One of the things many farmers are fearful of is that if they transfer the farm to their child and if that particular child’s marriage breaks down, what is the destiny of the farm in that situation. Is there a risk it will be passed to their child’s spouse, or sold?
All assets of a married couple are considered, in the event of marriage breakdown, under judicial separation and divorce proceedings. It doesn’t matter how an asset has been acquired by one of the parties, as to whether it relates to the marriage.
The law states that the court has to make proper provision for the parties, and all assets are taken into consideration when making such an order.
In the case of JBB V SMB, His Honour Mr Justice Barr determined an appeal against a decision of the Circuit Court.
In this case, there was a small farm involved, that was not turning a profit. The husband, being the farmer, had inherited the asset.
There were other assets within the marriage, namely a family home, and a house that the wife had inherited. He said that the farm was a significant issue in the case, and quoted in his judgement, “this court acknowledges that in divorce proceedings, all property, no matter how it has come within the reach of the parties, is available to be considered in making of an order for proper provision.”
However, the court has and will, in certain circumstances, make an exception in respect of inherited property, which is very often farms, when the distribution of such property is not necessary for the making of proper provision, but could be more correctly considered “redistribution of wealth”.
He cited another case where he quoted Mr Justice Hogan who stated: “inherited assets are not to be treated in the same way as the assets acquired in the course of marriage.” The court noted that in this case, one could not argue that the farm was contributing towards the husband’s livelihood, and his ability to provide for this children, as he worked as a full-time manual labourer off the farm.
If it is shown to a court that the farm provides a full-time income and provides for children, then it is even more unlikely a court will direct that a farm be sold.
Although in this particular case, the inherited assets were not transferred or sold, it is important to note that they will always be considered in a judicial separation or divorce, when the court is making proper provision for the parties.
In this case, the court took the view that as the farm was inherited, and as it was possible to make proper provision for the wife with the remaining assets, the farm would not be transferred or sold.
The facts of this particular case were that the farm was running at a loss and the husband’s livelihood was not dependent on the farm but, nevertheless, the court decided that the farm should remain in the possession of the farmer.
If both parties were involved in the day to day running of the farm, the court will give this consideration before making an order.
If you wish to hold onto the family farm, it is very important that you provide the court with options as to how to divide assets and provide proper provision for your spouse.
Many family law cases settle through negotiation without going before a judge, and it is preferable to try to find a compromise or solution to satisfy both parties. Before such negotiations take place, it is recommended that preliminary work is done by the parties, including the farmer who wishes to hold onto a farm or most of the farm.
There are various scenarios which can be considered. For example, the family home may be on the farm, and you may need to consider whether it is feasible for the non-farming party to continue to live there with dependent children.
A solution to this may be to build a house on a site on the farm where one of the parties can live on. In this regard, enquiries should be made to see whether or not a mortgage can be raised.
Alternatively, enquiries should be made as to whether a portion of the lands can be sold without affecting the operation of the farm to an excessive extent.
Enquiries can also be made of the planning authority to determine if planning permission would be granted for sites. The more work that is done by the parties in advance of the court hearing, the greater the number of options is available to the court. The parties should not arrive to the courthouse steps expecting the judge to solve their problems.
If no options are presented to the court, and there are no other assets, it is more likely that an order for part or all of the farm to be sold or transferred will be made.