It’s been a rough year in the world of mega-billionaire marriages. In a surprise announcement, Bill and Melinda Gates have agreed to divorce after 27 years of marriage. Melinda Gates filed the petition for divorce from her husband Bill Gates, the founder of Microsoft and fourth-richest man in the world. The pair had apparently already been separated before they made their split public.
Unlike another recent billionaire divorce, the Gates’s split does not appear to involve many hard feelings. The reason for the divorce is listed as “irreconcilable differences.” No other causes have so far been discovered.
The Gateses released identical statements about the divorce on their respective Twitter accounts, saying, “After a great deal of thought and a lot of work on our relationship, we have made the decision to end our marriage. Over the last 27 years, we have raised three incredible children and built a foundation that works worldwide to enable all people to lead healthy, productive lives. We continue to share a belief in that mission and will continue our work together at the foundation, but we no longer believe we can grow together as a couple in this next phase of our lives. We ask for space and privacy for our family as we begin to navigate this new life.”
Overall, the Gates’s divorce is an excellent example of how even the most well-known couple can split privately. Here are the smart (and one not-so-smart) things Bill and Melinda Gates did during their divorce and where they may yet run into complications.
The Good
One of the reasons that the Gates split is so surprising is because they’ve done many things right. The couple has long been known for their financial and legal acumen. Before announcing their divorce, they made sure that several items were aligned in their favor.
No child support: While the couple has three children together, all three are now legal adults. This prevents the need for complicated child custody and child support orders that must be public record.
No spousal support: Before the pair filed for divorce, Bill and Melinda agreed that neither person needed spousal support, also known as alimony. A common point of contention between splitting spouses is whether and how much alimony is necessary.
Private separation agreement: Finally, and most importantly, the couple requested in their divorce petition that the court follow the asset division that had been outlined in their private separation agreement.
As a result, Mr. and Mrs. Gates accomplished two things. First, they ironed out the details of how their assets will be split before the public knew anything was going on. They likely used the services of a mediator who helped them find a split that felt fair to both of them.
Second, since their divorce petition references a private agreement, their finances aren’t revealed in public records. This reduces the number of opportunities for scandals or prying eyes.
The Bad
So, Mr. and Mrs. Gates did almost everything well during their divorce, but they made one mistake early on. Before they got married, they failed to sign a prenuptial agreement.
This isn’t uncommon for older couples. Prenuptial agreements were rare even between high-income creators and entrepreneurs before the turn of the millennium. The problem is that when these couples go through gray divorces, they’ve spent their lives earning assets together.
In California, marital property is considered “community” property, so both parties own half of the assets. The couple has to split everything they’ve built over time, including their businesses and intellectual property. Their net worth is estimated to be $130 billion, so both Bill and Melinda would walk away with $65 billion.
This may or may not be a problem. On the one hand, Bill will not retain the majority of his earnings and remaining stock from his time at Microsoft. This would bother many people, especially entrepreneurs who developed successful companies. On the other hand, the Gateses have donated most of their stake in Microsoft to the Gates Foundation and Bill is no longer playing a significant active role at the company.
As a result, the lack of prenuptial agreement doesn’t mean Bill is losing control of his company. This is lucky for him; many other entrepreneurs and business owners have lost what they’ve built in similar divorces. If the Gateses had implemented a prenuptial agreement when they first got married, however, this problem would never have come up.
The Complicated
Many aspects of the Gates divorce seem to have already been finalized. However, several elements won’t play out until next year. In particular, both Bill and Melissa will potentially be hit by significant tax penalties because of their individual fortunes and potential new wealth taxes put in place by the Biden administration.
It’s worth keeping in mind that the couple has declared that they will continue working together in their roles at the Gates Foundation, a multibillion-dollar private charitable foundation that’s the largest of its type in the world. They have already donated billions of assets to the foundation, including the majority of their Microsoft stock. Suppose either of them choose to donate more to the Gates Foundation. In that case, they will be able to write off significant amounts and potentially avoid some of those tax penalties.
Divorce Can Be As Simple As You Make It
The Gateses did just about everything right in their divorce. The couple protected their privacy, retained their dignity, and avoided messy legal battles in the public eye. If it’s possible for one of the wealthiest couples in the world, it’s possible for you, too.
If you’re considering divorce, the first thing you should do is reach out to an experienced attorney. They can help you choose the right course of action to keep things as private as you’d like. Take a page from the Bill and Melinda’s book and keep your separation clean and your finances uncomplicated with expert legal assistance.
