The importance of nuptial agreements for farmers

Following the 2024 Autumn Statement, there is now a plethora of information available to farmers surrounding inheritance tax changes, which may impact on succession planning. We know that family farms are often historic and complex, so structuring the business or partnership in the right way helps to ensure it passes successfully from generation to generation.

Perhaps a less talked about issue is the need for farmers to safeguard against divorce, in the unfortunate event that it should arise. Given that approximately 42% of marriages in England and Wales end in divorce, it is imperative that this discussion should form part of business planning, especially when multigenerational family farms are involved.

What is a pre-nuptial agreement and how can it protect the farm?

Having to sell land or divert income on divorce is likely to have a devastating impact on the farm’s future and viability.

A pre/post-nuptial agreement is a bespoke document between a couple entering into a marriage or civil partnership which documents what they intend to happen to their money and property in the event the marriage or civil partnership were to end.

A pre/post-nuptial agreement can deal with the division of assets such as property, business interests, savings and income. Within the agreement, you can define non-marital property coming into the marriage, such as land and other key business assets, which could be essential in protecting the farm’s future.

A pre/post-nuptial agreement might be particularly beneficial where:

1. One of you has a substantially greater capital, such as family farmland, than the other.
2. One or both of you wishes to protect assets you owned prior to the marriage, including family trusts or inheritance.
3. One or both of you has children from a previous marriage or relationship and wishes to protect assets for the purpose of inheritance planning.

The agreement can give more certainty as to the financial arrangements should the relationship break down, which is why pre-nuptial agreements are increasingly popular and given recognition by the courts.

What considerations must be made?

Pre-nuptial agreements are not strictly binding upon the courts in so far as the courts have ultimate discretion. However, when certain criteria are met, they will be given great weight by a court considering the division of assets in a divorce and are more usually upheld.

Examples of these criteria include:

• Both parties providing full financial disclosure to each other.
• Whether the terms of the agreement are substantially fair, such as whether the agreement provides for both parties’ needs in the event of divorce or end to the civil partnership.
• That neither party felt pressurised to enter into the agreement.
• The receipt of independent legal advice for both parties.
• The agreement being fully negotiated and signed at least 21 days in advance of the wedding, although more time is safer.

What happens if my circumstances change?

We all know that circumstances during a marriage or civil partnership can change, and personal circumstances may look very different a few years or so after the agreement is entered into. For this very reason it is important to include within the terms of a pre/post-nuptial agreement the triggers for ‘review dates’. This ensures that the terms previously entered into remain inherently fair.

Is it too late to reach an agreement after the wedding?

Parties who are already married or within a civil partnership can still reach an agreement as to what should happen with their assets following the breakdown of the marriage; this is called a post-nuptial agreement.  Post-nuptial agreements are reached in the same was as a pre-nuptial agreement and can cover the same matters.  Again, they are not strictly binding on the court, and it will be necessary for the court to review the agreement and decide whether it would be unfair to uphold its terms.

If you are thinking of entering into a pre- or post-nuptial agreement, it is recommended you seek professional legal advice.

This article was first published in the January 2025 edition of South East Farmer.

This content is correct at time of publication