Steven Fernandez |

Divorce

The world’s richest man is getting divorced. Jeff Bezos, the founder of Amazon, recently announced that he and his wife MacKenzie were calling it quits after 25 years of marriage. The couple’s extreme wealth will certainly complicate the divorce.

Community Property in a High Net Worth Divorce

Since Jeff and MacKenzie Bezos reside in Washington, that’s where their divorce will unfold. Like California, Washington is a community property state. Unless a prenuptial agreement says otherwise, each spouse will be entitled to an equal share of all community property.

Community property includes most assets (and debts) each spouse has acquired since getting married, including:

  • Wages and income
  • Royalties
  • Business ownership interests
  • Patents
  • Intellectual property
  • Retirement benefits
  • Checking and savings accounts
  • Stock and bond portfolios
  • Mutual funds, and
  • Real estate.

Any property that is not community property is classified as separate property. This typically includes property that was owned individually prior to marriage or gifts given exclusively to one spouse. Spouses retain full ownership rights of separate property in a divorce.

When a couple gets divorced in a community property state, they have to figure out how community property will be allocated equally. Equal isn’t the same as equitable. Equal means that each spouse walks away from the marriage with the same amount of stuff.

Dividing property can be particularly challenging in a high-net worth divorce because many assets aren’t liquid. For example, Jeff Bezos owns 16 percent of Amazon, the Washington Post, and a space exploration company called Blue Origin. Since he acquired ownership of these assets after marriage, they’re considered community property. As a result, his wife will have a legitimate ownership interest in each of these things. However, some of these ownership interests are in publically-traded companies.

Figuring out how to divide ownership between the spouses can pose a challenge. Should the couple divest and sell their ownership interests? Should entire businesses be sold or liquidated to make the allocation of assets easier? Should the couple agree to split the current ownership interests in half? Would it make more sense to give full ownership of one company to Jeff and full ownership of another to MacKenzie? If they choose the latter, how can they be sure that the ownership interests are valued equally?

In order to do this properly, a full accounting of the spouse’s assets, debts, and liabilities will be necessary. An accounting will take time and require input from several experts, including forensic accountants and financial professionals. The goal is to identify all community property and figure out how much each asset is worth.

Prenuptial Agreements Can Save Time and Money in a High Net Worth Divorce

Many wealthy couples choose to execute a prenuptial agreement before they get married. Why? A valid prenup can significantly reduce the amount of time it takes to navigate the divorce process. This is particularly true when a couple has a massive estate and considerable assets. Rather than figuring out how to divide property in a contentious divorce, the details are already predetermined in the private contract.

It’s unclear whether or not Jeff and MacKenzie Bezos have a prenuptial agreement. Since most of the couple’s wealth and fortune accumulated after they got married, it’s very possible that they do not. However, if they do have a prenup, it can help to streamline the allocation of marital property. Unless the prenup is invalid, the spouses are legally bound to comply with its terms. In other words, they’re locked into what they agreed upon years ago.

Some couples, particularly those who find themselves with considerable assets, also favor postnuptial agreements. A postnuptial agreement is essentially the same as a prenup – it’s a private contract executed between two spouses. The main difference is that a postnuptial agreement is executed after a couple gets married. The terms of the contract are still binding, even though the agreement was signed after the wedding.

 

Are you thinking about getting a divorce? It’s important to consider how your property and assets will be affected by the process. Our experienced Los Angeles family law attorneys can help. Call our office to schedule a free, no-obligation consultation today and learn more.