The public eye has been on the social networking giant Facebook in the past week, with its initial public offering and subsequent lackluster performance. Less noticed, but still making headlines, is the marriage of Facebook’s Chief Executive Officer, Mark Zuckerberg, to his longtime girlfriend Priscilla Chan. While we all wish them the best in their marriage, any California divorce attorney will tell you that, particularly when large amounts of money are involved, a prenupial agreement can help avoid bitter disputes over property division if the union one day comes to an end.
Zuckerberg and Chan married the day after his company’s record-breaking IPO, which has led many to speculate as to the motivation behind the timing of the surprise ceremony. Some of the more cynical views posit that the timing of the marriage after the IPO means that all of his earnings from the event are his own separate property.
California is a community property state, which means that there is a presumption that assets acquired during the marriage belong to the community estate–that is, each spouse owns an equal share in everything acquired during marriage. Inversely, assets acquired before or after a marriage, or by gift, bequest, devise, or descent, are presumptively separate property. During a marriage, this distinction may not be significant, but upon a California divorce, classifying assets as community or separate property is one of the most difficult and contentious parts of the divorce process.
Upon divorce, a couple’s community property is divided equally between the two former spouses, regardless of who earned it. Generally speaking, a person’s separate property is not distributed to the other spouse upon their divorce.
In the case of the marriage between Zuckerberg and Chan, Zuckerberg acquired a substantial sum of money just before their marriage, which means that fortune is his separate property absent a clear written agreement to the contrary, such as a prenuptial agreement.
What is not clear is whether or to what extent any appreciation (or depreciation) in the value of Zuckerberg’s stock in his company would be considered community property. Generally, dividends from stock owned by one person before marriage are separate property. However, when one spouse dedicates time and effort to a company during the marriage, and that use of time and effort contributes to the growth of the company, courts frequently attribute some portion of that growth to the community. That means that upon divorce, the other spouse may be entitled to a portion of the difference in value between the company at the outset of the marriage and its value at divorce.