Monday, June 18, 2012

Farmers go for pre-nups as land prices soar

The rise in the price of farmland is leading increasing numbers of farmers to sign pre- and post-nuptial agreements to protect their wealth from enlarged divorce payments to their spouses. A roll in the hay can clearly have consequences not envisaged in the past.

Farmers who have not completed such an agreement face the unwelcome prospect of selling farmland or borrowing money to finance a divorce settlement. Farming divorces are complicated by the fact that the farm is usually the marital home, meaning its value is taken into account when deciding financial settlements for ex-wives.

Selling off part of the farm is not really a solution. 25 years ago a farm might have been viable between 500 and 700 acres, but today something like 1,200 acres is needed to sustain a profitable business, even with CAP subsidies (which are related to the farmable area anyway). If the farm is reduced in size, it may no longer be able to support heirs, particularly if more than one wants to be involved in the farm business.

According to the National Farmers Union it has had more calls from members on this topic since the 2010 ruling involving German heiress Katrin Radmacher which stated that courts can take pre-nups into account when deciding settlements. It has handled 40 referrals from members seeking advice on divorce and pre-nups over the last three years.

This gives a new meaning to the term selective benefit in the pressure group literature. Anyone can get advice on a divorce from a family lawyer, but they may not encounter that many cases involving farms and be relatively unfamiliar with the special considerations involved. That is where an organisation like the NFU can help, showing the relevance of Olson's by-product theory of selective incentives which seeks to explain how lobbying activity can be sustained in the face of the free rider problem

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