Saturday, November 04, 2006

Is Reese going to Pieces without a Prenup?

She Walked the Line - Without a Prenup . . .

What's a few million between celebrities?

Reese Witherspoon apparently did not sign a prenuptial agreement when she married her now estranged husband, Ryan Phillippe. She also did not have a crystal ball. At the time of their wedding - he was earning more. However, she has since shot to fame and fortune -- earning at least $30,000,000 (30 million!!) last year. Her husband earned less than a half a million dollars for Crash - and his asking price per film is in the several million dollar range -- while Reese now commands at least 30 million dollars.

California's community property laws come into play -- which means they split everything 50/50. That means that even if she earned 90% of their net worth -- she will only retain 50% in the split.

Moving on to the real world . . .

I suppose it is difficult for the average person to feel sorry for Reese and her financial difficulties -- people probably just figure that she will earn the money back with her next film. But lopsided, and seemingly unfair, divorce distributions can happen to everyday people -- and those are the cases where it is a lot easier to extend sympathy.

In Pennsylvania, if you earn more than your spouse, you most likely will have a spousal support (or alimony pendente lite) obligation towards them. It may only be for a short time period -- but even a short time of paying support to another person can be financially devastating -- especially when you generally live paycheck to paycheck.

Take, for example, two young professionals who marry and are each earning about $50,000 per year. They may decide they do not need a prenuptial agreement -- after all -- aren't prenuptial agreements for people like Paul McCartney and Donald Trump? Not necessarily.

What happens if the wife simply decides she does not want to work --- or cuts back to part time. (This scenario assumes the couple have no children.) Husband, continues to work hard in his career -- and increases his earnings to $150,000 per year. In a divorce situation -- he could end up paying temporary support to his wife in the amount of $2,000- $3,000 per month --- which would definitely put a dent in his wallet. This could be especially frustrating if Husband felt that Wife was simply not earning up to her potential. A prenuptial agreement, in this instance, could have protected Husband. But, when picking out tuxedoes, bridesmaid dresses and china patterns, few people wonder about whether their spouse will continue to work to their earning potential.

Back to Hollywood . . .

I am sure that Reese, Ryan and the lawyers will work out a financial split. The more interesting issue with Reese and Ryan will be what happens to the children. These are actors -- who spend many months away from home filming. What if Ryan films in Canada for six months -- when will he see the kids? If Reese shoots a movie in New York . . . will she be able to take the children with her? This kind of family will not lend itself to a traditional custody arrangement.

Splitting up the millions of dollars will be the easy part of this case. The real challenge will be working out an arrangement for the kids.