INSIDE THE BEZOS PRE-NUP

We go inside the the enormity, complication, and notoriety of the BEZOS PRE-NUP AGREEMENT with divorce attorney, MARILYN CHINITZ of BLANK ROME.

Outline of the ISSUES INSIDE the BEZOS PRE-NUP

• General Concepts
• What happens without a pre-nup?
• Process for disclosing assets
• Previous marriages and those pre/post-nups?
• Community vs Equitable Distribution (Does the Pre-Nup contract this away?)
• Separate property
• Outside trusts?  Estate Planning?
• Pre-nup vs ultra high net worth pre-nup
• Financial Considerations (and Complication)
• Non-Financial- NDA, media activity, scope of negotiations, data and tech issues
• Let’s go through the General Fact Pattern
• High Profile
• Asymmetric Net Worths
• Kids?
• Which state is used for choice of law? Portability? 
• How do you make sure this has teeth?  (Coercion penalties)
• Spousal support / alimony?
• Escalator or sunset clauses?
• Disqualifying or  “infidelity” or “weight gain” clauses?
• What happens if children?
• Other constituencies – charities, businesses, political causes etc 
• Integration with estate documents, life insurance, other vehicles
• Is there a check-in every five years?
• What else can we learn from what is inside the Bezos Pre-Nup?

Transcript

Frazer Rice (00:02.07) – Inside the Bezos Pre-Nup

Welcome aboard, Marilyn.

Marilyn Chinitz (00:04.088)

Thank you, really nice to be here and nice to talk to you about what’s inside the Bezos Pre-Nup.

Frazer Rice (00:07.541)

We sort of regaled ourselves with a mutual friend and we’re already, I feel like we’re already related. That’s right. So we’re going to talk a little bit about probably one of the highest profile marriages in the world that just happened with the Bezos Sanchez union and get inside the Bezos pre-Nup. But for just for a little bit here, let’s talk about what happens in a sort of family law divorce setting.

Marilyn Chinitz (00:13.39)

Your best and glorious buddies are ready.

Frazer Rice (00:35.232)

With general concepts because we’re going to be diving into some specifics with the case study here. What happens when something goes wrong and we have a divorce that happens without a prenup?

Marilyn Chinitz (00:46.734)

So it depends what state you’re in. If you’re in a state like New York, then we have equitable distribution laws. If you’re in a state like community property in California, then those laws are very different. So if you have no prenup, and a lot of people don’t because they start their marriage with very little assets, and everything that you acquired during your marriage is now subject to a division.

Frazer Rice (00:49.569)

Of course.

Marilyn Chinitz (01:15.918)

And what happens is you start to trace the assets and you look at, what do I have? You look at homes that you purchase, real estate that you purchase, stocks, securities that you purchased. It doesn’t matter in whose name the asset is held. It’s a marital asset if it was acquired during the marriage and it was not gifted or inherited.

If you come into the marriage with assets and you have no prenuptial agreement and you keep those separate property assets clean, and I’ll explain what that means. When they go up in value because you actively caused their appreciation, they may be subject to a marital claim, the appreciation aspect. If you… have an asset that went up in value because of passive reasons and you kept that asset separate, it will remain separate property. So let’s talk about an example. If I owned a building before I got married and that building was worth five million dollars and then I get married and years later I get divorced, that building is now worth twenty million dollars.

It appreciated by 15 million. Did it appreciate because of market fluctuation, because the market went up, real estate did better? Or did it appreciate in value because I managed it, I collected the rent, I made sure the repairs were done, I made renovations to the building, and therefore it went up in value. If it went up in value during the marriage because I actively did something,

I renovated, I took care of the building, I managed the building. That appreciation from five million to 20 million is gonna be considered marital. Then the question is, what percentage does the other spouse get? Do they get 10 % of the appreciation or 50 % of the appreciation? If that asset went up because of market fluctuation, I sat back, I did nothing, the market went sky high.

Marilyn Chinitz (03:38.905)

Then that property will remain separate property and the appreciation is separate. So you have to look at those different factors. But other than that, if you come into the marriage with no assets and you create a marital estate and you have no pre-nup, that marital estate is going to be divided. Now the question is, how is it going to be divided? If you’re in an equitable distribution state,

Frazer Rice (04:04.907)

Right.

Marilyn Chinitz (04:08.718)

What does that mean? It means what a particular judge feels in a particular courtroom on a particular day. What does equitable mean? It’s completely subjective. So did the other spouse take care of two, three children while you were managing that property? Did the other spouse work but supported you? Or did the other spouse do their own thing and had no real contribution? It’s very fact specific.

And if you can show that the spouse really contributed in a meaningful way while you were running your business or running your properties, I took care of the children, I took care of the home, I took care of you, then the court is likely to give you a more substantial percentage interest of that appreciation. And in New York, for example, equitable, and then we’ll talk about community, California, for example, generally,

Bank accounts, retirement accounts, stock security accounts are going to be divided pretty much 50-50. Where the court will not give 50-50 is if it’s a business. And then the court can go anywhere from 10%, 15%, 20%, up to maybe 40 % in unusual cases. What do those cases look like? They work together in the business.

They took care of things together. It’s very unusual for a court to give 40 % interest to the non-working spouse unless they were really actively involved in the business. Now, conversely, take California, which is a community property. When you get married and you acquire property in California, that’s 50-50 off the bat. Now, why does that become really important?

We’re seeing a lot of cases where people have really created a lot of wealth in their marriage and they are correctly and smartly putting some of that wealth into trust. They’re gifting it to a trust for their children. New York, for example, is a title state. A title state means if I own the asset during my marriage, I can sell it, I can gift it, I can do whatever I want with it.

Marilyn Chinitz (06:33.718)

As long as there’s no divorce. If you are in a community property state, you can’t do that because that person, that spouse already owns 50%. It’s almost jointly owned. So you can’t give away a marital asset unless you consult with me, your spouse, unless you ask me, is it okay? So in New York, if I wanted to take an asset,

an interest that I own during the marriage, it’s a marital asset, but because there’s no divorce, there’s nothing that prohibits me, I gift it to a trust, I have the right to do that. In California, I may not have the right to do that unless I got my spouse’s consent. So, number one, what’s critically important is you need to know what the laws are in the different states. Now,

Sometimes people get married. They get married in New York. They enter into a prenuptial agreement in New York. But now they move to California that has very different laws. And if they thought they were going to move to California, then you want to make sure as a New York lawyer to advise the client, we need to engage California counsel. We need to find out what their laws are so that your prenup is portable, it could be enforced in a different jurisdiction.

Frazer Rice (08:03.559)
So choice of law, obviously very important. Then I would say sort of the process and hygiene around using assets and deciding what happens jointly versus what stays separate is something that’s important to manage going forward. How do you think about that with clients?

Marilyn Chinitz (08:20.346)
So, I mean, interestingly enough, when I do a, let’s talk about prenups for a minute. Because when I do a prenup for a client, we have a check-in every year. We go to lunch. We talk about what changes, what’s going on. Does the agreement need to be modified? So many times people will sign a prenuptial agreement, they put it away, they don’t even know where they put it. And 20 years later, sadly, somebody triggered.

the terms of that agreement. Now they pull it out and they go, my God, everything’s changed. When we signed that agreement, he was only worth X amount. He’s now 20 times wealthier, but I didn’t increase anything. That’s not fair.

If the agreement is…an agreement that you entered into with the advice of counsel. If the agreement had full financial disclosure, if the agreement was negotiated, if you had your own counsel, etc., all the bells and whistles, it may be an unfair agreement, but it’s going to be enforceable unless it is unconscionable. So what does unconscionable mean? Unconscionable means shocking to the conscience.

So I represented, and I could say it because it was in the media, Liba Icahn, married to Carl Icahn. And he had a prenuptial agreement prepared, and she signed it. Years later, he decided he wanted a divorce. And she argued to the court, I was not her first lawyer. I was not her second lawyer, I was her third lawyer. And I’ll tell you why that was important.

She argued to the court that the agreement is unconscionable. He’s now worth several billions of dollars, and all I got was X amount of dollars. That’s unconscionable shocking to the conscience. And the court, lower court said, well, I’m sorry. That’s a lot of money for most people. And by the way, in the statement of net worth, there’s a notation that there’s a diamond emerald necklace worth

Frazer Rice (10:23.239)
A lot!.

Marilyn Chinitz (10:42.56)
A million and a half dollars. So coupled with that, there’s nothing unconscionable about your agreement. Now, it was appealed, but the more important thing is that the court said the following. You are barred by the statute of limitations to set aside the agreement. So years ago, you had six years to set aside a contract. Now, if you’re happily married,

You’re not going to wake up and go, hmm, honey, it’s six years. I got to set aside that agreement. You don’t do that. And so finally, a judge in New York County, Phyllis Gangel-Jacob, wrote a decision that said, wait a minute, that’s unfair. We’re going to toll the statute. Because people, they’re happily married, they’re not going to wake up and say, I’ve got to change the agreement.

Frazer Rice (11:34.961)
Right.

Marilyn Chinitz (11:35.151)
You’re going to toll the statue until there’s a triggering event. And then you have six years to set it aside. Now you would think a seasoned lawyer would know that we talked about knowing the law in different states. You’ve got to know the law in your own state. So in New York County, the first department, Phyllis Gangel Jacobs said, toll the statue.

That would have meant that Mrs. Icahn would not have been barred by the Statue of Limitation. She could have brought her case to set aside the agreement. In Westchester County, that’s the second department, they had a totally different law. They went by a six-year Statue of Limitation.

So had her lawyer made inquiry about how that…ruling how the statute of limitation works in the different departments, they would have probably started the action in New York County because they owned a home in New York, not just in Westchester. So when we were chit chatting before we went on, I said to you, it’s all about being in the right hands. You can’t be sloppy in this business. It’s too complicated. It’s too detailed.

You’ve got to have an attorney who really goes out of their way to find out what’s the best jurisdiction, what are the different rules, what are the different laws. I had a client in Hong Kong and she would have jurisdiction in New York or Hong Kong. We then retained Hong Kong Council to find out what would be the benefit if we brought the action there versus here.

I had a similar situation a year ago where I had a client who had jurisdiction in Germany and jurisdiction in New York. That was critical because her husband came from a very wealthy family and there was a lot of separate property. In New York had she brought the action, the court would have said separate property, you don’t get any portion of it. It’s remained intact, no commingling, no transmutation. That’s his. In Germany, they throw everything into the pot. So I called German council and I said to her, you need to go and pursue this in Germany. It was the best decision because in Germany, she had the access to all the assets.

Frazer Rice (14:04.732)
Again, it’s so hyper-specific. You’ve got to know, as you said, not only the state, but in the state, how things work. Whenever I wouldn’t go as far as to say I advise, I really more issue spot. I had a friend of mine, it wasn’t a client, but basically New York, Florida, Dallas, Texas, and then got married in Ireland. I said, you’ve got a lot of things to work out here because I’m not sure which one’s the best.

Marilyn Chinitz (14:11.416)
Correct.
Yeah.

Frazer Rice (14:32.63)
And it turned out to be a good thing for him five years later on when it didn’t work. And he ended up using Florida for whatever reason that was the one to choose. So let’s apply.

Marilyn Chinitz (14:44.654)
You reminded me of something that I did want to bring up because it’s very interesting. So a lot of people will get married and they’ll have these big weddings and big affairs and invitations and come to our wedding and it’s a destination wedding and there is all the bells and whistles. But what happens if you didn’t have somebody to really officiate the wedding? It was someone who just signed up with a website.

Marilyn Chinitz (15:12.556)
What happens if you did not get the marriage license? And we’re seeing a lot of cases like that, where people thought they were married and they’re not married.

Frazer Rice (15:24.008)
Those technicalities could just cave your knee in.

Marilyn Chinitz (15:26.348)
Right. that’s right. So then you look fact specific. Well, let’s see what they did inside the Bezos Pre-Nup. Let’s see how they held themselves out. So it is so many complexities. And that’s why it’s really important that you need to have an attorney who’s in the know who asked you these questions.

Frazer Rice (15:42.747)
So let’s apply some of these concepts that are inside the Bezos Pre-Nup. First of all, high profile. So I imagine in the prenup that you’ve got not only the financial, which has its own elements to it, but the non-financial, the NDAs, media activity, what the scope of negotiations are, even so far as the things like data and tech issues and privacy. How do you think about that in those big high profile cases?

Marilyn Chinitz (16:08.782)
I will tell you, I was in Italy at the time they got married in Italy. And it was like on every station in Italian, but it didn’t matter. was all you’re doing is looking at all these beautiful people and beautiful dresses. And it was very elaborate. The thing that I found very interesting is what happened before the wedding? So what happened before the wedding is Bezos, I think, sold

Frazer Rice (16:14.2)
Right.

Marilyn Chinitz (16:37.294)
Over three million Amazon shares, generate about $700 million. Was that used for the wedding or as a gift or whatever? But I thought that was an interesting fact. So when you have a prenup like their prenup, number one, it was negotiated over a very extended period of time. And it was viewed not by one lawyer, not by two lawyers, by a team of

Frazer Rice (17:02.797)
Whole fleets!

Marilyn Chinitz (17:05.966)
Trust and estate lawyers, tax lawyers, real estate lawyers. This was structured as if it was a business merger. And it was carefully structured to withstand any kind of scrutiny, because there’s a lot at stake, obviously. He had already gone through a divorce where there was no prenup. And that resulted in a $38 billion award to the wife.

I think that was great. because she started the company with him. But now you have a different situation where he had this massive wealth long before he got married. Amazon stock, Blue Origin, Washington Post, real estate, and the future appreciation of those assets, just to name a few. There’s a lot to protect here. And so clearly, there’s going to be a massive amount of financial disclosure.

Because every prenup has to be accompanied by full financial disclosure. You can’t wave something when you don’t know what you’re waving to.

Frazer Rice (18:13.657)
Question. So, Lauren Sanchez gets a book of his finances that’s two feet thick minimum. At what point, the detail can be overwhelming and the marriage may not have ever happened if there was, let’s call it complete understanding of his financial situation. At what point do you sort of say, okay, here’s generally what we think he’s worth and therefore that number underpins?

Marilyn Chinitz (18:41.868)
Well, here’s how you do it. It’s not that complicated. It’s called a title agreement. Everything’s in my name is going to be mine. Anything in your name, Lauren, will be yours. What will be marital is what we put in joint names. It’s very clean way of keeping it.

So if he buys interest in future companies and private investments, properties, et cetera, and he puts it in his name, then under that title agreement, it’s his. It doesn’t get sloppy. If she purchases something, it’s in her name, it’s hers. If they purchase something together and they put it in joint names, it will be a marital. But he may say, I put in some separate property. I get that back off the top, it comes to me.

Frazer Rice (19:32.706)
So once we get that in place, the idea of if something were to go wrong five or 10 or 20 years from now, the concept of alimony or spousal income or any other sort of payout, how does that happen in the negotiation?

Marilyn Chinitz (19:51.159) Inside the Bezos Pre-Nup
So, you know, you have to look at, let’s put it this way, if Lauren Sanchez is gonna walk away with $400 million, she’s not getting support, right? That’s obvious. And we know she’s not walking away with $20 million. You could have in the agreement that for every year that we’re married, I give you a million dollars, that’s your separate property, you do whatever you want with it. That’s not an uncommon situation for very wealthy people.

But what he wants to do is to make sure in the agreement that she does have wealth so that it’s a fair agreement and that he does create marital wealth that they end up sharing. So I’m sure some of the houses and I believe that they already have homes that are in joint names under the agreement will probably be a marital asset. So off the bat she’s probably going to end up with a significant amount of wealth.

If this marriage lasts a long time, do they put in a sunset clause? Most likely not. know, sunset clauses can be very dangerous and clearly under the law, he’s entitled to all the separate property because he earned it long before he ever met her. So I don’t expect that there is a sunset clause in there. But let’s face it, you can gift your spouse whatever you want.

But it doesn’t have to be in the agreement. So if he is so happy and the marriage is fantastic and they live a very long time, he may never look at this agreement and he may give her a substantial amount of assets jointly or in her name and make it very, very fair. What happens though, a prenup is not only what happens in the event of divorce, it’s also what happens in the event of a death in an intact marriage.

I’m sure that he wants to fully protect her. If they’re not divorced and God forbid he dies and it’s an intact marriage, there could be a marital trust that’s set up, you know, that has $200 million or $400 million or more. She gets the interest on that so that she’s well taken care of for the rest of her life. And, and, you know, everybody says that he’s an incredibly kind, generous person.

Marilyn Chinitz (22:18.156)
I’m sure he’s also made provisions for her children inside the Bezos pre-nup and estate planning.

Frazer Rice (22:21.111)
How does this integrate with the other pre or post-nup or the divorce settlement with the first wife and then with those estate planning documents? That to me, you’ve got a conference room with the marital family law attorneys, the estate planning attorneys, her attorneys. How does everybody stay organized on that front?

Marilyn Chinitz (22:45.774)
So it’s something that we do all the time and you separate it out. Look, there’s a lot of issues that get involved in these kind of agreements and settlements and as I said, a business merger. There are tax issues, right? So if he gifted her anything before marriage, that’s a taxable gift. So…

The estate lawyers know that nothing should be given to her until after their marriage. And then these trusts are very sophisticated. And you separate out what’s trust related. When you put assets into a trust, they’re no longer part of the marital estate. They now belong to a separate entity. And so these trust and estate lawyers carefully craft trust that are going to accomplish different things.

One, could be to take care of a spouse’s health, education, welfare. One could be to distribute property or principal. It’s not uncommon. It’s very common when there are agreements like this that you have people who are of extraordinary wealth.

Mackenzie, the prior wife, has nothing to do with this at all because she got her Amazon shares. And I’m sure those shares now are worth probably $180 or $200 or $300 million because they’ve gone up. But the first wife issue, there’s no issue. If you got $38 million, you’re not a support candidate. He doesn’t have to consider it that. So this is really being looked at as if there are no other factors involved.

But this is probably why the negotiation of this agreement took place over a long period of time.

Frazer Rice (24:44.802)
For the some further down the pike certainly not at the Bezos level but let’s say at the high net worth level where you’ve got outside trusts that you that you don’t have ready access to there’s a trustee that can make payments at a discretionary basis. Do you have to be careful as far as how you receive money that’s distributed from a trust so it doesn’t get tainted ultimately. The other spouse if they’re divorcing that that’s not part of, you know, maybe a standard of living that they’d become accustomed to.

Marilyn Chinitz (25:18.836) INSIDE THE BEZOS PRE-NUP
That’s a very, very good question. So I’ll give you an example.

Joe and Mary marry. Mary comes from a wealthy family. Her family set up a trust and put $20 million in that trust for her, for her benefit. And during the marriage, he made a lot of money.

Marilyn Chinitz (25:42.2)
I’m sorry. During the marriage, he made a lot of money. They lived a good lifestyle. Her parents would on occasion distribute money to her. But it was a discretionary distribution. 20 years later, they divorced. And he said, I don’t want to pay you any support. We’ll divide up the assets, but you get no support. And the reason why you get no support is you’ve been getting distributions from your parents. That’s more than enough to take care of your expenses. And she said,

That’s not fair. It’s discretionary. I don’t know when my parents are going to distribute. I can’t force them to distribute. And therefore, I’m asking the court for support. Well, the court agreed with her. The court said it’s a discretionary trust. And therefore, we can’t she can’t bank on when she’s going to get it because she may not get it. You must pay support. So the court will look at again, fact specific.

Are they discretionary or are non-discretionary? If she was getting distributions on a regular basis, the court would impute that, its income to her, they would consider those distributions because they’re non-discretionary. She’s getting them, she could rely upon them. She could use it to pay her own expenses and her own support.

Frazer Rice (27:08.766)
Is it good hygiene, I guess, to have it go into an account in her name as opposed to a joint account?

Marilyn Chinitz (27:16.842)
If you want, well see, you’re raising really good questions. Here’s why. If you want something to be separate property because of the gift of an asset, if you put it into joint names once you get it, you’ve now commingled it. You transmuted what was separate and you’ve now made it marital. So if you get a distribution from a trust or a gift,

You’re going to have to put that in a separate account in your name only. And let’s say you buy stocks and your husband works for Morgan Stanley. And he says, well, wait a minute. I can trade that account for you. I’ll make it go up in value. Once he does that, he’s actively contributing to the appreciation. He will now have a claim. I caused that account to go from 800,000 to 5 million. I want a piece of the appreciation.

So when I said to you earlier, I meet with clients a year later, and it’s really to say, keep your assets separate. Do not commingle them. If you did, then you may have lost them. What does the financial circumstance look like now? People can amend a prenup. They can enter into a postnup. But you’ve got to look at the agreement to know what you signed. If you look too late, it may be too late.

Frazer Rice (28:41.63)
So I hate to wind down on this because we’ve gone through and there is a ton of unbelievable information here. Most of us do not have the Bezos Sanchez wealth, not only the asymmetry, but the size that we’re talking about here. What are some good lessons for people to take away? Either going ahead and marrying or if circumstances changed after the marriage?

Marilyn Chinitz (29:07.63)

So I think there’s so much wealth of information out there. I think number one if you are I Think prenups are great. First of all, why because you learn about the other person’s or or debt So a lot of times people live a very lavish lifestyle. They have a beautiful apartment. But you don’t know if there’s a mortgage on that apartment. They have a beautiful home in the Hamptons but is at their home. They drive a fancy car, but is there dead on it.

So when you enter into a prenup, you have to make full financial disclosure and all you find out, wait a minute, I thought you own that apartment. You don’t own that apartment? Or you bought that? Did you borrow against it and it’s all debt? Or you owe this to your former spouse? And now all of a sudden you’re finding out the full picture.

You can make a decision, yes I want to marry that person, but you’re in the no. Being in the no is important on every scale. So if you’re to enter into a prenuptial agreement, number one, you want to get the best attorney, and you need to know and have the time to really negotiate the terms, you have to understand what do I want to accomplish? Do I want to create a marital estate? I recognize you came into the marriage, let’s keep that separate. I agree to that.

But anything that we build together, I want that marital. You take the time to negotiate. You don’t rush into it. Never sign an agreement given to you on the heels of a marriage. Do not feel pressure. You’re not doing yourself a service at all. So having good counsel, financial people, a good team of professionals, I find is super, super helpful. And then in terms of…

What happens after marriage? Again, stay in the know. Don’t tell me that you didn’t know that there was a mortgage on your house. That he refinanced three times and you signed the documents and you have no equity in the home. So ask your spouse, tell me what’s going on. Sit down every year.

Marilyn Chinitz (31:30.146) (INSIDE THE BEZOS PRE-NUP)
Can we look together and figure out what we have because if God forbid something happens to you I want to make sure the children and I are okay. Can we go and meet with a trust and a state attorney because we need to understand in case anything happens how do we set things up. If you just close your eyes and you bury yourself you’ve buried all the information and who wants to do that in life. I think no one should be afraid to ask questions nobody should be if you are then you’re in the wrong marriage.

But you have every right to know, what do we have?

What kind of debt do we have? How would we pay this off? How are we protecting ourselves in the event something happens? Should we get life insurance? Should we put some assets in trust so that it grows in the trust tax free? There are important decisions to make in marriage, just like there are important decisions to make in business. You don’t enter into a business transaction and sit back and hope everything goes well. You are a part of things and make decisions.

And that’s what you have to do in your marriage.

Frazer Rice (32:35.876)
Great stuff. Marilyn, how do our listeners slash watchers find you?

Marilyn Chinitz (32:39.51)
So I am a partner at BlankRome, B-L-A-N-K-R-O-M-E. I’m in the matrimonial department. If you go on the website, you’ll see my name, my email, my phone number. And it was pleasure talking to you. Ask great questions.

Frazer Rice (32:54.268) Inside the Bezos Pre-Nup
Likewise, thank you.

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