The world’s fascination with the wealthy elite can be especially
intense when a divorce occurs. When a significant amount of wealth is
at stake, a high net worth divorce can be extremely contentious and involve
many complex legal issues. This often makes good fodder for journalists,
but for the couple divorcing, their financial standing and private family/marital
issues are typically scoured and published for public consumption.
And it’s never over quickly. When significant assets are involved,
the divorce process is typically longer. Determining the value of all
types of assets (investments, real estate, companies, intellectual property,
etc.), which assets are separate, which are jointly owned, and how much
of each spouse is entitled to requires a lot of work and can often lead
to lengthy court battles.
Splitting Complex Assets in a High Net Worth Divorce
Take, for example, the high-profile divorce of billionaire Elon Musk and
his wife, actress Talulah Riley. The couple first divorced in 2012 and
remarried in 2013. Riley filed for divorce a second time in March of 2016.
Musk, co-founder of PayPal and CEO of Tesla and Space X, is worth more
than $11 billion. Musk had been worth $680 million at the time of their
first divorce, with Riley receiving a settlement exceeding $16 million.
Riley cited “irreconcilable differences” in her divorce petition
and asked that she be allowed to file a report of the couple’s assets
at a later date because "the true nature and extent of community
property assets and obligations [were] unknown” at the time of the
filing. She and her attorney had also requested that the court provide
specific legal reasoning for its decisions in the case regarding things
like property valuation, spousal support, property division, tax consequences,
etc. Riley was also seeking spousal support (alimony) and attorney’s fees.
All of the money that was made during the second marriage, in addition
to the appreciation of the property Musk already had prior to this latest
divorce filing, was considered marital property subject to division. Without
a prenuptial agreement, Riley could have been entitled to a share of the
marital estate reaching into the billions of dollars; however, many assume
that a prenuptial agreement existed. The couple’s divorce was reported
to be amicable and they reached an undisclosed settlement out of court
eight months later. Considering the complexity of the marital assets,
if Musk and Riley had ended up in court, it may have taken many more months
– or years – had they not settled.
How Divorce May Affect Companies
One of the most important issues in this case was how the divorce would
impact the value of Musk’s businesses. According to a report on
the impact of CEO divorces on shareholders by Harvard Business School,
divorce can impact a company in the following ways:
- Divorce can influence a CEO’s attitude toward risk
- Divorce can affect the CEO’s energy levels, concentration, and productivity
- A CEO may suffer a loss of influence or control if he or she is forced
to sell or transfer a portion of the business to satisfy the terms of
a divorce settlement
While not much business speculation surrounded Musk’s divorce from
Riley, many in the business world wondered if Musk’s Tesla Motors
Inc. would be impacted by his divorce from his first wife, Justine Musk.
The IPO of Tesla Motors was scheduled just a few months after they filed
for divorce and ultimately considered a success. However, after the IPO,
Musk’s stake in the company (28 percent) was still subject to division
in his divorce from Justine Musk.
Washington Attorneys Handling High Net Worth Divorce Cases
If you are facing divorce and have substantial assets at stake, your divorce
attorney needs to be
experienced in complex divorce matters. We invite you to contact a Washington divorce attorney at McKinley Irvin.
We have extensive experience handling high net worth cases skillfully,
strategically, and professionally. We serve clients throughout Washington
State from our office locations in Puyallup, Vancouver, Everett, Bellevue,
Tacoma, and Seattle.