The Jeff Bezos divorce case has captured attention around the globe. What lessons can divorcing parties and their legal teams learn from this high-profile, high-stakes divorce?
By Briggs P. Stahl, Forensic Accountant and Business Valuator
The recent announcement of the Jeff Bezos divorce was headline news around the globe. With a net worth of $137 billion, Bezos is currently the richest person in the world and his divorce from wife MacKenzie Bezos could be the most expensive of all time, beating out celebrity split-ups like Paul McCartney, Madonna, and Tiger Woods. When looking at this high-profile divorce, several questions that all parties should ask themselves before filing for divorce come to mind.
In Light of the Jeff Bezos Divorce Case, Here are Five Questions Legal Professionals Should Consider
1a. Does the Couple Own a Public Company?
1b. Are There Shareholder Issues to Be Worked Out?
There is much speculation about whether or not MacKenzie will be awarded half of the Bezos shares in Amazon, which are currently worth about $1,600 each. The first question that should be asked in a case where a company is involved is whether that company has any provisions in shareholder agreements that would either prevent the transfer of the shares or allow their repurchase by the company on favorable terms. In any agreement for the divorce without court, it is likely that there would be some agreements as to the disposition of the shares.
In the case of the Bezos divorce, if MacKenzie were awarded half the shares, then she would have to keep some to prevent severe market fluctuations in the stock price. This is often called a “blockage discount” to the value because one cannot sell all shares at once without affecting the market. She would also probably be considered a market insider and prevented from selling shares except during certain windows and with SEC disclosure.
If MacKenzie sells her shares over time, then there probably won’t be any major issues other than the decreased control for the Bezos family in the company. The real question if she holds the shares whether that will create disruption in Amazon as a company. There is also the possibility of MacKenzie selling her shares to an “unfriendly” third party, which would depend on the shareholder agreement and potentially a divorce agreement along with applicable SEC oversight
2. Does the Couple Own Residences in Multiple States?
Crossing a state line can result in extremely different outcomes in a divorce case with regard to how property is divided and how spousal support (alimony) and child support are calculated. Many – if not most – couples don’t realize that divorce laws are set by each state’s legislature. The laws are shaped by that state’s court interpretations of the law, and they are anything but uniform across the United States.
The Bezos family currently owns multiple homes, and while divorces primarily occur in the state of residence of the parties, this can become an issue when the parties have residences in multiple states and may even reside in separate states. This often leads to a rush to file first in the state deemed most favorable by the filing party. Filing first doesn’t guarantee the jurisdiction, but getting it changed can lead to significant legal proceedings in multiple states.
3. Is this an Amicable Breakup?
In the case of the Bezos divorce, it appears that the parties have chosen to go about their dissolution of marriage amicably and cooperatively. This is a perfect scenario for a couple to enter into a collaborative divorce agreement: a method under which each party has their own collaborative attorney, financial professionals who are joint for each party, and a mental health professional who assists the couple and all involved parties in letting pragmatism – rather than emotion – govern the decision making.
All professionals in this scenario should be trained in collaborative divorce, and the couple and their attorneys should sign an agreement to abide by the terms of the process (such as honesty, willing production of required documents and information, etc.). The agreement carries a clause requiring the couple to start over from scratch with new counsel if the process is not successful. The collaborative process is favored by many high-profile individuals because the terms of the divorce are kept confidential and not part of court records.
4. What if there is no Prenup?
The Bezos divorce was a long-term marriage (it pre-dates the founding of Amazon) and there was no prenuptial agreement. Without a prenuptial agreement, property that was owned before the marriage can become marital property subject to division if it has become commingled with other assets or income from the marriage. Depending upon the state, even assets owned before the marriage could have a marital component if work effort during the marriage increased the value.
5. Do You Need to Call in Other Professionals?
Tracking the marital component of assets and liabilities requires not only knowing the legal issues of each state, but it also calls for a forensic accountant and business valuator who is knowledgeable of those issues and techniques to determine the difference between active and passive appreciation of assets. Even Certified Public Accountants who may have experience in business valuation and forensic accounting need experience and knowledge in the family law area as well to properly assist counsel in presenting testimony on these issues.
Divorce is never easy for either party, but it can be especially challenging when the couple’s net worth and assets are matters of national interest – as is the case with the MacKenzie and Jeff Bezos divorce. Considering these questions from the start will help to inform your clients and ease the process.
A partner at Baker Tilly, Briggs P. Stahl (CPA, ABV, CFF, CBA) is an expert on divorce valuation. A Charter Member of the American Academy of Matrimonial Lawyers Foundation Forensic Accounting and Business Valuation Section, as well as Accredited in Business Valuation and Certified in Financial Forensics by the AICPA, he has testified in more than 400 marital dissolution proceedings. www.bakertilly.com
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The comments about invading separate property don’t go quite far enough. In Washington State, where Amazon is headquartered, the Court can invade separate property if it deems that fair, without needing a special reason to do so. See In re Larson, 313 P.3d 1228(2013). Mr. Larson, an early MSFT employee, had a separate estate worth about 400 million dollars. The community estate was worth about 100 million dollars and almost all of it went to Mrs. Larson in their divorce. Mrs. Larson also got about 40 million of her husband’s separate property. They’d been married 25 years. Mr. Larson appealed, arguing there was no justification for the court to give his wife some of his separate property. Wrong! said the Court of Appeals. The court can divide separate property without needing to show a special reason for doing so. The ultimate property division just has to be fair.
I agree with Rosemarie. Separate Property is no longer guaranteed to be “separate”. Fairness seems to be a determining factor.