When Microsoft co-founder Bill Gates divorced his wife Melinda French Gates in August after 27 years of marriage, she received an estimated $2.4 billion in shares as part of the settlement. Two years earlier, Amazon founder Jeff Bezos and his wife MacKenzie ended their 25-year marriage and divided one of the world’s largest fortunes. With billions of dollars in play, none of these ex-spouses, or their children, are likely to run out of money for the rest of their lives.
We need to ask the question; what has changed that we are starting to see more couples divorce after more than 20 years of marriage? The stigma of divorce has reduced, making it more acceptable. Additionally for older couples who have grown apart, the divorces are more amicable, and their children have grown up and left the nest. But the financial risks of a “grey divorce” can be high for high-net-worth families with sizable assets worth millions.
For instance, one spouse may have greater financial acumen and experience than the other. A separation or divorce could leave that soon-to-be-ex-spouse vulnerable to making financial mistakes or becoming a victim of a bad advice.
On the other hand, a spouse who has spent a long career running a business or making savvy investment decisions might be faced not only with the loss of half of his or her net worth, but potentially loss of control of their business.
Regardless, the result of a breakup later in life combines the worries of financial stresses together with deep emotional and lifestyle. A grey divorce may also have serious repercussions on a family office, which may be drawn into the middle of it and forced to choose sides. Such a divorce can also create issues for a family business or family foundation, regarding ownership, control, direction, on top of the division of assets.
Whilst divorces involving couples in their 50s, 60s and 70s were once rare, this no longer appears to be the case. Therefore, it is inherent of wealthy families and their advisors to consider strategies to reduce the financial risks to both parties. For example, a post-nuptial agreement could be drafted to reduce the risks down the road.
It has long been the practice to use one attorney for the planning, but this can bring in issues of conflict of interest, when situations such as a grey divorce occur, (please see my vlog from July 2021 “Estate planning and divorce”). Other foundational documents, such as a family constitution or family office mission statement, should also be reviewed by an outside financial professional who can advise on methods to mitigate the risk related to a grey divorce.
Whilst divorce is far from the minds of most married couples, these breakups happen to people of all ages and backgrounds. In my opinion, it is far better to prepared for all eventualities, such as divorce, substance abuse or mental health problems rather than trying to make decisions during an emotionally stressful time. We hope, these plans will never be needed – however like insurance, there can be great comfort in knowing they are in place.
Samy Dwek is founder and CEO of White Knight Consulting LLC and The Family Office Doctor, Delray Beach firms that provide professional guidance and outsourced chief financial officer, chief operating officer services to high-net-worth individuals and families.
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