Kevin, the middle son of Mr and Mrs Smith, is getting married soon to Annie. His grandmother, Victoria, is concerned about the marriage as Annie is a ‘city girl’ and might not adapt to farm life.
The family want a Prenup in place to protect the farming assets and Kevin’s catering business which is based at the farm. They are also keen to protect the farmhouse which the couple will live in as it has been in the family for several generations. With 42% of first marriages ending in divorce, Victoria’s worries are understandable.
How assets are divided on divorce
Without a Prenup in place, the financial outcome is uncertain and the courts have a very wide discretion how to distribute assets on divorce taking into account a number of factors, not least financial needs and the resources available to meet those needs. Where one party to the marriage has greater assets, as is the case here, an equal sharing of the assets division can seem unfair and unbalanced. Having in place a formal written agreement that sets out the rights and obligations of each party should the relationship fail makes good legal sense.
A Prenup gives both parties a clear understanding from the outset as to how their assets, debts and financial commitments are to be dealt if they decide to part, and can include financial provision for any children of the marriage too.
The protection a Prenup provides
Anyone who is not entirely comfortable with the idea of sharing all their assets with their other half if their marriage or civil partnership were to break down should consider a Prenup.
Kevin and his family want to protect the farm assets used in his catering business. The couple will be living in one of the farmhouses which has been inherited and passed down the family for several generations, so the financial and family fall-out from a divorce could have far-reaching implications for all concerned. Although inherited assets such as farms are sometimes excluded from the pot of shared assets on divorce (depending on the circumstances of the marriage) this does not generally extend to the matrimonial home and other mingled assets, in this case the farmhouse.
Putting plans in place
A Prenup must be entered into freely and willingly by both parties. Kevin and Annie will need to take independent legal advice to ensure they understand the nature and implications of the agreement they intend to be bound by. There also needs to be transparency as to your financial circumstances with full financial disclosure being exchanged to ensure you know the implications of the agreement.
Although a Prenup doesn’t (yet) have statutory support, it will usually be upheld by the Court provided that:
- it was entered into by each party with a full appreciation of its implications
- it doesn’t give rise to a manifestly unjust result
- there is no evidence of one party being coerced into signing it against their will
- it was drawn up well in advance (if it’s made close to the ceremony, the other party could challenge it, taking the view that it was made under pressure, and so not enforceable).
- Full financial disclosure is exchanged.
Whilst they aren’t always viewed as the most romantic of gestures, Prenups can play an important role in establishing an open and honest relationship from the outset. For farming families, they can provide a practical and pragmatic tool that protects their livelihood for future generations.
For further information, please contact John Egan on 01908 202150 or email email@example.com
This article is taken from our Agriculture Newsletter (Spring/Summer 2018 Edition).