Family Solicitors Suffolk – Is there trust on the farm?

Amanda Crowe

‘Farms are often passed down through generations of a family and as they do so, the finances of individual family members can become inter-linked. It is becoming more common for farming parents to their give adult children financial support, for example by providing a home for them to live in and capital or income to meet expenses. This allows the needs of not just the family, but the farm in particular to be met, especially where it is beneficial or necessary for the people who own and operate the farm to live on site.

However, if an adult child’s marriage fails and they begin divorce proceedings, the generosity of their parents can backfire. Where an adult child has received financial support or housing from a parent during the marriage, it can be open to a District Judge to make an order against the child that forces them to prevail upon parents or the extended family, to provide funds to meet a spouse’s financial settlement.

Consider this scenario:  a couple have been married for 18 years and have four children. The husband worked for the family farming partnership and the partnership allows the couple and their children to live in one of the farmhouses. The family is generous and a number of substantial financial gifts are made to the couple over the years. The husband and the wife separate and begin divorce proceedings. Although the husband’s wage is modest and his personal capital resources are limited, the wife is awarded a significant sum, calculated with the family’s past generosity in mind.

This scenario highlights that extreme caution should be exercised by parents and grandparents when deciding whether or not to finance adult children during their marriages. This is especially so where a family’s wealth has been built through the farming generations, and the family want to prevent this from flowing into the pockets of a spouse.

Trusts can play a key role in protecting family wealth on divorce as they can provide a means to finance adult children without the children claiming a right to the money in the trust. However, Trusts should be considered as part of a long-term strategy to protect family wealth, and not just as part of divorce proceedings.

A discretionary trust set up by parents or grandparents before a child or grandchild’s marriage could potentially withstand attack by the courts on divorce. However if a trust is set up after marriage by a family member, there is potential for a challenge to be brought against it by a spouse, especially if there were signs of marital disharmony when the trust was created.’

Amanda Crowe is a family law solicitor at Barker Gotelee, solicitors in Suffolk

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