Facebook Founder Weds Day After IPO – Coincidence?

On Friday, May 18th, Facebook CEO, Mark Zuckerberg, established his net worth to be around $19 billion. The very next day after the company's initial public offering he surprised everyone with a wedding. Zuckerberg married his long-time girlfriend Priscilla Chan. Zuckerberg and Chan met at Harvard University in 2004.

In the realm of family law the timing of the couple’s nuptials seems to be anything but a coincidence.

It’s likely that someone in Zuckerberg’s position would have signed a prenuptial agreement, in which the parties could agree ahead of time how to split their assets, including his Facebook stock. Prenups generally explain how the couple will divide their assets if they get divorced in the future. Under California community property laws, any property acquired after the marriage is presumed to be community property and should be split 50-50 between the parties after a divorce. A prenup allows the parties to ignore community property laws and divide their assets any way they want, avoiding the mandated 50-50 split. Chan, who allegedly negotiated a “relationship contract” before coming to California, has likely negotiated a good settlement for herself if the marriage does not work out.

Even without a prenup, Zuckerberg timed his wedding just right so that his $19 billion in Facebook stock would be considered his separate property in the event of a divorce. Property acquired before marriage is generally considered one’s separate property. Property acquired during marriage is presumed to be community property with the exception of property acquired by gift or inheritance, produced by separate property (rents, issues, and profits), or acquired after the date of separation. These exceptions are characterized as separate property even if acquired during marriage. Community property is split evenly between the parties to a divorce but each party keeps their separate property, which would allow Zuckerberg to hang onto his Facebook fortune. Had Zuckerberg married on Thursday May 19th his billions would be part of the community.

However, if there is no prenup Chan has a couple possible claims she can make to get a piece of Zuckerberg’s fortune.

For instance, if Zuckerberg has stock options and grants that will vest during the marriage Chan could be entitled to those assets. In California, the court has discretion to allocate community or separate property interests when it comes to stock options that are granted to an employee prior to separation that do not become exercisable until after the parties separate depending on their purpose. (Marriage of Hug (1984) 154 Cal.App.3d 780, 782.) Stock options are considered community property when the efforts used to earn them are exerted during the marriage so it is necessary to determine the period of employment corresponding to the options. To make this determination you must look at whether the stock options would be considered deferred compensation, incentives for future performance, or both. (Id.) If the stock options are characterized as deferred compensation the earnings would likely be separate property but incentives for the future might put the earnings in the community.

Another option is a claim for stock Zuckerberg had before marriage if Chan can prove the value of the stock increased during their relationship as a result of Zuckerberg's efforts. When a separate property asset increases in value due to the community efforts of the owner spouse, the community is entitled to a portion of the interest. However, it would be difficult prove a claim like this with a company like Facebook because it would be hard to ascertain who or what attributed to the increase in its value.

In any event, the timing of Zuckerberg’s wedding after the IPO, whether it was coincidental or on purpose, will help him protect his $19 billion if his marriage to Chan were to end in divorce one day.

While not every divorce case involves assets like Mark Zuckerberg has, there are many other complicated issues surrounding various items of assets and debts that may arise in any case. At Mello & Pickering, LLP, we can help you to determine what your rights are with regard to your assets and debts or those of your spouse. Give us a call at (408) 288–7800 to schedule a free 20 minute telephone conference or to set up an in person one hour appointment.