Bill and Melinda Gates caught the world’s attention when they announced their plans for divorce in May 2021. Reports at the time named Bill Gates as the world’s fourth wealthiest person, with a fortune estimated at around $124 billion. The sheer amount of wealth to distribute boggles the mind. The public naturally wondered just how the parties or court would split the unimaginably vast fortune and, perhaps just as important, who would walk away with what. Think, for example, of the implications for the Gates Foundation, which alone grants about $5 billion per year and employs 1,600 people. With so much at stake, some imagined a hundred-billion-dollar version of the film The War of the Roses.
But Wait: The Parties Had a Separation Agreement
The couple quickly put the worst of that speculation to rest when they revealed that they already had a separation agreement in place before the divorce filing and that they wished the court to honor their ready-made agreement in their divorce. What was even more surprising to many people is that Melinda Gates had the separation agreement in the works years earlier in 2019. Did the separation agreement mean that the divorce was effectively already over?
But Wait: The Parties Had No Prenuptial Agreement
One might have thought that Bill and Melinda Gates would have had a prenuptial agreement already in place before they married. Bill, after all, had founded Microsoft way back in 1975 and was a wealthy and powerful executive when he met his then-employee Melinda and married her in 1994. A prenuptial agreement is an agreement between an engaged couple that the couple signs before marriage. The prenuptial agreement states how the parties will divide assets and debts, and pay spousal support, in the event of a divorce.
Why Couples Make Prenuptial Agreements
One of the main reasons people get prenuptial agreements is that they want to protect their personal assets if their marriage does not last. Those who seek prenups include people who have children from prior relationships and people with a lot of personal wealth accumulated before the relationship.
While people generally assume that a prenup protects the wealthy person from sharing their wealth, the person entering the marriage with fewer assets may also seek a prenuptial agreement for their own protection. A prenuptial agreement can ensure that the person with fewer assets entering the marriage leaves the marriage in a secure financial position in the event of the marriage’s untimely demise. Prenuptial agreements are usually found in high net worth divorces, but just about anyone can use a prenup to ensure appropriate financial treatment in the event of a divorce.
People who have substantial personal wealth and enter into marriages without a prenuptial agreement should understand that they could be putting their financial health at risk. Bill and Melinda Gates did not have a prenuptial agreement. The absence of a prenup made it seem to many people that they would end up arguing over their multibillion-dollar fortune.
Why Couples Make Separation Agreements
It now appears that Bill and Melinda Gates may have settled their argument before it really got started, or at least before it got public. Bill and Melinda Gates put a separation agreement in place well before filing for divorce.
A separation agreement is a contract that both spouses voluntarily negotiate and sign, addressing the rights and responsibilities of each spouse while they are going through a separation and potentially a divorce. The fact that a separation agreement existed meant that Bill and Melinda Gates had resolved many of the legal and financial issues in their divorce. If they had not put that separation agreement in place, their divorce proceeding would have addressed those issues, perhaps through lengthy discovery, contentious hearings, and even to a trial and judgment.
Separation agreements can be a very good thing in the event of a divorce. Separation agreements help the parties avoid the cost, delay, and contention of litigation. Separation agreements usually cover things like child support, child custody, alimony, and division of assets and debts. In Bill and Melinda Gates’ case, their three children are adults, so their divorce involves no issues of child custody or child support. The divorcing couple may be able to keep the details of their divorce private. They may also favorably address more-complex legal issues, such as estate-planning considerations, that the court might not in a litigated divorce judgment.
What Courts do with Separation Agreements
The Gates’ divorce petition requests that the court divide their assets “as set forth in our separation contract.” Asking the court, rather than telling the court, is appropriate. Courts have some authority to adjust or even ignore separation agreements, especially for things like fraud, duress, illegality, and unconscionability. Courts will usually require that they exchange financial disclosures and that they’ve each received some independent legal advice before getting into the agreement. The court must also trust that both parties entered into the agreement on their own free will.
Whether the court enforces a separation agreement may, in other words, depend on how the parties negotiated the agreement and whether the agreement’s terms appear fair and reasonable. But when both parties, such as in the case of Bill and Melinda Gates, ask the court to enforce their agreement, then the court is quite likely to do so.
When Separation Agreements Won’t Necessarily Forestall Litigation
Once the existence of the separation agreement came to light, the Gates divorce sounded straightforward, even amicable, and responsibly handled. Thanks to the separation agreement, the legal proceedings could well turn out to be mundane.
Yet, a recent Vanity Fair article alleges conversations having taken place between Melinda Gates’s attorneys and certain third parties who may have had damaging information involving Bill. The article alleges that Melinda’s team worked with private investigators before the divorce filing and that those investigators may have discovered information that could “inform both the public and private case.” The article further alleges that Melinda may have been upset or unhappy with how Bill handled a sexual harassment claim against one of his employees in 2018, by allegations of infidelity on Bill’s part, or by Bill’s alleged association with Jeffrey Epstein.
Melinda Gates’s spokesperson denied the article’s allegations. The allegations, though, dim the rosy glow the divorce had even a month ago. The allegations also inject a greater degree of uncertainty into the divorce proceeding than may have appeared when news of the separation agreement broke. What Bill or Melinda disclosed or failed to disclose to the other to induce the separation agreement, or what either might have threatened to disclose publicly, could potentially affect the separation agreement’s enforcement.
Better a Separation Agreement than Nothing at All
Regardless of any of the details that may come out regarding the actions of either Bill or Melinda Gates leading up to the separation agreement, the separation agreement very likely remains the key for how the court will handle asset distribution and any other matter in the Gates divorce. Allegations of sexual or other improprieties may make for good tabloid reading. But they may not ultimately affect how the court distributes assets, especially since Melinda had apparently been working on the separation agreement since at least 2019.
Consider a Marital Agreement Before It’s Too Late
Whether you’re dealing with a high-net-worth divorce, or you have a more-normal lifestyle, preparation can make all the difference before the actual filing of the divorce. Going into a marriage with a prenuptial agreement may prevent a lot of discord during the divorce process. In lieu of a prenuptial agreement, a separation agreement may help you resolve key issues before you officially file for divorce. Reach out to us online or give us a call with any questions so that you can get the answers you need and move forward with your life.