Protecting the family farm: nuptial agreements and succession planning

Since changes to Inheritance tax reliefs were announced in the October 2024 Budget, the family team at Barker Gotelee have seen a significant increase in the number of pre-nuptial and post-nuptial agreements we have been asked to advise on for the local farming community.

Given the proposed changes to exemptions to IHT for the land-owning generation, this has resulted in farming families having to consider succession planning sooner than they may have otherwise expected to try to avoid the need to sell land or borrow money to meet future tax obligations.

For many farming families one of options being considered is the making of lifetime gifts but in doing so this can bring another challenge which is the risk of potential claims by the spouses of their children should their marriages breakdown. So, what can be done to help protect the family farm if a lifetime gift is made to the next generation?

It is possible for couples to enter into a nuptial agreement. Although nuptial agreements are not enshrined in statute, there have been several reported cases where nuptial agreements have been given weight by the family courts within divorce proceedings.

There are 2 main types of nuptial agreement.  A pre-nuptial agreement is an agreement which a couple can enter into before they are married which sets out their plans for a financial settlement in the event that their marriage breaks down. A post-nuptial agreement is a similar agreement, but a couple enters into this after they have married.

These nuptial agreements can be upheld by the family courts provided that:

• They have been entered into freely and without duress
• Both parties have received independent legal advice
• Both parties have disclosed details of their financial circumstances to the other party
• The agreement reached is considered fair.

The existence of a valid nuptial agreement can significantly alter the division of the matrimonial assets away from the starting point of equality and instead to the terms of the agreement recorded by the couples.

Within a farming family it is very common that any land is owned by the eldest generation but farmed by the younger generations. It is not always therefore apparent as to what is a matrimonial and non-matrimonial asset. This can sometimes cause additional costly disputes between separating couples.

If consideration is being given to passing down land to the younger generation, then at the same time, consideration can also be given to the recipients entering into a nuptial agreement to try to protect the farm for the benefit of the family and for future generations.

Very often nuptial agreements are considered in the realm of overall financial planning for the farm and at a time where there is no dispute between the couples making it a far easier time to reach an agreement. Having these discussions as part of succession planning is valuable for the entire farming family as it can help to minimise future disputes.

As a collaborative lawyer I have found that it is also possible to agree the terms of a nuptial agreement in a collaborative setting during which financial advisers can also be brought in to assist.

Having been a Family Solicitor for over 30 years, it is a far better experience for all parties involved to reach an agreement together and to avoid future potential disputes.

How we can help

A nuptial agreement helps to remove future uncertainty and the cost and delay of court action by recording a clear agreement between the separating couple.

For further information about nuptial agreements in this context please contact Sue Wardropper on 01473 611211, or fill in our contact form below.  Barker Gotelee has an office in Martlesham, Suffolk.