Is the family farm at risk when you or one of your business partners walks down aisle?

Whilst the bride and groom may be focussed on floral arrangements, guest lists and trying to avoid the notorious blackening, other family members might be considering the impact of the impending nuptials on the family farming business.  Or, more specifically, what will happen to the farming business if the marriage doesn’t stand the test of time.

Unlike many family businesses, when you’re running a farm, the land isn’t just an asset on a balance sheet – it’s heritage, livelihood, and often the family’s future. But when it comes to marriage, separation, or divorce, that heritage can come under threat without proper legal planning.

But my spouse has nothing to do with the business, surely it wouldn’t be impacted by divorce?

Many farmers are unaware that their business may be considered a matrimonial asset. The common misconception is that if the spouse is not involved with the business nor a partner in it, then the business is safe. That is incorrect. Whilst the basic principles are that assets acquired prior to marriage, those that are gifted or those that are inherited, are not considered to be a matrimonial assets, certain actions can bring these assets into the scope of being a matrimonial asset. For example, if the business is established, restructured, or altered during the marriage, this can bring it into the scope of being a matrimonial asset.  A common example is where a farming business has traded as a partnership for many years (pre-marriage of one of the partners) but a decision has been made to trade as a limited company. This change in structure could expose the business to challenge upon divorce. Whilst it may be possible to argue that the spouse’s interest in the business would not have been available on divorce had it not been for the change to the business/ partnership, this argument is not failsafe and there is no guarantee of success.

How can I protect the family farm if I divorce?

One of the most effective tools available to protect the farm is a nuptial agreement. These take two forms:

• pre-nuptial agreements (signed before marriage)
• post-nuptial agreements (signed afterwards)

Both can offer vital protection, provided they are properly drafted, fair and entered into with independent legal advice.

These agreements can define how assets and debts will be treated in the event of separation. They are particularly advisable if you are founding a business, restructuring ownership, or making significant financial changes. It is also essential that business partners are aware of these considerations, as decisions made by one partner can have long term implications for the entire company.

What can a nuptial agreement do?

Ring-fence the farm: A nuptial agreement can specify that the farm, or certain farming assets, are to remain outside the “matrimonial property” to be divided on divorce. This protects inherited land, gifted assets, or the family business from being broken up.

Preserve succession plans: Many families intend for the farm to pass to the next generation. A nuptial agreement helps ensure that divorce does not disrupt those plans. Parents transferring land or shares in the business can take comfort that the gift will be safeguarded.

Protect diversified enterprises: From farm shops to renewable energy projects, diversification is now central to many rural businesses. Agreements can clarify which assets belong to the core farming enterprise and are not to be divided.

Provide certainty and reduce conflict: In the absence of an agreement, separation can lead to lengthy and costly disputes. A nuptial agreement provides clarity in advance, reducing uncertainty and legal expense.

Balance protection with fairness: A well-drafted agreement need not leave one spouse vulnerable. Provision can be made for housing, income, or other support, ensuring the arrangement is reasonable and more likely to be upheld by the court.

In Scotland, nuptial agreements are enforceable provided they are:

• Fair and reasonable at the time of signing
• Entered into voluntarily
• Supported by independent legal advice
• Based on full and honest financial disclosure

It’s important to note that entering into a nuptial agreement won’t completely prevent a claim being made upon divorce. However, its purpose is to reduce the risk of such a claim succeeding.

With the average UK marriage lasting 12.8 years (ONS), the question for business owners is not whether a nuptial agreement is romantic, but whether it is prudent. For those with significant business interests, the answer is clear. Before making any decisions that could affect your business structure or personal assets, seek legal advice to ensure your interests and those of your business are protected.

How we can help

If you are concerned about how marriage or divorce could affect your business, or would like advice on nuptial agreements, get in touch with Danielle Stevenson (danielle.stevenson@andersonstrathern.co.uk) or speak to your usual Anderson Strathern contact.