sally Stanway to explore your options.