What Business Owners and Non-Profit Founders Can Learn from Bill & Melinda Gates

One of the more common causes of separation and divorce is financial incompatibility. Perhaps one spouse is a spendthrift, and one cannot stop buying. Or, perhaps, one spouse has a serious gambling addiction, and the other did not know until after they were married. Maybe the couple gets into serious debt after some kind of life emergency, and now they argue all the time.

Of course, when you are worth $130 billion, it is hard to imagine that money is the root cause of any disagreements. Bill and Melinda Gates recently announced they are divorcing after 27 years of marriage, issuing simultaneous statements on Twitter that said, “we no longer believe we can grow together as a couple in this next phase of our lives.”

The Gateses are the latest in a list of the super-wealthy who have decided to divorce. Jeff and McKenzie Bezos split in 2019, and early this year the tabloids ran rampant with the stories of Kanye and Kim Kardashian’s decision to divorce. While their wealth may preclude them from worrying about the “typical” costs associated with a separation – paying mortgages, paying for education for the children, paying off credit cards and loans – they do have financial concerns that need to be addressed.

Philanthropy, charitable giving, and the Bill & Melinda Gates Foundation

The most pressing concern (according to multiple outlets, it appears) is the future of the Bill & Melinda Gates Foundation. The Foundation’s endowment, worth about $50 billion, is set up as an irrevocable trust. Its assets are not considered marital or separate property, and will not be included in the couple’s assets. However, changes could still be enacted in the Foundation’s operations, goals, and scale, much the way operations are affected when two business owners divorce.

Prenuptial agreements vs. separation agreements

The Gateses – much likes the Bezoses – did not have a prenuptial agreement (called a premarital agreement in North Carolina) in place. Instead, they created a separation agreement which detailed how they wanted their assets divided. They asked that this separation agreement be the guideline for asset division in their divorce, according to Business Insider.

This agreement is a critical component of their divorce, because unlike North Carolina, Washington (where Ms. Gates filed) and California (where the Gateses own a home) are community property states. That means the assets would be divided 50/50. North Carolina is not a community property state. In North Carolina, marital assets and debt are divided “equitably”, may not necessarily be 50/50. A premarital agreement would have outlined how assets were to be divided in a divorce in any state. Instead, Business Insider surmises, the Gateses may have spent up to a year working out their separation agreement – which means this divorce was likely planned for much longer than the public knew.

What lessons can we learn from high-asset, high-profile divorces?

Thankfully, most couples will not have to undergo the scrutiny that the Gateses (or the Bezoses, or the Wests) face, where the entire world appears to be watching. But that does not mean there are no lessons to be learned, even for couples with fewer assets and less global cache.

Business and foundation financial evaluations are important.

Asset valuation is critical to any high-asset divorce, and especially those with shared businesses, non-profits, and other organizations. If you are accountable to shareholders, this documentation can help set their minds at ease, and potentially avoid drastic market fluctuations, too.

Trusts are important tools to ensure legacy giving.

Trusts can help protect your foundation, too, by ensuring that the assets contained within are not part of the divorce settlement. There are tax benefits to setting up a trust as well, and to appointing independent trustees whose sole purpose is protect the foundation.

Postmarital agreements can give you greater flexibility in dividing assets.

If you are already married and did not sign a premarital agreement, you should consider a postmarital agreement. It will address asset division as well as spousal support and can be created at any time. Postmarital agreements can be amended, too, as long as both parties agree.

Always keep separate property separate.

Certain types of property, such as inheritances, are generally immune to equitable division – but it depends on how you use that money. If you place your inheritance into a joint account, or use it to improve a family business or marital home, then that money will be seen as marital property. To this end, couples should keep their separate assets in separate accounts to ensure it remains separate in the event of a divorce.

Point of note: if you take part of your inheritance and place it in a joint account, but keep part in a separate account, the entirety of the inheritance will not be deemed marital property. Only that which is comingled can be divided.

Be honest about your assets and your debts.

Forensic accountants value all assets, and it is their job to find them all. Hiding assets can and likely will lead to hefty penalties. As a rule, judges don’t look kindly on those who attempt to “pull a fast one” on their soon-to-be-exes, and may grant a greater share of the assets to the other spouse.

The same is true for debts. If Spouse A attempts to run up debts in both spouses’ names during the separation period, and forensic accountants can prove Spouse B had no knowledge of those debts, the judge require Spouse A to remove Spouse B from the accounts and then replay those debts in full.

For the record, neither Gates has been accused of hiding assets or debts; we just think it is advice worth mentioning.

The Charlotte divorce attorneys of Epperson Law Group, PLLC assist high-asset clients with pre and postmarital agreements, separation agreements, and estate planning to ensure their businesses, foundations, and assets are protected. If you need counsel regarding tax ramifications, forensic accounting, or legacy planning, please call us in Charlotte, Concord, Boone, or Weddington at 704-321-0031, or visit our contact page, and schedule your consultation.