Court unlikely to split premarital assets

            Posted on December 18, 2016 

Court unlikely to split premarital assets

Q.   As a result of being born into a very wealthy family, I had about $350 million when I married a man I’ll call Bob.

After college and an MBA, I joined our family business which is managing our wealth. I met Bob while earning that MBA. He moved into my condo and we married three years later. I then had our one child, a son. Bob annually earns about $260,000 which is much less than my income.

Now, seven years after we started living together, I’m getting divorced because Bob is having an affair with someone he wants to marry.

Over those seven years, my assets increased by about $50 million. Half is attributable to investments I made. The other half is due to passive market activity.

Bob demands I transfer half my assets to him. What do you think Bob would be awarded after a contested trial?

A.  Massachusetts is an all property state. So the judge will consider all of your assets. Because you have a relatively short marriage to someone who is financially unequal to you, it would be rare for a court to award Bob any share in the assets you had before the marriage.

The same can be said, but with less certainty, for the $25 million increase due to passive activity. Those increases would have occurred regardless of your marriage or work.

It would also be rare for a court to not equally divide the $25 million you earned during the marriage. Bob’s share of that $25 million would be reduced by half of any money he put into retirement funds, increases – if any - in the value of his separate assets, etc.

If Bob wants to fight over the passive increase, suggest you’d give him half on condition that you’d each immediately gift all that money, net of income and gift taxes resulting from the transfer, into a new trust for the benefit of your son and his heirs. The trust could provide that, if your son dies before age 21 without having any heirs, half the then value would go out to Bob – unless he predeceased your son. In that later event, you could direct the assets to either a charity or back into the family pot. The trust could also provide that, after age 21, your son would have the power to appoint where the trust assets should go upon his death.

While you didn’t ask, I’d suggest, the court won’t order you to pay alimony to Bob. Whichever of you is your son’s primary caretaker will likely get some child support from the other. You’d both equally pay all the expenses for your son’s K-12 private schools, if any, and for his undergraduate college.

Last, if you again want to marry, to paraphrase Shakespeare, say from your balcony, “Romeo. O Romeo. Wherefore art thou our premarital agreement?”