When billionaire mogul and Amazon founder Jeff Bezos split with his wife of 25 years, MacKenzie Scott, she walked away with US$38 billion in Amazon stock. Bezos did not have a prenup agreement, which likely makes him an outlier among the ultrawealthy who tends to take every precaution to guard their wealth from being eroded in the event of a marital breakdown.
When marriages involving high net worth individuals fall apart, there are millions of dollars at stake. Undeniably, divorces amongst the wealthy are different from those amongst the middle class. When legal expenses aren’t an issue, people can engage in all-out battles rather than coming to a swift compromise.
While most divorce battles are sparked by the same issues in any marriage — infidelity, damaging allegations, or the mutual agreement — the potentially massive financial implications for the rich amplify everything while adding new wrinkles to plan for.
Here are some of the issues that make divorces among the rich a unique challenge that requires special measures to safeguard wealth:
Big League, Big Stakes
High net worth individuals have greater wealth at stake, which could result in a costly legal battle.
The rich have more assets to divide and the more you have, the more you have to fight over. They may have complicated trusts and corporations, investment properties, vacation homes, and assets in other countries.
There are also considerations around larger support payments and lifestyle needs.
Children of wealthy families have more expenses towards private school, lessons, sports, after-school care, live-in nannies, and others. Things can get even more complicated where business assets are involved, especially if the business is jointly owned, or both spouses are involved in running it.
The higher the stakes, the bigger the support staff you may need to ensure your financial and emotional well-being.
The rich often need a larger team of experts, including lawyers, mediators, counselors or therapists, accountants, investment advisors, certified divorce financial analysts, and others.
Let’s Be Friends
If mediation fails to produce an amicable resolution, a legal settlement may be the only way to go. But, when things go to court, there are many legal and financial angles to consider.
It may be worthwhile to consider mediation rather than going to court at the beginning. Mediation could be a way to go for some to help with the process of dividing assets, access to children, support, and living arrangements. Talking it out may work better than fighting it out for an amicable and healthier outcome.
Play Your Cards Right
If you fall in the high-net-worth category, a pre-nuptial agreement – known as a marriage or domestic contract in Canada – is of special significance as a hedge against wealth erosion in the event of a marital breakdown. Trouble is, not a lot of affluent people have a prenup in place.
At a time when divorce rates in Canada have been steadily rising, a prenuptial agreement is both a practical and arguably advantageous thing to consider. Such a contract clearly spells out who gets what and how much support. There can be clauses added – like the US$500,000 infidelity clause in the Justin Timberlake and Jessica Biel prenup – where a certain amount can be deducted due to adultery or other transgressions.
A good prenup should outline how assets will be divided in a divorce. For example, anything earned or acquired during the marriage could be split in half, but assets acquired before the marriage will remain with the owner. The contract could also serve to protect certain properties, like a business, and set out child and spousal support guidelines.
That said, a marriage contract may not be enough. There are other things the rich could do to plan for the worst-case scenario.
With blended families now becoming more prevalent, it may be prudent to update your will to include spousal trusts to ensure your spouse isn’t allowed to sell assets like your matrimonial home, thus protecting your children’s inheritance.
Also, consider holding inheritance money separately so it could be deemed outside of your marriage if you can prove that. Don’t put into a joint account that down payment your parents gave you to buy a home before the marriage. Keep it separate, in your own name, and have paper trail to prove that the money came from your parents as an inheritance. If you put it in a joint account with your spouse, it will have to be split as part of the divorce deal.
Could Come Down to a Coin Toss
Litigation related to high-net-worth cases has an additional wrinkle of complication. Since money isn’t an issue, a lot of divorces amongst high-net-worth individuals end up in court. However, there’s no guarantee of a favorable outcome, no matter how strong you believe your case to be.
If not carefully presented, the adjudicator can make a judgment call that may not be in your favor. It may, therefore, be best to settle outside of court, if possible.
Of course, no one wants to go into a marriage thinking of the worst outcome down the road. However, sometimes a divorce is in the best interest of all those involved. When that day comes, it’s important to ensure your interests are protected. In marriage, like in lifeit’s a good policy to hope for the best but prepare for the worst.