Bill and Melinda Gates have announced that their 27-year marriage has come to an end. The couple announced on Twitter that they no longer believe they can grow together as a couple in the next phase of their lives. The couple has three adult children together, Jennifer, 25, Rory, 21, and Phoebe, 18.

Bill Gates co-founded Microsoft in 1975. Since that time, he has amassed significant wealth. Bill is now the fourth richest person in the world, with an estimated net worth of around US$124 billion (NZ$173 billion).

How will their property be divided?

Bill and Melinda live in Washington State, which is a “community property” state. Similar to New Zealand, all property and debts acquired during their marriage can be split equally unless another agreement is negotiated.

Some people do not agree that a 50/50 division is fair when the generation of wealth was primarily established through Bill’s work founding Microsoft. These people believe that each case should be decided on merit. They would believe Melinda is entitled to some, but not all of Bill’s fortune. However, if the separation happened according to New Zealand law, all relationship property used or acquired during the relationship would need to be divided evenly between Bill and Melinda.

Property acquired during the relationship

All property acquired during the relationship is relationship property. Bill originally earned his fortune through his 45 per cent ownership of Microsoft. However, over the years Bill has sold most of his shares in the company and diversified into other significant investments. Bill now owns less than 1.3 per cent of Microsoft’s shares. He owns significant stakes in a diverse range of companies and is currently the biggest private owner of farmland in the US.

Bill and Melinda also own significant personal real estate. Their family home is a waterfront mansion in Seattle that has an estimated value of US$150million. In New Zealand, the family home is considered relationship property, regardless of whether one or spouses own it.

Pre-nuptial agreement

Pre-nuptial agreements are common among the wealthy. A pre-nup allows a couple to agree on how they will divide their property if they separate. It is possible that Bill and Melinda signed a pre-nup before their marriage. As they are private agreements, there is no way to know for sure.

However, their circumstances have changed enormously since they were married. In New Zealand, it is possible to overturn a pre-nuptial agreement if the circumstances have changed so significantly that enforcing it would be “repugnant to justice”, in other words intolerably unfair.

Pre-nups are not set-and-forget documents. They need to be revisited and revised as your marriage evolves and your family grows.

Financial and non-financial contributions

Melinda played a senior role in Microsoft’s success around the time she and Bill began dating. As a product manager, she contributed to the success of products such as Expedia and Microsoft Bob. After Bill and Melinda married, Melinda took a step back from Microsoft to raise their children.

In New Zealand, financial contributions and non-financial contributions, such as raising children, are considered to be of equal value. This ensures that a spouse is not disadvantaged if they put their career on hold to care for children, as Melinda did.

Trust Property

Bill and Melinda launched the Bill and Melinda Gates Foundation in 2000. It is reportedly the largest private foundation in the world. It owns assets of around $46.8 billion US. Bill and Melinda are trustees of the foundation, along with Warren Buffet. Bill and Melinda have given tens of billions of dollars to the foundation since its establishment.

A multi-billion-dollar foundation is not typically an issue in Kiwi divorces. However, the situation can be compared to a family trust of which your children are the final beneficiaries. Family trusts are very common in New Zealand.

Property owned by a trust sits outside of the default relationship property rules. However, you can agree to treat trust property as relationship property. This is what most couples do in long-term relationships like Bill and Melinda’s. If you do not agree to do this, it can become a long and complex exercise to determine whether any relationship property has been added to the trust. If relationship property has been added, you may need to be compensated for that. It would initially require the assistance of a forensic accountant.

Summary

Bill and Melinda’s separation is likely to be complex because of the significant property pool. They will probably need the assistance of many experts, including lawyers, accounts, valuers and tax experts. Whatever settlement Bill and Melinda reach, it is likely to impact Bill’s standing as the fourth richest person in the world.

• Jeremy Sutton is a senior family lawyer, specialising in divorce cases where there are significant assets, including family trusts and complex business structures.

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