If the Zuckerbergs got divorced?

[kunilou]

On Friday Mark Zuckerberg made the jump from being simply stinking rich to beyond wildest dreams rich. On Saturday he got married.

While I wish the couple a lifetime of happiness, I am curious about how the property would be divided if they were to divorce. I know California is a community property state, so would it make any difference if he had gotten married on Friday and become a multibillionaire on Saturday?

[R. P. McMurphy]

There's probably a pre-nup agreement.

[Martin Hyde]

People always say "probably a pre-nup", but a pre-nuptial agreement is just a contract. Contracts typically cannot trump State law, and certain rights are built into your marriage and can't be waived just by contract whatever sort of pre-nup you signed.

I know in general you can take some steps to protect "pre-marriage" assets, but it's a lot more difficult to protect assets generated during the marriage. So if I'm a multibillion dollar trust find kid who marries my high school sweet heart when I turn 22, I can protect a lot of my pre-marital assets. If I'm just some blue collar kid who marries my high school sweetheart then start my own company and become a billionaire, even if (this would be unlikely) we had signed a prenup back when we were poor, she'd still have a powerful claim on a large portion of my assets.

I'm sure Tiger and his wife had a pre-nup but she still got nearly half of everything, because a large portion of his then-wealth was generated during their marriage.

[hajario]

Originally Posted by Martin Hyde

I'm sure Tiger and his wife had a pre-nup but she still got nearly half of everything, because a large portion of his then-wealth was generated during their marriage.

Yes. Simply stated, everything that he had before the wedding is all his. Anything earned afterwards, by either of them, is split. So, if he has $1 billion in stock now and it appreciates and is worth $1.5 billion when they get divorced, she is entitled to $250 million.

Something similar happened to a friend of mine who became a dotcom multimillionaire and then got married although in his case it was "only" around $25 million. When his wife literally left him for the tennis pro, she thought that she was going to get half of everything. In reality, because of the stock bubble burst and the housing market burst, the estate had depreciated and all she got was a few years of alimony.

[R. P. McMurphy]

The pre-nup is important. Two key elements is that all holdings and assets must be disclosed. If one party gets caught hiding anything the pre-nup can be voided.

The other thing is that both parties must be represented by capable lawyers. Say the party with the most assets insists on a pre-nup, it is also in the best interest of that party to make sure that the other party has competent legal representation before signing.

There is no way that Zuckerberg's new wife will miss a meal no matter what happens. Undoubtedly, there is an iron-clad pre-nup in place.

As for Tiger. As much as his ex got I highly doubt that it was half of his assets.

[Joey P]

Originally Posted by kunilou

On Friday Mark Zuckerberg made the jump from being simply stinking rich to beyond wildest dreams rich. On Saturday he got married.

While I wish the couple a lifetime of happiness, I am curious about how the property would be divided if they were to divorce. I know California is a community property state, so would it make any difference if he had gotten married on Friday and become a multibillionaire on Saturday?

I'm willing to bet he had a team of lawyers, bankers, and notary publics working right up until midnight making sure a lot of very important papers had Friday's date on them. I'm kind of surprised they didn't push the wedding until the following week just to take some of the pressure off. OTOH, I wonder if the wedding was in place long before the idea of going public. Makes sense.

[jtgain]

Originally Posted by Martin Hyde

People always say "probably a pre-nup", but a pre-nuptial agreement is just a contract. Contracts typically cannot trump State law, and certain rights are built into your marriage and can't be waived just by contract whatever sort of pre-nup you signed.

I know in general you can take some steps to protect "pre-marriage" assets, but it's a lot more difficult to protect assets generated during the marriage. So if I'm a multibillion dollar trust find kid who marries my high school sweet heart when I turn 22, I can protect a lot of my pre-marital assets. If I'm just some blue collar kid who marries my high school sweetheart then start my own company and become a billionaire, even if (this would be unlikely) we had signed a prenup back when we were poor, she'd still have a powerful claim on a large portion of my assets.

I'm sure Tiger and his wife had a pre-nup but she still got nearly half of everything, because a large portion of his then-wealth was generated during their marriage.

So what good is a pre-nup? I was under the impression that pre-marital assets weren't subject to equitable distribution anyways.

[Joey P]

Originally Posted by jtgain

So what good is a pre-nup? I was under the impression that pre-marital assets weren't subject to equitable distribution anyways.

I was always sort of confused about that. My understanding is that it helps define what, exactly, the pre-marital assets (and debts) were. That way when the divorce happens, each person can start with that and divide what's leftover.

Also, if there isn't a trumping state law, I've always wondered/assumed it might give one the ability to protect a future inheritance. For example: "If I inherit my parents house, you can't have it..nah nah nah" funny, that sounds bad on paper, it was much more elegant in my head. IOW, could Mark Z protect all his future money from FB, or is a pre-nup basically just a document that defines what each person came into the marriage with? And if so, how would it work with this? Could he really know what the IPO would hold or did he sign the pre-nup on the wedding day?

[hajario]

My Mom and step-Dad have a prenup that defines what they had when they got married but also said that their finances would forever be considered separate.

Re: Tiger. His ex would have gotten relatively little but as I recall from reading the news. He begged her to try and reconcile with him and as part of that had the lawyers write a new one, which I guess would technically be a post-nup, that was much more generous.

[Martin Hyde]

Marriage and divorce law are one of those things that vary significantly from State to State. However some general things that are true in some states:

• Pre-nups can specifically define what are and are not marital assets. This can be important for couples that have lived shared lives prior to the marriage.
• Pre-nups can sometimes waive alimony claims.
• Pre-nups can protect say, a future inheritance from becoming a marital asset.
• Pre-nups can within the framework of State law define how marital assets will be divided upon divorce.

However, the general legal concept is that marital assets are divided as determined by statute which typically means roughly equally, with some states allowing for adjustments for certain things. I'm not saying that in no state in the union can you waive your right to marital assets and just agree to say, a lump sum instead. That may be possible. But in many states the state defines how those marital assets are distributed and when your pre-nuptial agreement collides with State law, those parts that are inconsistent with State law will not be held valid.


Some things that are absolutely not allowed in a pre-nup are anything relating to child custody and etc. Family courts simply do not allow their authority over such matters to be sidestepped by any contract entered into by the couple.

[Martin Hyde]

With Tiger I think initially there was talk of Nordegren getting a huge sum, but they ended up settling for $110m. When amounts like that come into play you're basically dealing with a situation where anything would be contested in courts for potentially a decade so there is a big impetus to settle.

[R. P. McMurphy]

Originally Posted by Joey P

I was always sort of confused about that. My understanding is that it helps define what, exactly, the pre-marital assets (and debts) were. That way when the divorce happens, each person can start with that and divide what's leftover.

Also, if there isn't a trumping state law, I've always wondered/assumed it might give one the ability to protect a future inheritance. For example: "If I inherit my parents house, you can't have it..nah nah nah" funny, that sounds bad on paper, it was much more elegant in my head. IOW, could Mark Z protect all his future money from FB, or is a pre-nup basically just a document that defines what each person came into the marriage with? And if so, how would it work with this? Could he really know what the IPO would hold or did he sign the pre-nup on the wedding day?

I believe that there was a case recently where the court ruled (and rightfully so), that potential inheritance cannot be considered part of the equally divided assets.

It's too late for me to research this so CMIIW.

[Martin Hyde]

Originally Posted by Joey P

I was always sort of confused about that. My understanding is that it helps define what, exactly, the pre-marital assets (and debts) were. That way when the divorce happens, each person can start with that and divide what's leftover.

Also, if there isn't a trumping state law, I've always wondered/assumed it might give one the ability to protect a future inheritance. For example: "If I inherit my parents house, you can't have it..nah nah nah" funny, that sounds bad on paper, it was much more elegant in my head. IOW, could Mark Z protect all his future money from FB, or is a pre-nup basically just a document that defines what each person came into the marriage with? And if so, how would it work with this? Could he really know what the IPO would hold or did he sign the pre-nup on the wedding day?

You can pre-define future things to not be part of communal assets, too. For example you can say that your workplace savings plan will be yours even for the amounts you contribute while married, and say hers remain hers, for example. However these have been struck down by courts, too--for example in one case a man substantially increased his contributions to his workplace savings plan after the marriage, believing he was sheltered a larger portion of his assets this way. When the divorce came 'round, the court ruled that the increase in contribution was not foreseeable and his wife got her hands on some of the money.

Although this is where it gets heavily into state by state law, in some states you can pre-define most foreseeable wealth as "personal" and not "shared." But many jurisdictions will still require some minimum of financial support / consideration for whichever spouse ends up less well off, it wouldn't be typical for example for someone married to a multimillionaire to end up literally penniless after a divorce. That's the sort of thing state alimony laws were crafted to prevent.

Another thing worth noting, is in some states pre-nups have a "time limit", essentially meaning if you are married beyond a certain number of years the agreement falls out of force.

[hajario]

Originally Posted by Martin Hyde

But in many states the state defines how those marital assets are distributed and when your pre-nuptial agreement collides with State law, those parts that are inconsistent with State law will not be held valid.

Of course if the settlement is contested and it turns out that some part of the pre-nup is illegal (or wasn't legal at the time it was signed perhaps), then the law will win over the contract. Surely though a couple could agree that one of them could get something less than State law allows, right? The State wouldn't force a party to take more than they wanted. For example a friend of mine got divorced and his ex-wife waived all of the alimony to which she was legally entitled.

[Martin Hyde]

Originally Posted by hajario

Of course if the settlement is contested and it turns out that some part of the pre-nup is illegal (or wasn't legal at the time it was signed perhaps), then the law will win over the contract. Surely though a couple could agree that one of them could get something less than State law allows, right? The State wouldn't force a party to take more than they wanted. For example a friend of mine got divorced and his ex-wife waived all of the alimony to which she was legally entitled.

You can always give money to anyone you want, although there could be different tax implications I would guess. That's a total guess by the way, I'm just imagining that if me and my hypothetical spouse had $100m in assets and we were both entitled to $50m, and I gave her $75m, I suspect that extra $25m she wasn't legally entitled to would be considered some form of income for her that she'd have to pay income taxes on.

In Schwarzenegger's case it's been said that they either did not have a pre-nup or it has fallen out of effect, and he has said that he plans to give Shriver "more than required under California law." It may have already happened, I haven't really paid attention to what he's been doing.

But anyway, yeah, of course if you voluntarily choose to not take something the State isn't going to force you. But if you're willing to give up your fair share then the pre-nup is kind of pointless anyway, a pre-nup is only there to preclude someone from getting something they would otherwise get normally, or to specify precisely what assets you're coming into the marriage with. That stuff can be very difficult to work out if the couple had pseudo-joint assets going into the marriage.

But imagine a state that says a spouse is entitled to alimony no matter what. If the pre-nup says you can't receive alimony, that portion would be unenforceable. But if the state allows you to waive alimony in a pre-nup, then it'd be fine.

[Senegoid]

Current on-line news article discussing all these things:

"Zuckerberg's post-IPO wedding is smart legal move"

[Smeghead]

It's complicated.

[Martin Hyde]

FWIW Zuckerberg's wife doesn't seem like the type just interested in being a rich guy's wife. She kept going to school even after he had made it big (and they met as undergraduates) and I believe just finished up medical school. I suspect she's probably planning on actually working as a doctor, because medical school is way too much work to do it just to get to the post-nominals. I'm sure she probably has been given some Facebook shares and some assurances she'll never really have to worry about money.

[Dewey Finn]

Here is an article from the New York Times on this issue. Summary as I understand it: because California is a community property state, whatever he earned prior to the marriage is his, but earning during the marriage (and growth in the value of the stock) are joint property. Yahoo refused to comment on whether there is a pre-nup or if she had any shares of her own.

But my guess is that he didn't worry about it.

[md2000]

One way it was explained - personal assets are not shared. So if I inherit a pile of money, and invest it, it's separate. If I take that money and apply it to something joint - like paying off the mortgage - then it now has become communal property.

In Canada, a lot depends on how long the marriage has gone on. A guy who amasses a fortune, while the wife stays at home and raises the kids - well, she took care of some of the communal chorses which allowed him to devote time to making more money - hence, it's communal.

There was a case a while ago, where two BC lawyers were getting married. he had a lucrative partnership, she had substantial debt. The day before the wedding he surprised her with a pre-nup; she could 'earn' the family house, 1/10th each year, his partnership asset stayed out of the mix, no alimony, etc. She thought "this will never stand up in court" under British Columbia law, so she signed. It stood up; the judge said - she was a lawyer, so therefore competent to understand the deal; she could not simply sign on the assumption it would be overturned. It was not "unconscionable"; it was relatively reasonable, it sought to separate communal assets (house) from business, and it was not a horribly unbalanced deal under the circumstances.

That is what overturns a prenup - if it's so horribly unbalanced that it's not fair, or the other person did not understand the implications of what they were signing.

[Saint Cad]

Something is bothering me here.
Let's say I own a company and have 1000 shares of stock worth $100,000. We all agree that that stock is mine and does not have to be split with a future wife. I marry the new Mrs. Cad and over the years, that stock climbs to $200,000 in value. Why do I have to split that $100,000 gain with her? The asset is still 1000 shares of stock but by having to give her $50,000 earned solely through holding that stock, it is in effect giving her 250 shares.

[Really Not All That Bright]

Let's say I own a company and have 1000 shares of stock worth $100,000. We all agree that that stock is mine and does not have to be split with a future wife. I marry the new Mrs. Cad and over the years, that stock climbs to $200,000 in value. Why do I have to split that $100,000 gain with her? The asset is still 1000 shares of stock but by having to give her $50,000 earned solely through holding that stock, it is in effect giving her 250 shares.

In community property states, the general rule is that an increase in the value of separate property which results solely from market forces remains separate property.

On the other hand, the increase in value of property which appreciates due to non-market forces, particularly the work of one or both spouses, is community property. This is called the Cockrill Rule (and the property interest is called a Cockrill lien) after the Arizona case which codified it in most respects.

The rationale is fairly simple: any work you do during your marriage represents time and effort in which your spouse has an interest. Thus, your spouse has an interest in the fruits of that labor. Alternatively, perhaps your spouse's effort contributed to the success of the company/increase in value of your rental property/higher auction price of your original Goya/whatever.

On the other hand, appreciation of an asset that isn't the result of your work represents no sacrifice on your spouse's part. Thus, your spouse has no interest in it.

In the case you describe, the critical inquiry is whether you actually do anything with your company (say, run its day to day operations), and whether your spouse is adequately compensated for whatever it is you're doing. Let's say you do run the company, and you pay yourself a pittance for years in order to reinvest your profits. Without the Cockrill rule, you would in effect be sheltering some of your income that would otherwise be community property- after all, if you paid yourself a market salary, all of it would be community property.

[Fotheringay-Phipps]

Why was Michael Strahan's pre-nup which awarded 2/3 of his money to his ex-wife not overturned?

[Saint Cad]

Originally Posted by Really Not All That Bright

In community property states, the general rule is that an increase in the value of separate property which results solely from market forces remains separate property.

On the other hand, the increase in value of property which appreciates due to non-market forces, particularly the work of one or both spouses, is community property. This is called the Cockrill Rule (and the property interest is called a Cockrill lien) after the Arizona case which codified it in most respects.

The rationale is fairly simple: any work you do during your marriage represents time and effort in which your spouse has an interest. Thus, your spouse has an interest in the fruits of that labor. Alternatively, perhaps your spouse's effort contributed to the success of the company/increase in value of your rental property/higher auction price of your original Goya/whatever.

On the other hand, appreciation of an asset that isn't the result of your work represents no sacrifice on your spouse's part. Thus, your spouse has no interest in it.

In the case you describe, the critical inquiry is whether you actually do anything with your company (say, run its day to day operations), and whether your spouse is adequately compensated for whatever it is you're doing. Let's say you do run the company, and you pay yourself a pittance for years in order to reinvest your profits. Without the Cockrill rule, you would in effect be sheltering some of your income that would otherwise be community property- after all, if you paid yourself a market salary, all of it would be community property.

That makes sense and goes along with my concept of what is "fair". Thanks!

[hajario]

Originally Posted by Fotheringay-Phipps

Why was Michael Strahan's pre-nup which awarded 2/3 of his money to his ex-wife not overturned?

Did he contest it?

[md2000]

Originally Posted by Fotheringay-Phipps

Why was Michael Strahan's pre-nup which awarded 2/3 of his money to his ex-wife not overturned?

Hard to find any detail on this, all the news stories seem to be re-writes of the same thing, but...

It looks like he sprung a prenup on her just before the wedding.
In it, she would get 20% of his paycheque each year, while they were married.
She also would get 50% if they divorced.

She never actually got the 20% while they were married.
Presumably, that meant that each year, while married, he should have put $X in her separate personal bank account.
He says "she never asked for it at the time." Therefore, she should not get it now.
The judge said no, a deal is a deal.
Plus interest.
Stupidity is not a defence either.

The moral of the story is - hire a lawyer who has more brains than a football player.

[Really Not All That Bright]

Originally Posted by Fotheringay-Phipps

Why was Michael Strahan's pre-nup which awarded 2/3 of his money to his ex-wife not overturned?

Why would it be? It was drafted by his attorneys at his request. Can you think of any case where a contract would not be enforced against the party with more bargaining power, and which drafted the agreement? I can't.

Originally Posted by Saint Cad

That makes sense and goes along with my concept of what is "fair". Thanks!

No problem. I started family law this week, but I had to do a lot of work on Cockrill for work a few years ago so it's still familiar.

[R. P. McMurphy]

Something to consider about pre-nups. A lot of times it's not about restricting what the spouse will get. It can be about protecting the children so that if the spouse leaves the person that he or she takes up with will not get the inheritance that is intended for the grandchildren.

The press only covers the celebrities but there are much more practical issues in play.

Say you get married to the love of your life. Together you do well and there is community property. You have children. Those children grow up, get married and have their own children. Before your child gets married you may insist that they have a pre-nup with their future wife/husband or you will cut them out of the inheritance.

Why?

You want a portion of your inheritance to go to your grandchildren and want to insure that. You die before the grandchildren are born. If your child marries a whack-job that is looking for a payday they may have a kid or two, leave your child, take whatever they can get under community property laws and run off with some total asshole who is mining them for the money. At that point the money you passed on is totally under the control of the whack-job son/daughter in law and the asshole they ran off with.

Without the pre-nup the grandchild ends up with little or nothing while the total asshole blows whatever you earned that was intended to be passed on to your grandchildren.

With the fantasy of marriage being all about love and romance the fact of the matter is that pre-nups can serve a very useful purpose. Again, there has to be full disclosure and all parties have to be competently represented. No surprises or it can all fall apart.

Hope I explained this properly.

Pre-ups can serve a very usefull purpose

[alphaboi867]

Originally Posted by hajario

...Something similar happened to a friend of mine who became a dotcom multimillionaire and then got married although in his case it was "only" around $25 million. When his wife literally left him for the tennis pro, she thought that she was going to get half of everything...

Originally Posted by Martin Hyde

Marriage and divorce law are one of those things that vary significantly from State to State...

Some states (not California) still have the old fault-based grounds for divorce on the books. They're very rarely pursued because it's expensive and time consuming for the petitioner to prove his/her claims in court, but can have the advantage of eliminating the respondant's entitlement to alimony.

[AndyLee]

Can you imagine it.

Mrs Zuckerburg) You were out all night playing cards I want a divorce

Mark) Honey, I just lost two BILLION dollars gambling. But you can half half.

Mrs Zuckersburg) Oh great now I only get half of what's left? How do you expect a fully qualified physician to get by on 7 BILLION?

[Fotheringay-Phipps]

Originally Posted by md2000

Hard to find any detail on this, all the news stories seem to be re-writes of the same thing, but...

It looks like he sprung a prenup on her just before the wedding.
In it, she would get 20% of his paycheque each year, while they were married.
She also would get 50% if they divorced.

She never actually got the 20% while they were married.
Presumably, that meant that each year, while married, he should have put $X in her separate personal bank account.
He says "she never asked for it at the time." Therefore, she should not get it now.
The judge said no, a deal is a deal.
Plus interest.
Stupidity is not a defence either.

The moral of the story is - hire a lawyer who has more brains than a football player.

I don't think anyone could be that stupid.

I imagine that the intention was that she get 20% of the paycheck for her living expenses while they were married. As a practical matter he never explicitly designated specific cash for living expenses, but she did incur expenses and he paid for them.

I would have thought the contract would be interpreted in a way that made some sense, especially in light of the comments to this thread about how much leeway judges have in pre-nup situations.

[md2000]

Originally Posted by Fotheringay-Phipps

I don't think anyone could be that stupid.

Lawyers are just like real people. Of course they can be that stupid. Especially the type that have football players for friends, I bet...

I imagine that the intention was that she get 20% of the paycheck for her living expenses while they were married. As a practical matter he never explicitly designated specific cash for living expenses, but she did incur expenses and he paid for them.

Or, she may have been too scared to ask for her share. Or he may have blown her off and said "Here's $1000, go buy yourself a pretty dress." Why was this clause in there in the first place? Was she being upset at being held on a tight budget while her boyfriend blew the rest like a drunken sailor? We just don't know.

I would have thought the contract would be interpreted in a way that made some sense, especially in light of the comments to this thread about how much leeway judges have in pre-nup situations.

I too would have thought that a certain amount of their married living expenses would be deducted from the total amount owing; at least say, half the cost of the house, cars, vacations, etc. should be considered as money spent on marital property 50-50. Maybe he or his lawyer pissed off the judge. Maybe the judge wanted to show the lawyer how stupid the contract was. Maybe the point was "you couldn't keep your word when you were married, we'll make sure you understand a contract is a contract."

I too would like to see a bit more detail; all the articles I found were basically rewrites of the exact same thing, a short summary of the judgement.