Jun 07, 2012

Making the Case for Facebook’s Zuckerberg to “Like” a Prenuptial Agreement

Justone dayafter the opening bell rang for the Nasdaq stock exchange, thereby announcing the hotly anticipatedFacebook IPO, wedding bells were ringing for Facebook founder & CEO Mark Zuckerberg and his bride, Dr. Priscilla Chan. While some may wonder what to get a multi-billionaire and his bride as a wedding gift, others were wondering what the couple may or may not have gotten before the wedding – a Pre-Nuptial Agreement, or pre-nup. While we may never know, as such revelations often come out only at the time of divorce, divorce lawyers are surely pondering the question.Many divorce attorneys have already weighed in on the matter, virtually all of them insisting that if Mr. Zuckerberg had been their client they would have advised him to sign one (yours truly included), he might well have declined to do so. After all, clothed in his trademark hoodie and maintaining his seemingly casual attitude, Mr. Zuckerberg has clearly followed his own path as to what a CEO is or should be (he even bucked tradition when he chose to ring the opening bell from Facebook company headquarters, rather than from the floor of the Nasdaq Exchange), and he has done so with great success.However, with the timing of the Facebook IPO occurring before the wedding, Mr. Zuckerberg may not need a pre-nup to protect a large portion of his wealth. The reason is that Mr. Zuckerberg’s earnings up to the marriage, including the 60 million shares he exercised at the IPO, will be considered his pre-marital property. Also helpful is the easy valuation of those stocks at the time of the marriage, thanks to the publicly listed Nasdaq trading price. And while California is considered a “community property” state (Illinois is an “equitable division” state), the laws regarding pre-marital property are similar. As long as Mr. Zuckerberg takes certain steps to keep that money separate from other property that could be considered marital property, he can insure that that money stays his non-marital property.If protecting his newly found Facebook wealth was his only concern, Mr. Zuckerberg may have been able to protect a large portion of it without a pre-nup, thanks to the timing of the Facebook IPO. Still, as CEO of Facebook, Mr. Zuckerberg will have substantial earnings, which will likely include further stock options in the company. Depending on when those options are granted and later exercised, without a pre-nup identifying any future options as his non-marital property they might be considered marital property, subject to division, just as his post-marriage salary earned during his time at Facebook will be. A pre-nup also could have protected those assets and more.A pre-nup can set property rights during the marriage, set support/maintenance rights after a marriage, and provide clarity to both parties as to what to expect in the event of a divorce. Such clarity can help to avoid an acrimonious and expensive divorce process. For a man that values being able to lead a relatively low-profile life, certainly there is value in avoiding a potentially high-profile divorce.Potentially most important, though, is to recognize that pre-nups are not only for the wealthier spouse. A well negotiated pre-nup might also greatly benefit Dr. Chan as well, insuring a fair settlement to her in the event of divorce, both in terms of property and support. The clarity that such an agreement would provide, as well as the benefit of avoiding protracted litigation, would clearly be desirable to both parties. Of course, it is important to remember that pre-nups may address only financial issues between the parties and cannot address child related issues such as custody and child support.All in all, it is always fun to speculate and wonder about these things (well, at least to some family law attorneys). And as some commentators have pointed out, it is easier to get by on half of $20 billion (Mr. Zuckerberg’s estimated worth, which changes with each passing day), than it is to get by on half of $20,000. The value of a pre-nup is in more than just protecting that half. It is about providing clarity to both parties, and in the unfortunate event of divorce, avoiding protracted litigation. So whether you are worth $20,000, $20 billion, or somewhere in between, if marriage is in your future, the consideration of a pre-nup should be as well.

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