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After nearly three decades of marriage, Bill and Melinda Gates are getting divorced. And by virtue of their wealth, splitting up their assets could take a great deal of effort.
The pair announced their divorce on Monday, saying that they “no longer believe [they] can grow together as a couple in this next phase of [their] lives.” The Gateses plan to continue working together at the namesake foundation they established following their split.
Bill and Melinda’s eldest daughter, Jennifer, called her parent’s split a “challenging stretch” for the family. Certainly, the emotional hurdles pose a significant challenge for the entire family. But the financial dimension of their decoupling likely weighs heavy as well.
Microsoft
MSFT,
founder Bill Gates was once the richest man in the world, and together their net worth is estimated to be $146 billion, according to Bloomberg. Like many of the world’s wealthiest families, their holdings are diverse.
But just like many couples seeking a divorce, who gets the home will be a major question Bill and Melinda — and their lawyers — will need to sort out.
The couple are among the largest private landowners in America. Despite that, financial experts say that divvying up their real-estate holdings may not be as complicated as you might expect.
Lawyers for the Gateses did not respond to a MarketWatch request for comment.
How much real estate does the Gates family own?
The Gates family’s real-estate holdings are vast. Their main home is a high tech-enabled mansion in Medina, Wash., nicknamed “Xanadu 2.0” after the estate in the film “Citizen Kane.” The couple purchased the home for $2 million in 1988, but today it is estimated to be worth close to $170 million, according to public records reviewed by Mansion Global.
Xanadu 2.0 is just the start of their real-estate empire. The Gates own nearly 270,000 acres spread across 19 states, according to research from The Land Report. This includes around 242,000 acres of farmland. The Gates family has spent millions of dollars over the past decade on horse farms in Wellington, Fla., and Westchester County, N.Y., in particular.
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The Gates’ main home, a mansion in Washington state, is estimated to be worth around $170 million.
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The couple has purchased many properties in recent years. Roughly a year ago, they bought a six-bedroom oceanfront home in Del Mar, Calif., for $43 million from the former wife of Texas billionaire T. Boone Pickens. Back in 2017, they shelled out $5 million on an apartment in Harlem for their 22-year-old daughter Jennifer, who at the time was planning to attend medical school in New York City.
Other real-estate investments were made through Bill Gates’ firm, Cascade Investment LLC. These holdings include The Charles Hotel outside of Boston and a 490-acre Wyoming ranch once owned by “Buffalo Bill” Cody, according to The Wall Street Journal. Cascade also has part ownership in luxury hotel chain the Four Seasons and the Ritz-Carlton Hotel in San Francisco.
How does Washington state handle property in a divorce?
Divorce filings made by Melinda Gates’ lawyers, obtained by MarketWatch, note that the couple had entered into a separation contract in advance.
These contracts set forth details regarding spousal maintenance, how property is handled and what agreements the divorcing couple make regarding their financial support of their children.
“A separation contract (except for portions involving a parenting plan for children) is binding on the court unless the court finds, after considering the economic circumstances of the parties and any other relevant evidence, that the contract was unfair at the time of its execution,” KC Celebi, a divorce and family law attorney in Everett, Wash., wrote in a blog post.
Details of the Gates’ contract were not immediately available, and the judge has not yet ruled on its validity. So what would happen if the judge were to throw the contract out?
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‘Washington divorce courts frequently divide separate property.’
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Like Amazon’s
AMZN,
Jeff Bezos and Mackenzie Scott before them, Bill and Melinda Gates are getting divorced in the state of Washington, which is a “community property” state.
In states like these, most assets acquired during marriage are considered to be jointly owned and are often divided in half in the divorce.
In some community property states, the couple can designate which property they bought together and which, if any, property they purchased separately. But in Washington, it can get murkier.
“Unlike some other community property states, characterizing something as ‘community’ or ‘separate’ property does not determine how it’s treated in divorce.
Washington divorce courts frequently divide separate property — or even transfer it to the other spouse — because the law requires a judge to make a ‘just and equitable’ division above all else,” J. Mark Weiss, a Seattle-based divorce and family law mediator, wrote.
The benefits and challenges of dividing investment properties
Regardless of whether the judge takes on that task of dividing their property, or if the Gates themselves split up their assets through the separation contract, someone will need to assess the value of their real-estate holdings in determining how much each of them get.
But the Gates family’s wealth likely means that they have taken a different approach to owning real-estate than the average household — one that could actually make it less onerous to split things up in divorce.
Dividing real-estate assets is an issue that Harvey Bezozi, a certified public accountant based in Boca Raton, Fla., encounters regularly.
“For asset protection and estate-planning reasons, the rich and famous own their real estate in LLC entities. This makes it easy to allocate property ownership when a couple divorces,” Bezozi, who also founded YourFinancialWizard.com, said.
“Each spouse will continue to own their respective share of LLC membership interests from the date the property was originally purchased, all through their marriage, and after divorce,” Bezozi said.
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‘For asset protection and estate planning reasons, the rich and famous own their real estate in LLC entities.’
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If any of the Gates’ holdings are rental properties, though, there are tax considerations Bill and Melinda will need to make in deciding who will keep what.
“When assigning rental property during a division, depreciation recapture needs to be considered, as it reduces a property’s cost basis,” said Michelle Petrowski Buonincontri, a certified financial planner and certified divorce financial analyst.
For instance, should either of them choose to sell any property they retain immediately, none of the gain would qualify for the capital-gains exemption. That would reduce the asset’s actual value.
“If a rental is turned into a primary residence, those receiving the property will need to live there for at least two to five years preceding the sale, so that some or all the Capital Gains Exemption may apply when the property is sold,” Buonincontri said.
