Divorces can be an emotional time for everyone involved. But given the rate of divorce, it may be necessary to walk away from a bad marriage. While some couples simply go their separate ways carrying everything they brought with them into the marriage, for wealthier couples, it can be a lot trickier.
For a perfect example, just look at Amazon founder Jeff Bezos’ divorce with his ex-wife MacKenzie in 2019. After their divorce was announced, it was believed that, his wife was set to become one of the wealthiest women in the world if she sued for half of his company as her right as his wife. Fortunately for Bezos, she settled for 25% of Amazon stock, making her the third wealthiest woman in the world with her $35.6 billion settlement.
Not all high-stakes divorce proceedings need to involve a multi-billion-dollar company. But here’s what you need to know should you and your partner undergo a high-stakes divorce.
What Is a High-Stakes Divorce?
A high-stakes or high net worth divorce is when there are many high-valued assets to be split by couples with high net worth. While there are divorces between couple with no or very low-valued assets or couples who can amicably divorce and easily agree on who gets what, there are messy divorces that involve a lot of high-value assets that can be difficult to split. These assets include:
- Real estate properties
- Stocks and stock options
- Bank accounts
- Retirement accounts
- Anything of high value
Because wealthy couples usually have a lot of these assets, it can be difficult negotiating who gets what especially if there is no prenuptial agreement in place. Divorce negotiations will take into account how much each spouse put in terms of monetary and non-monetary contributions. So, if Mr. Parker put more money into vintage cars while Mrs. Parker put more effort into collecting antiques, it may be decided that it’s only fair Mr. Parker gets the vehicles if Mrs. Parker keeps the antiques. However, if the vintage cars are worth $1,000,000 and the antiques are $5,000,000, it won’t be as simple as that if Mr. Parker contests.
In a high-stakes divorce, a couple’s total assets will be valued by experts who can accurately appraise the value of each of the assets. There may also be complications if you suspect your spouse has hidden assets.
Spouses with Unequal Earning Power
Let’s say that you and your spouse have a net worth of $10 million, but this isn’t equal: you make $300,000 a year in a high-paying job while your spouse makes around $900,000. After your divorce, it’s clear that you on your own income won’t be able to sustain the lifestyle you were accustomed to.
In these cases, the spouse who earns less has to decide on whether they want more of the marital property or higher alimony. The more you get out of the marital property, the more likely that your alimony will be lower. So, you need to decide whether the property or alimony payments will benefit you more after the divorce.
Handling Child Custody
Arguably the most delicate part of divorce has to be the matter of child custody and which parent the child gets to live with for most of the time. Older children may have a say on which parent they want to live with, but for younger children, custody is given to whoever can best provide for the child’s best interests.
The best solution to avoid a messy high-stakes divorce is to enter the marriage with a prenuptial agreement. This is a legally-binding contract which stipulates that certain properties that parties bring into the marriage still belong to one person and is not conjugal property. And in case of divorce, there are stipulations about what either party will walk away with. Both parties have to agree with and sign the prenuptial agreement to be considered valid.
A prenuptial agreement supersedes any divorce law in the state the couple lives in. For example, if Mr. and Mrs. Smith decide to divorce and live in a state where spouses are entitled to half the properties, if they bought a house after marrying and the house was valued at $500,000, if Mr. Smith decides to keep the house, Mrs. Smith is entitled to demand $250,000 to buy out her share of the house. But if they have a prenuptial agreement that says Mr. Smith is entitled to the house (maybe because he has a larger income and paid for 80% of the house’s expenses), then he can keep the property.
A prenuptial agreement can also have infidelity clauses. For example, Mr. Jones entered the marriage with a net worth of $500,000 while Mrs. Jones had a net worth of $3.5 million. To protect her finances, Mrs. Jones adds an infidelity clause stating that if the marriage ends because of Mr. Jones’ infidelity, he won’t receive anything from her.
Marriage is not about money, but it can be a tricky thing to handle in your divorce. In many cases, it’s best to not be greedy and simply try to walk away with enough for you and your partner to start anew. If you’re worried about your financial security, consider a prenuptial agreement before your marriage.