The moment the news broke about Jeff Bezos and Mackenzie Tuttle’s divorce, word spread like wildfire. The $38-billion-dollar divorce settlement came with no prenuptial agreement, leaving Amazon CEO, Bezos, at the liberty of what may come with the division of their assets.
The thought of negotiating such a significant amount of money made us question what lessons there were to learn from some of the most famous divorces in history.
Whether it’s Sir Paul McCartney and Heather Mills or Madonna and Guy Ritchie, there are only a few ways to protect yourself in an unexpected divorce that Vanier Institute estimates will happen to 41% of Canadian marriages by their 30th wedding anniversary.
Let’s dive deeper into what you need to do if you are planning to wed the love of your life – or already have.
#1: Your income shouldn’t dictate your plans
Regardless of how uncomfortable it can be to discuss the possibility of death or divorce in your relationship, it’s a necessity. “You really have to shift your mentality from my money and my wealth to our money,” says Erin Bury, CEO of Willful, a digital platform for will and estate planning.
Bury says that even if you were the one to do the most of the wealth-growing in your relationship, you might see half of the money or assets go to your partner. “In most situations, any wealth that you accumulate in that marriage, even if it wasn’t a joint effort, is split down the middle.”
Therefore, protecting your assets is important regardless of income. Although it may not feel like you have anything of value at the moment, that’s not to say you won’t grow your financial lives in the near future – which is what happened in the Bezos relationship.
There are two crucial ways to protect yourself and your spouse in these situations, and that is by setting up a prenuptial agreement to determine who will receive what in the case of divorce, and to have an estate plan. Your estate plan will protect you and your family in case of death or otherwise.
#2: Negotiations are not always straightforward
In most divorce settlements, people are hopeful that things will end in an amicable negotiation in which everyone walks out of the room happy with their decision. However, that’s not always the case.
A good example of the downside of not having a prenuptial agreement or estate plan is that your negotiations may take longer and be more argumentative. Take the 2008 divorce settlement between Sir Paul McCartney and Heather Mills. After the mentally draining two-year divorce was all said and done, Mills walked away with just under $27-million-dollars of the Beatles-members earnings. The breakdown of assets includes properties and periodical payments for their child’s care and education.
Luckily for Jeff Bezos, things between himself and ex-spouse Mackenzie Tuttle ended much more amicably. Tuttle agreed to accept 25% of Bezos investments and additional assets, whereas Bezos was left with 75% of their Amazon shares and additional investments and digital assets.
Patrick Hicks, legal counsel for Trust and Will notes that a prenuptial agreement is the only way to head off these issues in advance. “Everyone should have an estate plan, but it will vary,” says Hicks. “As your assets increase you might justify a little more complexity, but you absolutely need some kind of plan.”
#3: Divorce can become a hill to climb financially
Recently, RAND Corporation conducted a study to see what happens in life after divorce. The financial side effects were the biggest downfall for most people.
Ultimately, those that end their marriages in their 30s prove to make their way out of the divorce with 30 to 40 years left to save for retirement and accumulate a healthy amount of assets. However, the later in life that you go your separate ways, the shorter timeline you have to recuperate the earnings you and your significant other once had as a combined nest egg.
Hicks says to some extent, the stresses can change at higher or lower asset levels, but the process is universal. The legal system in Canada has different laws for division of assets dependent on which province you live in. However, for the most part, assets will be split equally.
On top of the division of assets, hiring a divorce lawyer and the filing for divorce are also costly. The going rate for divorce in Canada rings in at $1,353 – but that’s if both parties are on the same page. A contested divorce is much higher, with an average price tag of $12,875.
#4: Remember to update your estate plan
One last thing to remember is that your estate plan and all personal assets may have your ex-spouse listed as your current beneficiary. In the case of Bezos and Tuttle, Bury assumed that like most people who have recently settled up with their divorce, Tuttle is still listed as an executor or key beneficiary for Bezos.
“Who knows – maybe he still wants that to be the case?” says Bury. “The last thing you think about when you go through a divorce is estate planning, but it should be one of the first things you handle when you go through a separation.”
In any case, divorce has its challenges legally, but if you prepare yourself with an agreement before the big day, things might be a lot smoother if this unfortunate situation turns out to be your reality. Wealthy or not, you need to protect your assets.