Farm Ireland

Tuesday 25 October 2016

Pre-nup is a good way to avoid future conflict over family farm

Theresa Murphy

Published 11/11/2015 | 02:30

Losing the family farm through divorce is an issue
Losing the family farm through divorce is an issue

Our legal expert on the value of a pre-nuptial agreement in relation to future claims against a farm.

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Question: I am a young trained farmer and have worked with my parents on the family farm for over 10 years. I feel that I am ready to take over the farm but my parents are not ready to transfer the farm to me as they fear that the farm might end up being lost if I end up getting divorced or separated in the future. I don't know what I can do to put their mind at ease because I cannot tell what the future may bring.

Theresa replies: Results of the 2011 census show that 87,770 people in Ireland are now legally divorced. That's up from the 35,059 listed as divorced in the census carried out in 2002. Along with this is a study carried out by Macra na Feirme on 'Land Mobility and Succession in Ireland' which identified that keeping the family farm within the family is a concern for those handing on the farm to the next generation.

So your parent's concerns may be stemming from the increase in the instance of separation and divorce which has occurred since 1995. For many taxation and the exposure to Capital Acquisitions Tax will not be the only factor under consideration when deciding what is the best time to transfer on the family farm, more personal factors like the stability and the financial position of the transferee will often be considered as well as the circumstances of other children.

With changes to the Agricultural relief requirements since January 2015, it may be worth examining them to assess assess your eligibility.

The obvious ease to your parent's concern may be found in your agreement to enter into a pre-nuptial agreement with any future spouse.

You should also bear in mind that if you become a qualified co-habitee (you live with someone for a period of two years, if you have a child together, or a period of five years if you do not) there are consequences upon the ceasing of the co-habitation very similar to marriage.

However, you can enter into an agreement with your co-habitee similar to a pre-nuptial agreement, whereby one co-habitee can agree not to seek redress including any portion of a particular asset, eg, the farm, when the co-habitation ends.

Many legal professionals are noticing an increase in the number of couples choosing to enter into a pre-nuptial agreement in advance of marriage. The reason being that a prenuptial agreement can give both parties peace of mind and can reduce conflict later. The difficulty is that Irish courts are not bound to enforce them in the eventuality of a separation.

Significant case law in this area which related to an agreement of this sort in Germany will no doubt prove persuasive in this area of law in Ireland. As it stands there is nothing in Irish law to prevent couples entering into pre-nuptial agreements.

While the Irish Courts are not obliged to enforce such an agreement should the couple later separate, legal opinion on the matter sees no reason why courts should not take pre-nuptial agreements into account when making proper provision for spouses and children.

It is essential to note if you are considering entering into a pre-nuptial agreement that both parties receive independent legal advice. Also, the court would also have to be satisfied that each party had disclosed all of their assets before the agreement was reached.

The Report of the Study Group on Pre-Nuptial Agreements (2007) recommended that legal provision should be made to require the courts to have regard to existing pre-nuptial agreements when making orders in separation and divorce proceedings.

While this legal provision has not yet been made, many judges are already having regard to pre-nuptial agreements where they exist. It is also likely that at some future time there will be legislation introduced to give effect to the recommendations of the study group. Many legal professionals are also of the view that pre-nuptial agreements are most likely to be given effect by the courts in the case of a separation which occurs after a relatively short marriage or where the circumstances have not changed greatly since the marriage began.

So for a young farmer in your position it is certainly recommendable that you would enter an agreement whereby the family farm is not transferable/sellable in the case of the co-habitation coming to an end. It is also recommendable that you enter a pre-nuptial agreement which makes proper provision for your future spouse and children, taking the security of the farm into account and providing for your parents' wish to keep the farm in the family.

Olivia Moylan at AG Moylan & Co Solicitors, Loughrea, Co Galway, says: "Young couples should certainly think about... perhaps formalising arrangements by way of a pre-nuptial agreement and plan for their future in light of the Co-Habitation Act. Whilst they are not legally enforceable, at present in this jurisdiction, they could have a persuasive value in the event a breakdown in the relationship."

But how long will it take and how much will it cost? The general advice is that you should enter the pre-nuptial agreement well in advance, that is, months before the wedding.

Such an agreement can be drawn up very quickly. Kevin Brophy of Brophy Solicitors recommends both sides need to be separately advised. The complexity of legal issues will always be a deciding factor in the costing of legal agreements/contracts. However, the following pricing indicates that such agreements can be drawn up for less than €1,500.

AG Moylan & Co Solicitors, Loughrea, Co Galway - standard pre-nuptial agreement €1200 + VAT. Brophy Solicitors, 38-40 Parliament Street, Dublin 2 - standard pre-nuptial agreement €1200 + VAT.

* This article is intended as a general guide and you should seek independent legal advice in relation to specific circumstances.

Theresa A Murphy is a barrister based in Co Galway

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