As shocking as the news may have been, it is no secret that Bill Gates and Melinda French Gates have announced the ending of their approximately 27-year marriage. What does the ending of the Gates’ 27-year, long-term marriage mean for the couples’ fortune and their billion-dollar estate?
According to Forbes’ “Real-Time Billionaires List,” co-founder of Microsoft, Bill Gates, is the 4th “Richest Person in the World”, with a net worth of $126 billion. Preceding him is Elon Musk with a $153.6 billion net worth and Jeff Bezos with a $188.7 billion net worth. Although Bill Gates’ net worth fluctuates daily, one thing is certain at this time: Bill Gates’ billion-dollar fortune and asset division will be a topic of discussion throughout the pendency of his divorce with Melinda French Gates.
Melinda French Gates filed for divorce in Washington State in early May 2021, with Bill Gates joining in the request to have their marriage dissolved by the Washington Court.
Similar to California, Washington is a community property state, which means that assets acquired during the marriage are considered community property and thus will be equally divided upon divorce. Although the Gates’ divorce petition references a “separation agreement,” there is no denying that the division of the couple’s billion-dollar assets has the potential to pose serious challenges.
A non-exclusive list of the couple’s billion-dollar assets includes roughly 330 million shares of Microsoft stock, the Bill & Melinda Gates Foundation valued at $46.9 billion, stake in the holding company Cascade Investment, a $43 million beach-front mansion in Southern California, and the couples’ $131 million primary residence in Lake Washington, Washington.
You might be thinking, “I’m not a billionaire, so why should I care about the Gates’ divorce and how they will be splitting their billion-dollar fortune?” Well, if you are in the midst of, or anticipate going through a divorce, and are in a long-term marriage and/or are a business owner, those similarities to the Gates’ divorce illustrate some important considerations to keep in mind.
The length of your marriage can affect a spouse's obligation to pay spousal support. Unlike in Washington State, where long-term marriages are marriages lasting 25-years or longer, the California Family Code defines "a marriage of long duration" as a marriage lasting 10 years or more.
The concept of “permanent” spousal support in marriages of long duration does not necessarily mean spousal support will be paid forever, but instead is better thought of as spousal support that is paid after the final judgment of dissolution is entered. Although spousal support may not be payable forever, the California Family Code authorizes the Court to retain jurisdiction over spousal support indefinitely, unless otherwise agreed to or a court order terminating spousal support. Generally, this means a California court can order or modify spousal support indefinitely for marriages lasting 10 years or more.
There are several factors and circumstances the court considers when making a “permanent” spousal support order, such as the marital standard of living, earning capacity of both spouses, needs of the parties, income of the parties, obligations and assets of both parties, a history of documented domestic violence, age and health of the parties, and the interference of employment with the interests of dependent children. These factors can be found in Family Code section 4320.
Spousal support can be a term the spouses agree to and include in a Marital Settlement Agreement. Although Bill Gates and Melinda French Gates’ petition for divorce stated that “spousal support is not needed,” this is something to keep in mind if your marriage is one of long duration.
California business owners facing divorce should understand how their business may be impacted. One of the first determinations will be to identify the character of the business as separate or community property.
Whether a business interest is community property or separate property will impact the division of the business in accordance with California community property law.
If a business is acquired or started during the marriage, the business is typically considered community property and will need to be valued and divided equally between the spouses in a divorce.
A business acquired or started before the marriage or after the date of separation is separate property. However, if a separate property business increased in value during the marriage, the business may have a community property component, which will need to be apportioned and divided in the divorce.
In most cases, the actual business asset is not divided. The business is valued and the spouse who retains the business must pay an equalization payment to the other spouse.
There are two apportionment methods the court typically looks to when there is a separate property business with a community property component: Van Camp and Pereira.
A business valuation conducted by an expert may be appropriate for your case.
The two businesses that come to mind when thinking about the Gates’ divorce are Microsoft and The Bill & Melinda Gates Foundation. Bill Gates co-founded Microsoft in 1975, which went public in 1986. Both events occurred before the parties married in 1994. Bill Gates now only owns approximately 1.3% of Microsoft. Nevertheless, the determination of the community’s ownership interest in Microsoft is likely to be addressed in the settlement agreement between the spouses.
The Bill & Melinda Gates Foundation (“Foundation”), valued at $46.9 billion, was founded during the parties’ marriage in 2000 and focuses on global public health. Although the Foundation was founded during the marriage, the Foundation endowment is held by the Bill and Melinda Gates Foundation Trust and will not be divided as part of the marital estate.
Due to the high-profile nature of the Gates’ divorce and the couples’ inferred desire to remain amicable and continue their humanitarian efforts, we may never know the details of the Gates’ property division agreement. However, the Gates’ divorce sheds light on the importance of having an experienced Cage & Miles, LLP attorney to guide you through the divorce process, especially if your marriage is one of long duration and if you are a business owner.
If you are going through the divorce process, or anticipate going through a divorce, contact an experienced Cage & Miles, LLP attorney today to advise and support you through the process.