On behalf of The Marks Law Firm, L.L.C. posted in Divorce on Saturday September 21, 2013
As some of you may be aware, Rupert Murdoch, one of the wealthiest individuals in the world, is in the process of completing his third divorce. As described very well by Paul Sullivan in the New York Times, all wealthy people (and even those of more modest means) can learn some important lessons from what transpired.
First, the Murdochs had a prenuptial agreement and two postnuptial agreements. Usually, a very wealthy individual seeks a prenuptial or postnuptial agreement to protect certain assets in the event of divorce and to simplify what could become a very complicated and expensive process. Not surprisingly, a wealthy person will want the prenuptial or postnuptial agreement to favor his or her interests, often at odds with what the law would otherwise grant. For example, the less wealthy spouse may agree to forego maintenance in lieu of a large property settlement or a structured retirement account. But to protect against the one-sided nature of such agreements, the less wealthy spouse should give serious consideration to the bargain. These agreements are enforceable as long as the less wealthy spouse had counsel and full disclosure of the financial records of the wealthy spouse. The issue of disclosure could help “break” such an agreement at the time of divorce if discovery shows assets that were not disclosed. Also, an agreement may be found unconscionable if its terms are so ridiculously one-sided as to prejudice the interests of the less wealthy party.
Second, the Murdochs have extensive assets across the spectrum, from real estate and offshore bank accounts to major business interests. Assuring a proper valuation of these assets and a full and accurate accounting of these assets will be critical to a fair distribution of property. Retaining experts for valuation and investigation will be necessary and potentially costly. If the parties can agree on independent valuators, it could save costs and conflict. Regardless, the task will still be challenging. For example, Murdoch has a share in NewsCorp, one of the richest businesses in the world. How does one get a proper value to his shares, and particularly for the time period of the marriage? The law generally entitles Mrs. Murdoch to half of the increase in value to those shares during the marriage. Also, in dividing property, the court will consider the lifestyle maintained during the marriage and seek ways to continue that lifestyle after the marriage – again, no simple task.
Third, the Murdochs have children who live extraordinary lives of privilege. How will the parties arrange a custodial schedule given the business life Mr. Murdoch leads? One can foresee a rather unconventional schedule that involves private jets and trips across continents, but how will that be in the best interests of the children? Exactly what standard of living are the children entitled to now and in the future? These are very difficult questions, particularly if the less wealthy spouse becomes the administrator of these funds for the children, and could be seen as an opportunity to take more from Mr. Murdoch for herself.
Finally, wealthy clients produce large legal fees – not because they can afford to pay more, but because the work involved in sorting through so many assets can be extremely difficult and time consuming. Who pays these fees will be important, as it can represent a large chunk of the settlement for the less wealthy spouse who will need competent counsel to assure she is adequately protected and represented.
Can the Murdochs really teach the rest of us mortals about divorce? Absolutely. Economies of scale may give the Murdochs more to discuss and divide, but the basic issues – property distribution, child custody, antecedent agreeements, support and fees – exist for every divorce. In many ways, the Murdoch divorce is a display of lawyering at its best – firms going all out to assure fairness for each party and to protect the best interests of the children. And to protect all parties’ interests, highly experienced and skilled attorneys and accountants will be required. It also shows that no one gets preferential treatment just because of wealth – try and cheat the system and the law steps in to protect the weaker party. The wealthier parent does not buy a better custody schedule; the best interests control. So, in a wonderful and strange way, this grand divorce of billions of dollars restores some faith in a system that all stand equal under the law, though most of us will find it hard to have sympathy if either party publicly bemoans the loss of a private jet or an island home – or an actual island.
If you have questions about high asset divorce, contact us – we can help.