Friday, August 04, 2006

Another Beatle Breakup

Media reports estimate that Heather Mills McCartney may receive approximately $400,000,000 (that’s 400 millions dollars!) in her divorce settlement from former Beatle Paul McCartney.

His total wealth is estimated at $1,500,000,000 (that’s 1.5 billion dollars!). That means her cut could be approximately 27 percent of his estate. But wait – how can that be? Every media account on this subject seems to mention that Paul and Heather did not sign a prenuptial agreement. Does that mean that without a prenup - your entire wealth is up for grabs . . . not just what was earned during the marriage? For Pete’s sake - these people stayed together less than four years!

They married in June 2002 and separated in May 2006. He turned 64 this year – which means he was 60 when they wed. Presumably, the bulk of his wealth was earned before he even met her. In fact, the Beatles broke up in 1970 – when Heather Mills McCartney was only two years old. So, some could say that Paul’s career had peaked before Heather was even born. How, then, simply by being married to him for less than four years, relatively late in his life, could she be entitled to more than 25 percent of his wealth?

First and foremost . . a few disclaimers. I am not licensed to practice law in the United Kingdom and I have only a passing familiarity with the laws on that side of the pond. In addition, I must rely on newspaper reports as to Paul’s wealth, Heather’s demands and other details needed to analyze this break-up. You could say that this my speculation, based on media speculation. In legal mumbo jumbo, this entire article could be called "guessing" as to the facts of Paul and Heather's breakup. The legal analysis, however, is right on.

So let’s take a look at what would happen if (1) Paul was indeed worth $1.5 billion, (2) Heather has little of her own separate assets, and (3) they were divorcing in Pennsylvania.

Significantly, Heather and Paul have a child, Beatrice, born in October 2003. This is not just a divorce case. It is a divorce, child custody and child support case.

What is up for grabs?

In Pennsylvania, we first determine what is contained in the marital estate. As a general rule, we look to the assets and debts accumulated during the marriage, regardless of how they are titled. That means, if a house, investment, or other asset, is acquired during the marriage, it will most likely be considered a marital asset. If something was owned before the marriage (examples: a house titled in only one person’s name, or a 401k, begun before the marriage), we look at the increase in value of that asset. So, if you had a 401k what was worth $50,000 on the day that you were married, and $60,000 on the day you separated, then the $10,000 increase in value probably goes into the marital pot.

Back to Paul and Heather: their lawyers are busily figuring out what is marital and what is not. So, if they bought a huge manor in the English countryside during the marriage - that is most likely being thrown into the marital pot. Any money that his investments earned — again, into the marital pot. Royalties, dividends, profits, concert revenues earned during the marriage — toss it all in.

So – this may be where people are getting the $400,000,000 figure. Maybe, in the last four years – Paul has earned $400,000,000. However, I doubt it. I would bet that the $400,000,000 figure being tossed around is due to Heather’s little trump card: daughter Beatrice.

Child support - is the sky the limit when there are ELEVEN ZEROES in your net worth figure?

In Pennsylvania, we have child support guidelines. If the parents together earn less than $20,000 net per month, their child support obligations are usually set by the Pennsylvania Child Support Guidelines.

Clearly, Paul earns more than $20,000 net per month. (He probably earns more than $20,000 net per day! Wow!!). Does that mean he just hands over buckets and buckets of money to Heather, so little Beatrice will have more resources than most small countries? Not necessarily. In Pennsylvania, in cases that are above the guidelines (again: parents earn more than $20,000 net per month which usually works out to incomes above $350,000 year gross), child support is based on the reasonable needs of the child. To determine reasonable needs, we first determine– what is the custody arrangement?

Does Heather automatically get full custody of the child?

Custody, in Pennsylvania, is based on a best interests standard. Many custody arrangements, are moving more towards shared arrangements – work schedules, school arrangements and geography permitting. So, if Paul is interested, and presumably his work schedule will allow it, he would probably be able to be awarded custody of Beatrice for approximately half the time – or very close to it.

So how much child support does Heather get if she has Beatrice for half of the time?

This is where the reasonable needs analysis enters the picture. A child of an ex-Beatle will be afforded benefits and privileges befitting her father’s wealth and status. Many practicalities must be taken into consideration: security, travel arrangements and other forms of protection. So, the lawyers are probably working out the logistics: how much will Heather need to take care of this child one half of the time – and keep her safe and secure.

Does this mean that Heather must have enough money to build a mansion as big as Sir Paul’s and that if Paul has four vacation homes around the world and a private jet at this disposal that Heather must be provided with the same amenities? This is where reasonableness reins in what could otherwise be a blank check to entitlement. So, Heather will be provided a more than comfortable living, and enough funds to provide for the safety, security, health, welfare and needs of the child. She will not necessarily match Paul, luxury item for luxury item.

What about alimony for Heather?

Pennsylvania is not a state that awards liberal alimony. So if they were here, she could not likely expect alimony for a marriage that lasted less than four years. She would be awarded interim support for herself — and that amount would be significant based on Paul’s income. But that gravy train would end once the divorce ends.

So is $400,000,000 the amount that represents Heather’s share of the marital wealth, plus child support?

The $400,000,000 figure being batted around probably represents a more than generous share of the marital estate (Paul probably earned serious cash in the last four years – but I doubt it approached $400,000,000), and some type of lump sum intended to address child support. Usually, child support is paid on a monthly or weekly basis, but when you are dealing with extraordinary wealth, and have a phalanx of lawyers and advisers at your disposal, you can usually set up some type of a trust for the child support.

What does all of this mean for those of us worth less than $1.5 billion?

The basic analysis of divorce and child support cases remains the same:
(1) what is in the marital pot?
(2) what will the custody arrangements be?
(3) how much will the child support be – and to determine this - we must know how much each spouse earns.
(4) will there be alimony?

Of course, the answers to those four questions can take years to determine – and a fortune in lawyers’ fees. Paul did not insist on a prenup – would that have prevented this mess? In this case, it may have limited some of the questions but in Pennsylvania, prenuptial agreements can usually not address custody or child support in strictly enforceable terms, especially if the child was not even born at the time of the marriage.

So, the short answer is: a prenuptial agreement would have provided Paul some significant protection - but they would still be arguing over child support and child custody.

If you have questions about child support, custody or divorce, consult with an attorney, familiar with this area of the law, who practices in the state where you live.

Wit and Wisdom on Divorce

"Ah, yes, divorce, from the Latin word meaning to rip out a man's genitals through his wallet."

- Robin Williams

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QUOTATION: Lovers’ quarrels are not generally about money. Divorce cases generally are.

ATTRIBUTION: Mason Cooley (b. 1927), U.S. aphorist. City Aphorisms, Sixth Selection, New York (1989).

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QUOTATION: When two people decide to get a divorce, it isn’t a sign that they "don’t understand" one another, but a sign that they have, at last, begun to.

ATTRIBUTION: Helen Rowland (1875–1950), U.S. journalist. "Divorces," A Guide to Men (1922).

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AUTHOR: Austin Elliot QUOTATION: Whoever said "Marriage is a 50-50 proposition" laid the foundation for more divorce fees than any other short sentence in our language.

ATTRIBUTION: "Some Observations on the Attorney-Secretary Function" Law Office Economics and Management Nov 64 SUBJECTS: The World: Law: Attorneys & the Practice of Law

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AUTHOR: Claire Trevor QUOTATION: What a holler would ensue if people had to pay the minister as much to marry them as they have to pay a lawyer to get them a divorce.

ATTRIBUTION: NY Journal-American 12 Oct 60 SUBJECTS: Humankind: Wisdom, Philosophy & Other Musings

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Marriage is really tough because you have to deal with feelings and lawyers.
-Richard Pryor

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From When Harry Met Sally:

Harry Burns:
Right now everything is great, everyone is happy, everyone is in love and that is wonderful! But you gotta know that sooner or later you're gonna be screaming at each other about who's gonna get this dish. This eight dollar dish will cost you a thousand dollars in phone calls to the legal firm of That's Mine, This Is Yours.


Harry Burns:
Please, Jess, Marie. Do me a favor, for your own good, put your name in your books right now before they get mixed up and you won't know whose is whose. 'Cause someday, believe it or not, you'll go 15 rounds over who's gonna get this coffee table. This stupid, wagon wheel, Roy Rogers, garage sale coffee table!

I thought you liked it!

Harry Burns:
I was being nice!

From the movie: When Harry Met Sally...