Marriage and cohabitation: risks for farming families
Deciding to move in with a long-term partner or to get married is a big step. You will be making a huge personal commitment to your partner or soon to be husband or wife and also a huge financial commitment as you begin to pool your resources. Thinking about the consequences of this if things do not work out may not be high on your list of priorities but, as Juliet Walker, family lawyer at Pearsons & Ward Solicitors in Malton, North Yorkshire explains, it is vitally important for all members of farming families and particularly younger sons and daughters.
'Farm businesses are a real family affair where personal and business finances are often inextricably linked and valuable land and property rights are routinely transferred from parents to children as part of succession plans and tax saving initiatives', says Juliet.
'The risk when a child decides to move in with someone or to get married is that if things do not work out, their former partner or spouse may seek to make a claim against farm assets which could put the future viability of the business at risk. An important step you can take to limit the chances of this happening is to ask a solicitor to draw up a cohabitation or prenuptial agreement.'
How do cohabitation and prenuptial agreements work?
Cohabitation and prenuptial agreements work in much the same way in that they both enable you to agree in advance what your respective financial rights and obligations will be if you decide to go your separate ways.
Assets that currently belong to you alone can be identified and agreement reached that they will remain your property irrespective of where your relationship takes you. Assets acquired during your relationship can be categorised, with equal rights of entitlement for anything you have acquired together and separate rights in respect of anything you have inherited. The payment of debts and liabilities can also be dealt with.
As Juliet notes:
'Probably the most significant issue to address with farming families is entitlement in respect of inherited land and farm property. The role of a cohabitation or prenuptial agreement here is to help ringfence these assets to reduce the risk of your former spouse or partner being able to claim some sort of entitlement based on the provision of free labour or contributions towards running costs or improvements and which may necessitate land or property being sold or finance having to be raised to compensate them.'
How do I make a cohabitation or prenuptial agreement?
To make a cohabitation or prenuptial agreement you and your partner or fiancé will have to reach an in-principle agreement about how financial arrangements between you should work. You each then need the help of a solicitor to record what you have agreed in a formal contract and to ensure that the terms of your agreement are fair.
If you are struggling to reach agreement on all key issues your solicitor may be able to suggest possible solutions or refer you to a family law mediator. They will also carry out checks to ensure you understand the terms of the agreement and that you are entering it of your own free will.
If you would like help to make a cohabitation or prenuptial agreement, please contact Juliet Walker on 01653 692247 or email Juliet.email@example.com to see how we can help.