With more than 12,500 farms in County Mayo, pre-nuptual agreements could become commonplace.
That’s according to a leading tax consultant who has warned that unmarried Mayo farmers could end up handing over land to a financially dependent partner in certain circumstances.
This is something that has also been discussed at IFA meetings in the county, according to Mayo IFA chairman Martin Gavin.
Mr Gavin told the Mayo Advertiser that there was uncertainly among the farming community in relation to handing over farms to sons and daughters. He said the farm is the family business and often has been for generations and the value of a farm does not always reflect its earning potential.
Where a farmer has a child with his partner, and if they have lived together for more than two years, courts are empowered to make wide-ranging orders where that partner is considered to be financially dependent. But as Mr Gavin pointed out most people are not looking for “a way out when they are getting in”. However these concerns are hindering farms being handed down, according to Mr Gavin.
Court powers include property and pension adjustment orders, maintenance orders, and orders in respect of deceased’s person’s estate.
Sonia McEntee, managing director of ITC Consulting, experts in pension, tax, and legal consultanting, has said this is causing real concern in the Mayo farming community.
The second major concern is that the taxation impact of these orders have not yet been addressed, so in a situation where a financially dependent former co-habiting partner is awarded, for example, a home on the farmland, then there may be a very significant tax bill which comes with that. Not only will this cause inevitable distress for the farming family, but the former co-habiting partner may not be in a position to meet tax liabilities, meaning that the sale of part of the farm may be inevitable.
The tax experts say that the farming community are now learning of these changes and, for a community which has traditionally been protective of land and assets, the changes are causing significant concern over the fact that the cohabiting partner of an unmarried son or daughter may end up with ownership of part of the farm itself.
According to Ms McEntee there is a solution. “While married couples are bound by the contract of marriage when it comes to entitlements to assets, an unmarried couple can contract out of the act by agreeing how matters should be dealt with in the event of their separation, or the death of the asset-owning partner — essentially a farmer’s pre-nup,” she said.
According to the 2006 Census, co-habiting couples (living together as partners but not married to each other ) made up 11.6 per cent of all couples in Ireland and, currently, could be as high as 15 per cent, ie, nearly one in six.
“The need for tax legislation is obvious, but affected people have been sidelined as a result of recent political events which saw the Finance Act enacted in record time,” Ms McEntee said. “Assurances have been offered to indicate that the legislation will be ready for the new Government to enact immediately, although this will be of little comfort to any dependents who finds themselves in these circumstances between January 1 and the date of enactment. While the implementation of legislation on a retrospective basis is constitutionally unsound, in these circumstances, given that the legislation required is simply to allow these partners to be treated as spouses from a tax point of view, it most probably would not be subjected to challenge. That said however, on the principal issue of protection of the family farm or business, it’s imperative that people in this situation take advice and act on it where appropriate.”
