Agricultural and Primary Industry Property Settlements

There can be a number of unique considerations that must be taken into account when finalising a property settlement involving agriculture, writes TGB family lawyer Melanie Tilmouth.

People involved in agriculture, the wine industry, aquaculture, and other primary industries facing the end of a marriage or de facto relationship should ensure that they obtain legal advice from an experienced family lawyer in relation to their financial entitlements. Seeking the proper advice early on will ensure your valuable assets are protected.

Assets –

Developing a good understanding of how an agricultural business is structured is imperative to finalising a property settlement. This can result in challenges given that the assets are often held in trusts and companies. These types of Family Law property settlements often involves careful deliberation of financial records to establish how assets are owned.

The courts have also acknowledged that when assessing the value of agricultural property that consideration must be given “to the climate and market risks which attend all agricultural production.” There will also need to be an assessment of whether other interests such as crops, licence entitlements, stock on consignment, water licences and stock (include lambs or calves at foot) should be considered assets available for division or whether they are considered income.

Immediate steps should also be taken as soon as possible following the breakdown of a relationship to ensure that all agricultural assets are accounted for. It is not uncommon for parties to hide or stock-pile crops in an attempt to minimise assets available for division. Acting quickly will minimise risk and provide greater protection for your assets.

Initial contributions –

In agricultural families it is common for one of the parties to the relationship or marriage to have received assets from their own parents such as farming land or stock which may have allowed the couple to improve their position more quickly then would have otherwise been possible. Careful consideration will need to be given as to how such contributions should be considered, and in particular, how such assets are owned including by family trusts and whether the gifted assets were conditional. It is not uncommon for other family members to claim an interest in a couple’s farming assets at separation and it may be that such family members require their own legal advice.

There is also often an intergenerational assumption that agricultural property will be given to the next generation. It may be the case that adult children of the relationship have worked without proper remuneration on the understanding that they will one day inherit or be gifted the agricultural business. Adult children may also claim for unpaid wages and any potential claims of this nature require investigation at an early stage.

Primary industries often rely on a collaborative effort by the broader family including assisting with book work, following the birth of a child, planting or at peak times during a season. Such assistance may need to be documented and taken into account during the property settlement process.

Maintaining a source of income –

Specific information will need to be obtained as to how particular types of agricultural assets can be divided. A good example are king crab and southern rock lobster entitlements where there are maximum and minimum units that any licence can hold. These entitlements may not be available for division even if the parties agree to divide the asset between them.

Establishing what a fair division of assets following separation is can be problematic when one or both parties to a relationship rely on the farm for their income. If possible, the Court will try to find a pathway to allow one of the parties to retain the farm. People involved in primary industries have often worked their entire lives developing a particular skill meaning that if the property settlement involves the sale of particular assets that they will no longer be able to carry out that work.

Negotiating a division of assets that will allow the farming business to continue to be viable will require a detailed assessment of the other assets available for division particularly given that farmers are also often “asset rich” but “cash poor” and cannot simply make a cash payment to the other party. Section 79(4) of the Family Law Act specifically requires that the parties consider the impact of any settlement on the future earning capacity of the parties but the court is clear that it will only allow one party to retain the farm if it does not impede upon the legitimate legal entitlement of the other party.

Summary –

Without doubt, this is a complex area of law and there is a significant amount of assessment that needs to take place as early as possible to ensure the process runs smoothly and that family members receive the assets to which they are entitled.

Early advice is imperative to ensure that assets are protected while your Family Law property settlement is finalised, particularly in primary industry where one party may have significantly greater control or insight into the workings of the business.

For further information or assistance contact your nearest TGB location.