When news broke last week that the founder and CEO of Amazon would be getting divorced, people across the country wondered: Is MacKenzie Bezos going to get half of her soon-to-be ex-husband Jeff Bezos’ approximately $140 billion, thereby making her the richest woman in the world?
My answer is that she’s already the richest woman in the world and that she probably should get half of this just silly fortune. Understanding why requires a brief excursion into the evolving realm of state divorce law.
The Bezoses, of course, live in Washington—one of nine states that follows the community property approach. In these states, most property acquired during marriage belongs to the couple as the marital community, no matter which spouse nominally earned it or how it was earned. (There are some exceptions, mostly for property acquired through gifts or inheritance, which are typically treated as the separate property of the spouse receiving them.) So MacKenzie and Jeff Bezos both have $140 billion. She’s as rich as he is. But what happens when that fortune needs to be divided between them?
Some of the accounts I’ve read have assumed that, because Washington is a community property state, the division will be equal when there’s a divorce. That’s not necessarily true. Some of the community property states start with a presumption of equal division of property, but Washington isn’t one of them. Instead, the court is tasked with sorting out the property, based on some very general factors: How long was the couple married? How much community and separate property is there? And what are the economic circumstances of the parties? Oh, and in case those aren’t general enough, the court can also take into account any other factors that seem, under the circumstances, “relevant.”
In other words, the court can do whatever it thinks is fair. That could be interesting, given that the “relevant” factors in this case will be virtually unprecedentedly unique. The Bezoses had a long (25-year) marriage. It’s hard to know how much “separate property” they had when they married in 1993. The amount was eventually dwarfed by the Amazon juggernaut, but Jeff Bezos had been a hedge fund VP for a few years before the couple met. He had enough scratch to quit and roll the dice on a chancy venture—with MacKenzie’s support, importantly. But the couple’s fortune today is entirely because of earnings accumulated during the marriage—community property. And the couple’s economic circumstances are similar as of now, of course.
What does all this add up to? In a long marriage with mostly community property, a court might well decide to divide the estate more or less equally.
There’s no guarantee of that outcome, though. Many courts continue to resist the idea that the spouse who directly engages in the business should be compelled to split the estate evenly with the spouse who stays home and raises the kids, or who acts as the “corporate wife” (a role MacKenzie apparently didn’t greatly enjoy). The problem is especially acute in cases involving very large estates. In a well-known case from Connecticut in 2000, Wendt v. Wendt, Lorna Wendt appealed a trial court’s decision to award her $20 million, which was substantially less than half of the entire marital estate. (The actual value of the estate was disputed, but may have been about $100 million; in any case, her share was clearly smaller than her ex-husband’s. She wanted at least $35 million.) The court couldn’t see how serving as a corporate wife and a mother justified the higher award she sought—and many people agreed, judging from the ginned-up outrage at Lorna Wendt’s position. It’s not surprising that people are stupefied by such crazy numbers and could care less about someone who’s walking away with more dough than they could ever imagine.
But there’s a principle at work here, and the Connecticut court’s unwillingness to divide the estate more equally stems from a fundamental misunderstanding of the roles of the two parties in a marriage. They are intrinsically connected in a partnership for the benefit of both. The successes often come from the combined efforts of the spouses, so it doesn’t make sense to disaggregate their contributions and then assign a monetary value to each. Until very recently, though, that’s what most judges did, at least as a way of informally “capping” the amount that would be awarded to the spouse—typically the woman—who didn’t make a hard “market” contribution. But the contribution comes from the mutual setting and implementation of goals by the spouses. And MacKenzie Bezos was committed to the couple’s partnership, to the extent of sticking with Jeff and the “Amazon plan” even when, in the early 2000s, the company nearly went belly up. And by all accounts, she played a major role in raising the couple’s four children (though Jeff Bezos apparently did too.)
If the issue of property division does find its way into the Washington courts, MacKenzie is likely to do much better than she would almost anywhere else. The Washington Supreme Court is quite progressive. For instance, the justices have recognized long-term cohabitation as a basis for claiming equitable distribution of property along lines similar to marriage. Although living in a community property state isn’t a guarantee of equality, that might be the result in a state like Washington , especially since it’s hard to see how the factors the court is supposed to consider lead to a different outcome (or, to be blunt, to any predictable outcome at all).
Of course, these questions might have been avoided by a prenuptial agreement. It seems the lack of such an agreement in this case doesn’t surprise most people, because the vast majority of the Bezoses’ wealth has been acquired since they married. But since Jeff was already a hedge fund mogul by the time they met, he might well have accumulated significant assets—and enough incentive to work up a prenup to shield them from the community property rules, if he’d wanted to do that. He didn’t, but it’s not too late for the couple to try to come to some kind of agreement on how to divide the world’s biggest fortune, if only to keep this potential tabloid trash fire out of the public eye. Settlement seems more likely and better for the couple than a court battle, but the cause of equality would probably be more effectively served by a decision that recognizes that the Bezoses, like many other married couples, were in a true partnership—the dissolution of which will leave both Jeff and MacKenzie Bezos with enough money for many, many lifetimes.
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