Amazon founder and CEO Jeff Bezos.

Being Rich Means an Expensive Divorce!

If you have a high asset marriage, be ready for a high asset divorce.

Amazon founder and CEO Jeff Bezos is the richest person in the world, sitting atop the Forbes 400 list with an estimated net worth of $160 billion in 2018 (his fortune fluctuates with the stock market, and has been reported as low as $135bn). Bezos is by far the richest man in history, with Bill Gates a distant second at $89 billion.

Bezos married his wife, MacKenzie, in 1993, a year before founding Amazon, now a trillion dollar company. And now, after 25 years of marriage, the world’s richest couple is calling it quits.

The pending dissolution of marriage is highly-publicized. The National Enquirer did an expose, and even President Trump has chimed in to wish him luck. While much of the media attention is on the sordid tales of alleged cheating, as a lawyer I’m much more interested in the legal proceedings.

As the Graham.Law attorneys are licensed to practice law in Colorado, not Washington State, this post discusses what Bezos may face in accordance with Colorado law, though I understand that Washington is a community property state, so may well end up with a similar property outcome as he would in Colorado, which is a marital property state.

Did Jeff Bezos Cheat?

Adultery & Expensive DivorceAdultery & Expensive Divorce

Who cares? This is a lawyer speaking – his family obviously cares deeply about his alleged infidelity, and the tabloid press loves the sordid headlines. But what impact would cheating have on the court?

None. Colorado is a no-fault divorce state, and remember we’re assuming Bezos is getting a divorce in accordance with our laws. Pursuant to C.R.S. 14-10-106(1)(a)(II), the only grounds for a dissolution of marriage in Colorado is that the marriage is irretrievably broken. Whether or not one spouse cheated on the other is almost entirely irrelevant (note the caveat – more on this later).

The division of the marital assets and debts must be made “without regard to marital misconduct.” C.R.S. 14-10-112(1). And even if Bezos were cheating, it would not affect any alimony obligation. Per C.R.S. 14-10-114(2), “An award of maintenance shall be in an amount and for a term that is fair and equitable to both parties and shall be made without regard to marital misconduct.” (Emphasis added).

Prenuptial Agreement

Per media accounts, Bezos did not have a prenuptial agreement, meaning that the fate of the fortune held by the world’s richest couple will be determined by the same law that applies to the rest of us. That is, assuming he does not have a postnuptial agreement (basically the same as a prenup, but it’s an agreement signed after marriage instead of before).

A prenuptial agreement could have limited Bezos’s exposure by, for example, defining Amazon as his separate property. However, in Bezos’s situation, it very likely would not have mattered. Note that he founded Amazon a year after the marriage, not before. Most prenups seek to preserve premarital property, and the growth in such property, so with Amazon being founded during the marriage, it likely would be marital property anyway.

Perhaps Bezos could have consulted with President Trump on the wisdom of prenups and postnups.

Dissipation of Assets

Dissipation means expensive divorceDissipation means expensive divorce

Now for the one way an affair may be relevant – if Bezos had lavished substantial marital property on a girlfriend, the court may determine that those funds were dissipated, and award his wife an “offset” equivalent to the amount dissipated.

But with a $160bn fortune, it’s hard to conceive of how dissipation would be a factor. In an average divorce, if one spouse spent $50K on a girlfriend/boyfriend, that would be a big deal in terms of the marital estate.

Compare that to Bezos spending that same $50K on a girlfriend – it would be 1/3,000,000 of his $160bn fortune. And assuming a conservative 5% growth per year, his net worth is increasing by about $8bn/yr. That comes to almost a million dollars per hour. In the big scheme of things, spending a couple minutes worth of income on a paramour is too trivial to worry about.

Money has a great way of smoothing over things that would be big issues to the rest of us.

Division of Marital Estate

What do you do with a $160bn marital estate? Divide it, of course. And that’s what will make this an expensive divorce for Bezos – he will “lose” tens of billions of dollars from the wealth currently in his name. Colorado law requires an “equitable” division of the marital estate – not necessarily equal, as it apparently is in a community property state, but fair.

Bezos founded Amazon, and was presumably the overwhelming driving force behind its growth. But Colorado law recognizes that marriage is a partnership – and his wife’s contributions as a homemaker must be recognized to balance out his more direct contribution towards acquiring the wealth. C.R.S. 14-10-113(1)(a). And there is case law where spouses have argued that they should get a greater share of the assets they created during the marriage due to working, and the fail every time.

In reality, equal means fair most of the time. Except in circumstances where there was dissipation of assets or one spouse contributed his/her separate property, I can count on one hand the cases I’ve seen where a judge has deliberately divided the marital estate in a way that resulted in a significant disparity. While lawyers may disagree with how the judge values particular assets, in virtually every case the judge at least believed the ruling divided the marital estate roughly equally.

Most of Bezos’s fortune is tied up in Amazon (he is a 16% shareholder), but since Amazon is a publicly-traded company, awarding each spouse 8% of the company shares would be simplicity itself, leaving just their other assets to divide. And since the division of marital assets pursuant to dissolution is not a taxable event, there is no need to cash in the stock or other accounts to divide them.

Alimony

This is a tough one, but I’m leaning towards no maintenance. The threshold for maintenance is:

“The court shall award maintenance only if it finds that the spouse seeking maintenance lacks sufficient property, including marital property apportioned to him or her, to provide for his or her reasonable needs…”

C.R.S. 14-10-114(3)(d).

Incredibly, Bezos is one of the country’s lowest-paid executives, earning a salary of just $81,000/yr, and even when his other compensation is included, he’s under $1.7m/yr. Most of his wealth is in stock, and most of his income is due to that stock, and while capital gains and investment earnings count as income, Bezos’s relatively-meager income will not be a factor compared to the family fortune.

Even if Bezos manages to keep more than half of the $160bn marital estate, and MacKenzie received “only” $50bn, it’s hard to see how someone sitting on that fortune gets past the threshold for maintenance. As the Guardian puts it, she will very soon be the richest woman in the world.

And even if she did meet the threshold in theory, how much maintenance would a multibillionaire need? Per C.R.S. 14-10-114(3)(c)(I), one of the factors in determining the amount and duration of maintenance is: “Financial resources of the spouse seeking maintenance, including actual and potential income on property set aside to that spouse, and the ability of the spouse to meet his/her needs.”

Imputing even a very conservative 3% earnings to MacKenzie’s $50-80 billion fortune would give her over $1bn per year, without ever having to tap the principal. She will never worry about making ends meet, and will have more than ample funds to support whatever lifestyle she currently enjoys.

So in terms of maintenance, I’m thinking this won’t be a very expensive divorce for Bezos.

Parenting

Child custody fights & expensive divorceChild custody fights & expensive divorce

The Bezoses have three sons, and a daughter adopted from China, with the oldest being born in 2000. Media reports very little about the children, including the ages of the others (good for privacy!).

Bezos travels a lot for business – and that’s unlikely to change much, which means logistically he may be unable to step up to the plate as a co-equal parent.

Otherwise, knowing nothing about the Bezoses’ relative skills as parents, or the preferences of their children, it is futile to speculate as to what their custody arrangements will look like.

Normally, a custody fight means an expensive divorce, but I’ve heard nothing about a possible child custody fight in the Bezos divorce. And even if they did fight while spending tens of thousands on legal fees and parenting experts would be an expensive divorce for most people, it pales next to the tens of billions in assets to be divided. So from a purely financial perspective, parenting won’t make this an expensive divorce.

Child Support

As the oldest child is under 19, Bezos will owe child support to MazKenzie for all four children. Their combined income completely buries the $360,000 cap for Colorado’s child support guidelines (which, for four children would be just $5091/mo, per the Schedule of Basic Child Support Obligations set forth in C.R.S. 14-10-115(7)(b).

Someone making almost $1m/hr is not going to lose any sleep over child support, even if the court extrapolated above the child support guidelines and multiplied his obligation by a factor of 10, or 100. So child support won’t turn this into an expensive divorce for the power couple.

The takeaway? Bezos is likely to pay dearly in terms of asset division (where, technically, he’s not really losing anything because the marital property created during the marriage belongs to both spouses anyway). But other than that, nothing else would turn this into an expensive divorce.

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The attorneys and staff from Graham.LawThe attorneys and staff from Graham.Law

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