The (It-Doesn’t-Get-Bigger-Than) Bezos Divorce

February 1, 2019
By Clifford Petroske

Recent news about Jeff Bezos,’s CEO and multibillionaire, has caused a stir in many circles, including our sphere of divorce law. With a net worth of $136.2 billion dollars, Jeff Bezos is, at least for the moment, the richest man in the world. And then came the affair with news anchor Lauren Sanchez, and the recent announcement by Jeff and MacKenzie Bezos that they would be divorcing after 25 years of marriage. As residents of Washington State, a community property state, the couple will likely share equally in Mr. Bezos wealth, making MacKenzie, with a roughly $68 billion settlement, tied with her former husband as the fifth richest person in the world, according to Forbes.

So what’s a few billion among friends? In some places, the division of wealth in high net worth divorces is not so easily accomplished. In New York and some other states, property is divided “equitably,” but not necessarily equally, as it is in community property states. Despite this distinction, in New York, most marital assets accumulated during a long term marriage are divided equally.

Unfortunately for Mr. Bezos, who moved with MacKenzie from New York to Seattle to start Amazon, the most notable exception in New York to this general rule of application is the ownership of a business interest. Historically, non-titled spouses have almost uniformly received less than half of the business-owning spouse’s ownership interest. Equitable distribution is often in the 25% range, with some cases spiking to 40%, but others landing in the 15% range. Case outcomes are fact-sensitive, so it falls on the attorneys to find advantageous case law precedent that most closely resembles the facts at hand. With the help of an experienced New York divorce attorney, this is generally not a problem.

In most high net worth cases regardless of locale, the business interest-owning spouse has a measure of control over the business that a division of his or her shares would dilute, causing difficulties with business management. For this reason, it is often preferable to pay the non-titled spouse for his/her interest by trading other asset interests. If, however, the value of the non-titled spouse’s interest in the business is greater than the business-owning spouse’s interest in those other assets, than a cash payout called a distributive award may be needed. Perhaps because they resemble loans, distributive awards are often paid out with interest.

Ironically, the Bezos divorce, like many high-profile CEO divorces, will be easier than most business ownership divorces, since the value of publicly traded shares is easy to determine. For most business owners, however, divorce presents a challenge in valuing the shares. The vast majority of businesses are privately or “closely” held, and there is no ready market for the sale of shares by which their value can be determined. For this reason, the first step when a closely held business interest is to be divided is to have it valued by an expert forensic accountant. In most cases, the net asset value of the business (or partial business interest) is added to the value of the goodwill the business possesses. Goodwill is valued by determining what a hypothetical investor would likely pay for the excess earnings presented by business-owning spouse’s interest, where excess earnings represent the annual earnings in excess of reasonable compensation.

From the standpoint of an experienced Long Island divorce lawyer and law group, we know it can get complicated, and, predictably enough, the valuations of different experts can vary widely. Of course, where valuations vary, so too does the value of non-titled spouse’s share. An extreme example arose recently in a case handled by Petroske Riezenman & Meyers, where the husband’s interest in a medical practice was initially valued at $44,000 by a so-called neutral forensic accountant. PR&M represented the wife and obtained an independent forensic expert who provided a valuation of nearly $1.5 million. At trial, the Court rejected the “neutral” expert’s valuation and adopted the wife’s expert’s valuation.