Do I Need A Prenup?
Do I Need A Prenup?
Prenuptial Agreements: Can they really save you money?
Emma Davison – Invalesco Family Law
Already this year we have seen the World’s richest man, Jeff Bezos, the founder and CEO of online retailer Amazon, announce via Twitter his divorce. This potentially will see his alleged $137 US billion dollar fortune being split equally with his wife, MacKenzie and her becoming one of the world’s richest women overnight. It also gives rise to consideration of how matters could have been very different had there been a prenuptial agreement in place.
Jeff and MacKenzie first met when he interviewed her for a research position at the Manhatten hedge fund where he worked.
In a 2013 interview given to Vogue magazine, the Bezos’ marriage was described as being “one of those complementary marriages, in which two parts come together to form an even stronger one”. In such an interview, Mackenzie describes Jeff as her “opposite”.
When they met, Mackenzie was a somewhat reserved, aspiring writer working in finance to pay the bills whilst Jeff, who is 6 years her senior, was the more gregarious business man working in the office next door.
They became engaged within 3 months of dating and married after 6 months in 1993. Together they have 4 children.
Shortly after their marriage, the Bezos moved from New York to Seattle where Mackenzie encouraged Jeff to follow his passion of launching an online bookstore which they started from a garage in Seattle and which has since become the global giant Amazon.
Amazon began in 1994.
Despite the company being fronted by Jeff, Amazon was very much something of a joint venture from the outset with MacKenzie supporting Jeff throughout. Reports suggest she did the company accounts, helped brainstorm names for the company and even shipped the early orders through UPS.
In 1997 Jeff became a millionaire and is now reported to have a net worth of approximately $137 billion US dollars. He remains the largest single shareholder in Amazon with almost a 17% shareholding in the company.
So, what effect will the divorce have on this wealth?
The Washington state where the Bezos live is a community property state which means that any wealth which has been accumulated during the course of their marriage will be divided equally between them upon divorce.
Although a divorce in America is very different to the rules which apply to a divorce in England, this mirrors the English starting point for how financial disputes are resolved.
In England, when a couple divorce, the court has a duty to consider all the circumstances of the case with first consideration being the welfare of any child(ren) of the family under the age of 18.
The couple’s available financial resources are calculated and then divided with the starting point being that all assets accrued during a marriage (known as matrimonial assets) are divided equally.
Where an equal division of matrimonial assets adequately provides for the capital and income needs of each party and any children, this is the appropriate financial outcome.
Where the needs of the parties and any children cannot be met by an equal division, an unequal division of resources may be appropriate instead. In these cases, needs are likely to dictate how capital and income are divided.
So, if the Bezos lived in England it is likely that Jeff’s fortune would be classed as matrimonial property and split equally with MacKenzie.
Initial reports suggest that the couple who have been separated on a trial basis now for some time remain amicable with their Twitter announcement declaring that they “remain a family, and …. remain cherished friends” who “see wonderful futures ahead, as parents, friends, partners in ventures and projects, and as individuals purchasing ventures and adventures”. It is likely therefore that they have already reached a private and confidential agreement as to how their finances will be divided. This may even mean that MacKenzie will become a shareholder in Amazon in her own right and, if she receives half of Jeff’s shares in the company, this will then rank her above the present second largest shareholder in Amazon and give her much power and influence.
Whilst the Bezos remain on good terms this will mean that they remain highly powerful despite their no longer being married. Had matters not been quite so amicable however their divorce could have proved highly problematic, not least in terms of the future of Amazon.
Reports suggest the Bezos do not have a prenuptial agreement. If they had then this may very well have changed how their finances are divided and meant that there was not an equal division of their fortune. Particularly in a less amicable divorce, the existence of a prenuptial agreement may be invaluable not least in terms of the more favourable result it can achieve for a party upon divorce but also because of the time and legal fees it can save in avoiding what may otherwise have become fiercely contested court proceedings.
In England, prenuptial agreements, although still not strictly binding on the courts in the event of a divorce, are likely to be respected by the court provided the effect of the prenuptial agreement is fair.
Both parties would need to have set out freely and frankly their respective financial circumstances at the time the prenuptial agreement is prepared and have each taken separate and independent legal advice on the terms and effect of the prenuptial agreement. Assuming this has occurred, and the net effect of the prenuptial agreement is fair, it is highly likely the prenuptial agreement would be honoured.
In cases such as that of Jeff Bezos, where one party has a sizeable interest in a business which they want to preserve and protect going forwards, the time and expense of a prenuptial agreement can therefore be invaluable.