What should be split?
In Scots law, the starting point for sorting out finances on divorce is a fair split of the "matrimonial assets", which is all of the property which a couple have built up together during their marriage. Assets which have been inherited or gifted from someone else aren't included as "matrimonial". That is often the case with farms, where the land, or an interest in a partnership, may have been passed down through the generations.
Because of this, it can often be quite complex to work out what is and isn't a matrimonial asset. Was the land really gifted, or was there any consideration for the transfer? If there is a farming partnership, when was the interest in that gained - before or during marriage? Is the land held in the name of the farmer as an individual, or is it actually owned by the partnership?
Sometimes, an accountant will advise the farmer to save tax by transferring assets to a spouse, or making the spouse a partner in the business. That can again cause complications if the relationship subsequently breaks down, as the transfer of assets or formation of a new partnership may have changed non-marital assets into "matrimonial property".
What's fair?
If most of the assets, such as the land and partnership, are not matrimonial, the non-owner spouse may try to argue that it would be fair for him or her to receive a larger share. This is particularly the case if that spouse has spent years working on the farm, helping out with either practical things or the farm books, or caring for the home and family to allow the other spouse to build up the business. The law provides that a spouse in this type of situation can argue that their spouse has been advantaged by their contributions, while they have been disadvantaged. This might mean a larger share of the assets to compensate - but it can be a difficult argument to make successfully.
What about the children?
Another concern for farmers is sometimes how to pass on the land and business to the next generation - rather than having to sell or transfer it on divorce. But if the couple are both open to the children inheriting the farm, it may be possible to negotiate a settlement that perhaps takes less account of the strict terms of the law, and more account of both parents' wish to preserve wealth for future generations. Sometimes, mediation can be a good option for couples in this situation, to resolve their dispute with a focus on longer-term goals.
The Morton Fraser family law team has particular expertise in dealing with the issues which arise for farmers and their spouses. We have acted in a number of high-value farming divorce cases with successful outcomes for our clients, both litigated and negotiated, and also frequently advise on pre-nuptial agreements. If there's anything that we can help with, please just contact us on 0131 247 1243 or lucia.clark@morton-fraser.com
If you'd like to learn more about our farming divorce services, please visit our dedicated page.
