Unfortunately for investors and directors alike, Tesla Motors Inc.’s highly hyped initial public offering (IPO) is competing for attention with media coverage of the bitter divorce of its co-founder, chief executive officer and major shareholder Elon Musk, who also co-founded the hugely successful company PayPal. The June 29th IPO went off without a hitch, resulting in a 41 percent in the company’s stock on the first day (which dropped dramatically, falling below the original price, in the first week). Regardless of what some still consider a relatively successful offering, questions remain about the viability of the country’s first electric car start-up should Musk’s shares — which, after it went public, now stands at 28 percent of the company — be considered marital property subject to division in the divorce proceedings.
Musk’s shares are wisely held in a private trust, and in theory they would be considered separate property, protected from his sarcastically self-proclaimed “gold digging” wife. Even so, Justine Musk is seeking half of his Tesla stock as well as five percent of his stake in SpaceX, one of the few commercial space exploration companies in the world.
How Could Musk Have Protected His Assets?
With proper planning and a few strategic moves, Musk could have kept the millions of dollars in assets from being on the line in his divorce proceeding. Although some people regard them as dooming a marriage or taking the romance of out it, parties who enter a union with significant assets would be wise to have an experienced family law attorney draft a comprehensive premarital agreement (sometimes known as a “marital property agreement”) beforehand. These can be particularly helpful in a second marriage, allowing the parties to designate property that should pass to children or other heirs.
Prenuptial agreements serve other purposes besides estate planning, including:
– Setting the rules for spousal support, such as one party waiving their right to seek alimony or pre-determining an amount that will be paid in the event of a divorce
– Valuation of the other party’s assets (to discover net worth – both parties must disclose their financial situation before a valid and enforceable prenuptial agreement is created)
– Protecting business interests
– Agreeing to commingle otherwise separate property
Should you have questions or concerns about protecting your business or personal assets in a divorce, you should seek the advice of Bohm Wildish relating to prenuptial agreements.