Something to make you smile more or less, Amazon founder, Jeff Bezos, did not have a prenuptial agreement when he divorced his first wife, MacKenzie Scott. While his divorce cost him $38 billion, some argue his net worth would hover around $288 billion today. If celebrity net worth lists don’t interest you, the importance of having a prenuptial agreement should.
At the time of his separation with Scott, Bezos was the wealthiest individual globally, with a net worth of $150 billion, primarily due to his 16 percent ownership in Amazon. Bezos’s divorce is considered a significant shift in the distribution of wealth at the pinnacle of global affluence. That’s because the distribution of the Bezos fortune at the time of the divorce was practically unprecedented in size.
As of February, Jeff Bezos’ wealth is estimated at $191 billion, positioning him near the top of the list of the world’s richest people. Embarrassingly, Bezos is rumored to rank behind Tesla Inc. CEO Elon Musk, whose net worth is $199 billion.
The Musk ranking comes with a caveat. A recent legal decision invalidated $56 billion in options Tesla awarded Musk in 2018, potentially affecting his net worth and standing.
Despite this, Musk’s financial status remains unchanged because of the possibility of an appeal. Both men trail behind Bernard Arnault and his family, who oversee LVMH, with a net worth of $217.6 billion.
Florida Prenuptial Agreements
I’ve written about prenuptial agreements before. Prenuptial agreements are about more than just resolving uncertainty in a marriage.
When a spouse is a major shareholder of company, their wealth can be subject to wide price swings. For example, when the head of Continental Resources was getting divorced, shares of his company dropped 2.9%. Conversely, when Rupert Murdoch announced his divorce, shares of News Corp gained 1.4%. Why? Because in Rupert Murdoch’s case, the divorce announcement stressed his prenuptial agreement, and a divorce would have “zero impact” on the company
A prenuptial agreement (or “prenup” for short) is a contract between people intending to marry. A prenup determines spousal rights when the marriage ends by death or divorce. This can be especially important in second marriages.
If you divorce without a prenup, your property rights are determined under state law, and a spouse may have a claim to alimony while the suit for divorce is pending and after entry of a judgment.
That’s where prenups come in. Prospective spouses may limit or expand state laws by an agreement. Prenups are also used to protect the interests of children from a prior marriage, and to avoid a contested divorce. Prenups can be a reliable guide down rough rivers if they’re done right.
According to Yahoo! Finance, an intriguing “what if” regarding Bezos’s billionaire ranking develops had he not divorced without a prenup. Before their divorce, Bezos’s 16 percent stake in Amazon was valued at $150 billion.
Following the divorce and subsequent financial decisions, including significant sales of Amazon stock to fund his Blue Origin space venture, Bezos’s share in the company decreased to approximately 10%. These transactions, coupled with the divorce settlement that transferred a 4% stake in Amazon to Scott, have substantially altered Bezos’s potential net worth.
Despite all of that, had Bezos maintained his full share in Amazon, without the divorce, and without liquidating portions of his stock, and without funding Blue Origin, his wealth might have been higher. Given that Amazon’s market cap is now around $1.8 trillion, a 16 percent stake would equate to $288 billion.
Now imagine how much different – and better – his life would have been if he’d only had a prenup?
The Yahoo! Finance imaginary calculation of the Bezos fortune surpasses the wealth of other billionaires, including Musk, Zuckerberg, Gates, and Arnault. Although purely hypothetical, the Yahoo! Finance analysis highlights the importance of having a prenuptial agreement.
The Yahoo! Finance article is here.