With the recent news of Bill and Melinda Gates’ divorce, many people are curious about their reported “separation contract.” As it has been widely reported, the Gates’ did not have a prenuptial agreement, but many people are puzzled by the term “separation contract” and how it affects their divorce. What is it, and how does it work?
Below we take a look at the difference between prenuptial and postnuptial agreements and how a separation contract fits into the divorce process.
What Are Marital Agreements?
Marital contracts are legal contracts that generally outline how a couple’s property will be handled in the event of a separation or divorce. Both prenuptial and postnuptial agreements are marital contracts. Prenuptial agreements are drafted and signed before a marriage and take effect upon the marriage. If a couple drafts a prenup and then does not go through with the wedding, the prenup never takes effect.
Postnuptial agreements are those that are drafted after the marriage has already taken place. They can be created immediately after a couple weds, or they can be developed years later as the need arises.
Things that are typically included in marital agreements are:
- Marital and separate property
- Debt and credit card spending
- Tax issues, including tax deductions
- Retirement accounts and pensions
- Plans for spousal support
- Business interests
While many people think having a prenuptial or postnuptial agreement means that you lack faith in the relationship, this is not the case. Marital agreements are a practical way for couples to get on the same page regarding their property and finances and help them feel more prepared for whatever the future may hold. They are typically not created with an assumption of divorce and instead are used to help a couple manage their property and plan for potential future outcomes.
How a Separation Contract Works
Though the contents of their contract have not been made public, the Gates’ separation contract is likely similar to a postnuptial agreement in that it was created after the couple was married and outlines how they want their estate divided during a divorce.
According to their divorce filing, the Gates’ separation contract outlines how they would like their estate to be divided. Their divorce petition specifically asks the court to divide their property “as set forth in our separation contract.” Ostensibly, this contract covers all areas of property division.
When dividing property, couples must address:
- Real estate holdings
- Bank accounts
- Cars, boats, and other vehicles
- Pensions, retirement accounts
- Investment accounts and investment portfolios
- Business interests
- Debts
- Art, antiques, and other unique types of property
- Spousal support
Why Have a Separation Contract?
The benefit of having a separation contract before filing for divorce is that they do not have to rely on the courts to divide their property. Leaving these matters up to the courts can be very stressful. While the courts aim to divide property fairly and equitably, they may not divide or assign property as you and your spouse would. Though the courts still must approve the Gates’ separation contract, by having one already in place, they retain control over how their estate is separated.
By negotiating a separation contract out of court, the Gates also retain a certain amount of privacy. When you litigate your divorce in court, the proceedings become part of the public record, and anyone can access them. With a previously agreed upon separation contract, the Gates may be able to keep many of the details of their divorce out of the public eye.
What to Do If You Are Planning on Divorcing?
If you plan to divorce your spouse, you should reach out to a trusted lawyer as soon as possible. Even if you are only beginning to consider divorce, it is worth speaking with an attorney. Not only can an attorney help you understand the process and what you will likely have to go through, but they can also help you deal with your specific situation.
Should High Net Worth Divorces Be Handled Differently?
According to an article by Insider, the Gates are worth an estimated $146 billion, and they have both hired three lawyers to help them with their divorce. While most divorcing couples will only work with one lawyer each, with extremely high net worth divorces like the Gates’, it is not uncommon for each spouse to have their own team of attorneys.
It’s also important to note that divorces can take a long time to resolve. As pointed out by The Wall Street Journal, Melinda Gates had been consulting with lawyers since 2019. It is reported that the couple worked with their lawyers and a mediator for over a year to come to a separation agreement. With such an extensive and complicated estate, this is not surprising.
It has also been reported that the couple will continue to co-chair their charitable organization, the Gates Foundation. This is another matter that could have been discussed during their divorce negotiations.
It is important to consider any additional documents that may need to be filed with the Court, even if you are seeking to reach an agreement via a separation agreement. It’s also important to know when to call in subject area experts, like tax attorneys.
Couples with high net worth often have complicated financial situations. An experienced attorney will have the skill to help you and the resources you need to navigate the process successfully. If you are going through a high net worth divorce, it is important that you work with lawyers who are experienced in handling these types of divorce cases, like Hunt Law Firm, PLLC.