Signing away billions in the postnuptial agreement

By MaritalMediation Staff on September 16, 2010

Justin Musk wrote a long article with the history of her courtship, marriage, and divorce from Elon Musk. She has appealed the ruling on the postnuptial case in California, which hinges on the question of whether mediation confidentiality should trump marital fiduciary duty. In her own words…

Two months before our January 2000 wedding — Elon told me we had an appointment with a lawyer who was going to help us with a “financial agreement” that the board of his new company wanted us to sign. When I looked at him, he said quickly, “It’s not a prenup.”

Although I’d been dating a struggling 20-something entrepreneur, I was now engaged to a wealthy one. Elon had sold Zip2, which partnered with newspapers to help them get online, in 1999, the year before, and was worth about $20 million overnight. He bought and renovated an 1,800-square-foot condo: We now had a place of our own. He also bought a million-dollar sports car — a McLaren F1 — and a small plane.

Most of his newfound fortune he rolled over into his second company, an online banking institution, X.com, that later became PayPal (the online payment company). It was this board that was supposedly urging him to get a “financial agreement.” What I didn’t understand at the time was that Elon was actually ushering me into a period of “mediation,” which, I now know, means anything done or spoken is confidential and cannot be used in a court of law.

But I had no time to research mediation, or learn that it rarely serves the interest of the less powerful person in the relationship. Years later, I came to learn these things. But two months after our wedding, I simply signed the postnuptial agreement. I trusted my husband — why else had I married him? — and I told myself it didn’t matter. We were soul mates. We would never get divorced.

Elon agreed to enter counseling, but he was running two companies and carrying a planet of stress. One month and three sessions later, he gave me an ultimatum: Either we fix this marriage today or I will divorce you tomorrow, by which I understood he meant, Our status quo works for me, so it should work for you. He filed for divorce the next morning. I felt numb, but strangely relieved.

Eight years after I signed the postnup, I began to understand just what I’d done. I had effectively signed away all my rights as a married person, including any claim to community property except our house, which was to be vested in my name once we had a child.

But my lawyer is presenting a legal theory that could render the postnup invalid. A postnup, unlike a prenup, requires a complete financial disclosure because of something called “marital fiduciary duty”: the obligation of one spouse to be honest and straightforward in financial dealings with the other. Around the time we signed the agreement, Elon was involved in a significant merger between X.com and a company called Confinity. Together, the two became PayPal and raised the value of Elon’s X.com stock by millions of dollars more than what he reported on the postnup. Whether this was deliberate or an oversight, according to my lawyer, it could render the contract fraudulent, and thus invalid — if it weren’t for the protection of mediation confidentiality. That period ended not when we left the lawyer’s office or when we got married, but only once we’d signed.

The question that will determine the outcome of our divorce case, which has been winding its way through the California legal system for more than two years, is a legal one: Should mediation confidentiality trump marital fiduciary duty, or vice versa? Two years after our separation, we ended up in court. The judge ruled in Elon’s favor, but stressed that the case was “a long cause matter” and immediately certified it for appeal. Resolution is at least a year away.

The full article at Marie Claire is very interesting.

Learn more about postnuptial agreements.

Tags: postmarital agreement, postnup, postnuptial agreement