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Facebook Marriage: Zuckerberg’s Property Status, Post-Marriage

The new Mrs. Mark Zuckerberg might not have to worry much about money, but that doesn’t mean she is automatically a billionaire.

Priscilla Chan and Mark Zuckerberg wed in ceremony held in the backyard of their home in Palo Alto, May 19 2012.
Mark Zuckerberg | Facebook
Priscilla Chan and Mark Zuckerberg wed in ceremony held in the backyard of their home in Palo Alto, May 19 2012.

The marriage of Mark Zuckerberg and Priscilla Chan has prompted speculation of a prenuptial agreement.

The timing of Mark Zuckerberg’s marriage to his college sweetheart, Priscilla Chan, on Saturday, just a day after he tookhis company public, was certainly curious. Was he looking to clarify his net worth, which, with roughly 503 million shares, now stands at about $17 billion? And if true, many observers are speculating, did that have to do with the terms of a prenuptial agreement? The Zuckerbergs are not saying.

But what is clear, according to matrimonial law experts, is that whatever Mr. Zuckerberg earned before the marriage is still solely his property afterward.

California is one of fewer than a dozen states that follow community property laws, which specifically outline how property is dividedbetween two spouses (or, in some cases, registered domestic partners).

The rest of the states generally follow equitable division rules, where the court tries to divide assets fairly at divorce. Generally, the rule for community property states that anything that was one spouse’s property before marriage is considered separate. In California, this includes things like dividends from previously owned stock or rent that is collected from an income-producing property owned before the marriage. After marriage, anything either partner earns or acquires is considered community property.

"This means the day after the marriage, whatever anyone earns is co-owned by the marital estate,” said Jo Carrillo, a law professor at the University of California Hastings College of Law in San Francisco.

But the lines between community and separate property can get fuzzy pretty quickly after that, particularly over many years of marriage. Separate property, for instance, remains separate unless that money is commingled with “community,” or joint, money and the couple does not keep records of where the money came from or who paid what, Professor Carrillo said.

The question in Mr. Zuckerberg’s case is whether Ms. Chan would be entitled to the growth in value of his Facebook stock.

“The bigger gray area is the growth of value during the marriage,” said Chris Donnelly, head of the family law department at Leland, Parachini, Steinberg, Matzger & Melnick in San Francisco. “That is the 800-pound gorilla, or in Mark Zuckerberg’s case, the 800-ton gorilla.”

Under normal circumstances, his previously owned stock would remain his separate property. But the fact that Mr. Zuckerberg’s job is to continue to contribute to the growth of Facebook — and with it, presumably, the value of its stock — “the fruits of the efforts may accrue to the community,” Mr. Donnelly said, adding that it would be hard to imagine that a court would not allocate some portion of that growth to Ms. Chan. “She would be entitled to something,” Mr. Donnelly said. “It’s a huge gray zone, which is why in California you can create an agreement that spells out property very clearly.”

"The day after the marriage, whatever anyone earns is co-owned by the marital estate.                     " -Law professor, University of California Hastings College of Law  , Jo Carrillo,

A prenuptial agreement could, for instance, outline a specific percentage of the growth that would be allocated to the “community” and what might remain separate.

It is unclear whether Mr. Zuckerberg gave any shares to his wife at any point. A Facebook spokesman, Larry Yu, declined to comment on whether Ms. Chan and Mr. Zuckerberg had a prenuptial agreement or whether she received any shares of Facebook stock in her own name before the couple married.

Naturally, Mr. Zuckerberg has plenty of assets to protect. But some experts said Ms. Chan — who graduated last week from medical school at the University of California, San Francisco — could stand to benefit as well. (The university’s medical center has accepted her into its residency program in pediatrics.) In fact, given that Ms. Chan reportedly asked Mr. Zuckerberg to sign a relationship agreement before she moved to California several years ago to be with him — outlining issues like how much time they should spend together — it might not be that surprising if she brought up the subject first.

“If she had legal advisers, I would hope they would have encouraged her to also consider a prenup,” Professor Carrillo said. “It protects the non-owning spouse because in California, we have a set of formalities that require the prospective spouses to take some time to negotiate the document, typically with their respective attorneys. The non-owning spouse will get disclosure and know what the other spouse owns and owes, and can choose or not, based on the disclosures, to make decisions.”

Since couples are not required to make prenuptial agreements public, experts said, it is impossible to know if such an agreement even exists. Several matrimonial lawyers said they would be surprised if the Zuckerbergs did not have one. Still, no one raised concerns about how either spouse would fare.

“The nice thing, when you have that much money, is that they are both going to be fine,” said Randall M. Kessler, chairman of the American Bar Association’s family law section and a founding partner at Kessler & Solomiany in Atlanta. “Divorce lawyers don’t make our money on people who have that much money. They typically settle their cases.”

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