Planning ahead when farms and family assets are at stake

Posted 24/08/2014

One fateful day, not so long ago, a farmer’s daughter on a trip to explore far flung places falls deeply in love with a blond haired surfer she meets on the beach. He is not entirely penniless; indeed he has an ancient VW camper and a sizeable motorcycle, but alas wealth in any other tangible form has thus far eluded him. The farmer’s daughter on the other hand has access to substantial family trust income and capital, if she were but to ask.

Surfer boy shed his shorts and tee-shirt, shaved off his wispy beard, donned a pair of chinos and a crisp white shirt and the happy pair walked spritely towards the daughter’s parents at Heathrow. She introduces surfer boy as her fiancé and is keen to discuss potential wedding plans with her parents.

Whilst surfer boy was amiable enough, the parents were concerned that he had no real financial contribution to bring to this union and were anxious about what would happen were the marriage to founder. Would he be able to make any claim against family assets, and how could they protect those assets?

This situation – albeit with slightly different circumstances – arises quite regularly, and sensible plans need to be put in place, which substitute financial prudence for impulsivity.
The first thing the parents would want to discuss with their daughter would be the need for her to have a properly drafted pre nuptial agreement.

This document, entered into at least a month before any wedding, would set out clearly what would happen financially if the marriage were to fail, and how property was to be owned during the marriage. Both surfer boy and his would-be bride would need to be independently legally advised as to the legal effect of this agreement, to ensure they have both understood  its terms, and have disclosed to one another the nature and extent of their assets.

In this way, the potential of the husband to be absconding with the family silver can be limited, as courts have shown themselves willing to implement such agreements, so long as they have been properly entered into.

But what of the trust assets – surely he couldn’t make any claim on them? Well, believing that could prove a costly mistake. If the daughter has treated the family trust funds as essentially her own, and the trustees have satisfied her requests for financial assistance, it is likely that a court would treat the trust assets as potentially being available for distribution in any divorce.

So what should trustees in this situation do? At this stage, unfortunately there is not much they can do, as the evidence of the transactions with the trust are going to indicate the daughter’s ability to treat those funds as if they were her own.

But, prior to the marriage, the pre nuptial agreement will state that the trust funds are not to form part of the matrimonial assets and the trustees could start to use their discretion in refusing (where appropriate), requests from the daughter for assistance, thus breaking the chain of compliance with her wishes.

Any assets that are given to the daughter during the marriage ought to be given solely for her benefit and not subsumed into the pot of general matrimonial assets. Ideally, they should be dealt with as being entirely separate and distinct from those assets and not used for matrimonial purposes.

At best in this situation, one has to work hard and plan ahead in order to try and preserve family assets; an approach which often strikes people as being far too premeditated when love is in the air. However, in a recent case where we represented a farmer’s daughter, we were able to prevent many hundreds of thousands of pounds disappearing with the departing soon to be ex-husband when the allure of East Anglia could not quite match the call of the Pacific.

For individual advice, please contact our Family team.

Find out more about our Agriculture & Estates team.