Wealth Matters: From a Prominent Divorce in the Affluent Class, Lessons for All

Over the years, I’ve tried to avoid writing about big money divorces like this. I’ve just been a bit prudish about something that is at best sad and at worst tragic. I always think of the children. But there is certainly plenty of practical advice to be gleaned from such an emotional issue, which is why lawyers and financial planners should tune in to the salacious gossip.

What little is known — or can be logically assumed — about the Murdoch divorce provides lessons for people with far less money.

There are at least four areas in the Murdoch divorce that other affluent people need to consider if they find themselves served with divorce papers.

AGREEMENTS In the Murdoch case, there is reportedly a prenuptial agreement and two postnuptial agreements that modify the original contract.

Ilan Hirschfeld, national leader of the marital dissolution practice group at Marcum, an accounting firm, said postnuptial agreements generally solidify the prenuptial agreement and make the separation of assets cleaner. But if there is only a prenuptial agreement and it is very old, he would use forensic accounting to challenge it.

“If I’m representing the Mrs. and she’s not happy because her husband is making 10 times what he was making in the beginning, I’ll go back and say, ‘Did you disclose all the assets?’ or ‘Was she properly represented?’ ” he said.

David Aronson, a founding partner of Aronson, Mayefsky & Sloan, took the opposite position. He said people who entered into prenuptial agreements lightly or without proper counsel could be sorely disappointed.

“Prenuptial agreements are routinely enforced in New York, even if they appear to be bad deals,” he said, adding that the few recent cases in which they were overturned were “still exceptions to the rule.”

One type of prenuptial agreement that could draw more scrutiny, Mr. Aronson said, is one drawn up to protect the earnings of the higher-earning spouse when both people were younger. “That’s a very bad deal for the spouse who is never going to earn a lot of money,” he said.

ASSETS Dividing assets between spouses is rarely as simple as deciding to split it 50-50 — or even 60-40. A lot depends on what kinds of assets are involved.

Appraisers and lawyers draw a distinction between passive and active assets. A passive asset would be a house or a stock portfolio, but not all of them can be parceled out.

Jason M. Katz, a private wealth adviser at UBS Wealth Management, said a municipal bond portfolio could be tricky to divide without slighting one spouse because bonds have different maturities and credit quality.

More difficult are investments in hedge funds and private equity. He said couples would have to wait until the next withdrawal period to get their money from a hedge fund, but with private equity they did not have the same option and could be in it for years, depending on how long the fund holds on to its investments. A way around this could involve one spouse trading away rights to it for something else, like a beach house.

A business, on the other hand, is an active investment, and the percentage a spouse is entitled to depends on how much he or she contributed to the business.

In the case of anyone who enters a marriage with an existing business, as Mr. Murdoch did with News Corporation, the calculation of what percentage of the business Mrs. Murdoch could be owed starts on the day they were married and ends with the value of the company on the day they filed for divorce. This is tricky: She traveled with Mr. Murdoch on business, particularly to her native China, and famously smacked a guy trying to throw a pie in his face. But what could she or any one person contribute to the success of a global company like News Corporation?

The calculation changes if the business was started while the couple was married. Mr. Hirchfeld said that a spouse of a business owner who stayed home and raised the children is generally awarded somewhere between 30 to 35 percent of the business.

Wendi Murdoch Hires a New Lawyer, Suggesting a Divorce Is Getting Messy

Mrs. Murdoch has hired William D. Zabel, a well-known New York trusts and estates lawyer who has represented several women in their divorces from wealthy businessmen, including Jane Beasley Welch during her contentious split from John F. Welch, the former chief executive of General Electric.

A spokesman for Mrs. Murdoch, Christopher Giglio, confirmed the hiring of Mr. Zabel, but otherwise declined to comment.

Mrs. Murdoch had been represented by Pamela M. Sloan, who advised Mrs. Murdoch on her prenuptial agreement with Mr. Murdoch in 1999, when the couple married in front of 82 guests on board his 155-foot sailing yacht, the Morning Glory.

But since then, Ms. Sloan had become friendly with the Murdochs, and Mrs. Murdoch decided that she wanted more independent counsel, said a person with direct knowledge of the case who like many people declined to be identified discussing personal matters.

Ms. Sloan did not return a request for comment.

Although the Murdochs signed a prenuptial agreement and two postnuptial agreements delineating the separation of assets in the event of a divorce, there are a number of areas that remain up for negotiation, said people with knowledge of the case who spoke only on the condition of anonymity.

For one, there are the custody arrangements and child support for their daughters, Grace, 11, and Chloe, 9, these people said. Because they are not binding on the court, custody arrangements and child support are rarely part of prenuptial agreements, and are often used by the less-moneyed spouse as leverage in negotiations.

Other issues that could be contended include the division of certain assets, like their Fifth Avenue penthouse and the yacht, on which Mrs. Murdoch, 44, and her daughters are currently vacationing in the Caribbean.

There is also the contentious issue surrounding the Murdoch family trust. Mr. Murdoch surprised his wife in 2006 when he announced during a television interview with Charlie Rose that Grace and Chloe would have the same economic interest in the family’s trust but not the same voting rights as his four children from his previous two marriages.

The slip almost created a separation, and prompted Mrs. Murdoch to negotiate more favorable terms for her daughters, according to people close to the couple.

Mr. Zabel, an expert in trust law, is expected to examine the soundness of the trust structure.

“Even with the most sophisticated couple, unless you have perfect 20/20 foresight often some issues can arise that weren’t taken into consideration and are prime for negotiation,” said Paul M. Talbert, a divorce lawyer at Donohoe Talbert in New York, who is not involved in the Murdoch case.

Representing Mr. Murdoch, 82, in the divorce proceeding is Ira E. Garr of the law firm Garr Silpe. But Mr. Murdoch is also relying heavily on the advice of Gerson A. Zweifach, the general counsel of both News Corporation and 21st Century Fox, as the newly separated companies are now known. Mr. Murdoch’s 1998 divorce from his second wife, Anna, cost more than $110 million in cash.

A company spokeswoman has said the divorce will have no effect on either company.

Shortly after a visit to the couple’s Northern California home in June, Mrs. Murdoch returned to New York to learn that Mr. Murdoch had served her with divorce papers, a decision he did not take lightly, according to several people close to the couple who would not discuss their private matters for attribution.

Mrs. Murdoch, after interviewing about eight different lawyers, including leading members of the matrimonial bar like Robert Stephan Cohen and Peter E. Bronstein, chose Mr. Zabel. Initially, Mrs. Murdoch did not have time to screen potential divorce lawyers and turned to Ms. Sloane, a trusted confidante, by default.

The core of Mr. Zabel’s practice at the law firm Schulte Roth & Zabel is advising wealthy clients like George Soros and the Lehman family, drafting their wills and trusts and advising on estate planning. But he also handles messier matters for his clients; in 2010, for instance, he represented the estate of his longtime client, the Palm Beach philanthropist and investor Jeffry M. Picower, in a $7.2 billion settlement with the federal government over claims related to money that he received from Bernard L. Madoff’s Ponzi scheme.

There is also the occasional divorce assignment. Much of the time, Mr. Zabel will play the role of mediator, and has peaceably settled the divorces of the late author Michael Crichton, the radio host Howard Stern and the New York Jets owner Robert Wood Johnson IV.

But at times, he has been involved in nasty marital spats, like that of Ms. Welch, whose marriage collapsed after she discovered her husband’s dalliance with the journalist Suzy Wetlaufer. The divorce was fiercely litigated and settled on the courthouse steps in 2002 only after Mr. Welch agreed to pay Ms. Welch several hundred million dollars.

More recently, he represented Christina Lurie, the former wife of the Philadelphia Eagles owner Jeffrey Lurie, who divorced after 20 years of marriage. Ms. Lurie remained a part owner of the team.

Because he keeps divorce representations to a minimum, Mr. Zabel often refers cases to his former wife, Eleanor B. Alter, herself a prominent matrimonial lawyer in New York.

The Pros and Cons of a Cut-Rate Divorce

I am sure you have seen billboard or newspaper advertisements that read something like ?$250 Divorce!? or ?Divorce Only $350!? Usually, the prices indicated are less than $500; indeed they are so low that they are less than the typical lawyer?s hourly rate for one hour of work, let alone a proper full retainer. How can these rates be so low for this sort of work? Clearly there has to be a catch.

Oprah Winfrey Dad Admits Oprah Paid For Divorce Because Ex-Wife Was Spending Too Much Money

Vernon Winfrey, 79, decided to break up with Barbara, his wife of 12 years, after becoming sick of her spendthrift ways, which he says almost cost him his barbershop business, and after confiding his fears to his daughter’s long-term partner Stedman Graham, Oprah stepped in to help.

Vernon said: “One day when Stedman was in town for a speaking engagement, I told him over dinner what was going on and that I didn’t know how I was going to handle it but I wanted out of my marriage.

“He asked if I needed help and I said ‘Yes I believe so’. He immediately told Oprah and she told me to hire attorneys and she would take care of it.”

Refusing to leave Vernon filed for divorce in June and claims his wife spent most of his money and is refusing to leave the $1.6m Nashville home Oprah bought for him.

He told National Enquirer magazine: “I’ve filed for divorce and moved out of the beautiful home Oprah bought me to live in but I don’t own it.

“Barbara was spending money as if I were Oprah.”

No more free rides boo!

Oprah has always looked out for her daddy Vernon despite his immature behavior, philandering and potentially outing his daughter. She is the better person for turning the other cheek. The soon to be ex step mother needs to become gainfully employed and self supporting because Oprah’s legal team will ensure her ride is over.

Small-Business Guide: When Couples Divorce but Still Run the Business Together

The two met in the late ’80s, in law school, and the relationship blossomed in the early ’90s at the firm — Ventura, Ribeiro & Smith — where Mr. Ribeiro was essentially the chief executive. They were married in 1998, and soon after, Ms. Calistro took a more active role in running the company’s operations. Together, they built the business into what is now a 50-person operation with an emphasis on civil litigation.

But while the business grew, their home life started falling apart. Mr. Ribeiro and Ms. Calistro divorced in 2006, and suddenly, the former spouses had to make a choice: Do they continue running the business together or should one of them leave? (Ms. Calistro was not an equity partner at the time of the divorce; she is now.)

“People said, including both of our lawyers, that we shouldn’t work together,” Mr. Ribeiro said. “But we talked in an office for two hours and decided we should try to make our business relationship work.”

Given a 2007 Census Bureau estimate that about 3.7 million businesses are owned by a husband and a wife. Given the high rate of divorce, this situation is more common than many realize. This small-business guide, based on the experiences of owners like Mr. Ribeiro and Ms. Calistro, offers suggestions on making the best of a difficult situation.

“We created the business,” Mr. Ribeiro said, “we created the structure, and we had a team that counted on us.” Six years after signing the divorce papers, the business partners say they are working together happily and the firm is in good shape.

RESPECT IS CRUCIAL When Stephanie Blackwell and her husband of 12 years divorced in 1991 — “we just fell out of love,” she said — she wanted out of the business they had started together, growing alfalfa sprouts. He was angry, she said, and she could not deal with it. One day she drove off, but he chased her and told her to come back to work. “There was so much anger between the two of us,” she said, “but I still cared for him. I just didn’t want to be married.”

While it was tough to continue running the company with her husband, she stuck it out. They had four children together, she could not afford to leave her job, and she still respected him.

In 1998, she left to start another business, Aurora Products, which turned into a $45 million company that packages and sells natural and organic snacks. Initially, her former husband took full control of the alfalfa business but it closed 12 years later. He now works for her, overseeing construction of a new plant.

Ivan Lansberg, co-founder and senior partner at Lansberg Gersick & Associates, a consulting firm in New Haven that advises family businesses, also emphasizes the importance of respect. Unfortunately, he said, many relationships become so damaged — especially if one person has cheated — that trust and respect are not possible.

To Mr. Lansberg, it all depends on open communication, predictability (people have to do what they say they are going to do), and consistency (they have to follow through even on bad days). But there also has to be some compassion. “You have to be able to put yourself in the shoes of the other person and empathize with what they are going through,” he said.

GET HELP Unlike most former spouses, those who own a business together must continue to see each other regularly even after the divorce papers are signed. That can make it harder to heal, which may be a good reason to seek professional help — even if it is too late to save the marriage.

Terri Allen still cared for her husband when the two separated in 2010 — they are not yet divorced — but there was so much anger that they could barely communicate. That made it difficult to continue running their accounting firm, which is based in Toronto.

The couple decided to hire a therapist to help them sort through their problems so they could continue working with each other. They found someone who specializes in Imago Relationship Therapy, a type of therapy that helps people communicate. “It helped us learn how to talk to each other in a calm and rational way,” Ms. Allen said.

The Pros and Cons of a Cut-Rate Divorce

I am sure you have seen billboard or newspaper advertisements that read something like ?$250 Divorce!? or ?Divorce Only $350!? Usually, the prices indicated are less than $500; indeed they are so low that they are less than the typical lawyer?s hourly rate for one hour of work, let alone a proper full retainer. How can these rates be so low for this sort of work? Clearly there has to be a catch.

New Atlanta Firm Offers Divorce a la Carte

From left, Michael Manely, his wife Shelia, and Luis Velez stand in the dress shop they are transforming into the Justice Cafe at Peachtree and MLK Drive in Atlanta.
Rebecca Breyer

Many middle-income people seeking a divorce can't afford to hire a lawyer but aren't poor enough to qualify for legal aid. Michael and Shelia Manely hope to fill this gap with a new kind of family law firm, the Justice Café.

Located a block from the Fulton County, Ga., Superior Courthouse, the Justice Café will charge $75 an hour for a la carte help in divorces and other family law matters, with no retainer up front, unlike most family law firms.

The storefront space at the corner of Martin Luther King Jr. Drive and Peachtree Street will take walk-in clients who want to handle their divorce themselves but need some guidance from a lawyer. Clients can pay for either general advice or specific tasks, such as drafting an answer to a complaint or representation at a 30-day hearing.

The typical client will engage a Justice Café lawyer for 10 or fewer hours, said Michael Manely.

"If they need more than 10 hours of help, then they probably need a full-service approach," said Manely, whose Marietta, Ga.-based practice, The Manely Firm, has specialized in full-service family law for about a decade.

Firms offering walk-in, a la carte family law services have sprung up in other parts of the country, but Manely said this is a first for Georgia.

The lawyers staffing the Justice Café will work on contract and collect half the $75 hourly fee. The other half will cover overhead. At $37.50 an hour, a lawyer billing 30 hours per week can earn an annual gross salary of about $55,000.

The Manelys think this arrangement will attract both new law school graduates seeking work and experienced lawyers who don't want the hassle of running their own shops.

"It's a way to serve people on Main Street," said Michael Manely. "There is no reason a working man or woman should not have access to legal services."

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The Pros and Cons of a Cut-Rate Divorce

I am sure you have seen billboard or newspaper advertisements that read something like ?$250 Divorce!? or ?Divorce Only $350!? Usually, the prices indicated are less than $500; indeed they are so low that they are less than the typical lawyer?s hourly rate for one hour of work, let alone a proper full retainer. How can these rates be so low for this sort of work? Clearly there has to be a catch.

The Pros and Cons of a Cut-Rate Divorce

I am sure you have seen billboard or newspaper advertisements that read something like ?$250 Divorce!? or ?Divorce Only $350!? Usually, the prices indicated are less than $500; indeed they are so low that they are less than the typical lawyer?s hourly rate for one hour of work, let alone a proper full retainer. How can these rates be so low for this sort of work? Clearly there has to be a catch.