Arnold, Maria, and Collaborative Divorce

The recent news about divorce proceedings starting up between one of America’s most famous couples – Arnold Schwarzenegger and Maria Shriver – now includes input from Collaborative Law Institute of Texas board member Tracy Stewart, who was quoted in this CNNMoney article which ran this past Friday:

The story focused on Schwarzenegger’s wealth – tied, of course, to his film career and subsequent investments. Stewart had a number of observations for the reporter beyond what could fit in the story – which focused on the question of whether there was a prenuptial agreement in place prior to the divorce – in looking at questions around how the fortune might be split up.

The essential designation that needs to be made at the outset, according to Stewart, is what is community property and separate property, determined according to when Schwarzenegger made money. The marriage began in 1986 – a year after two of his most successful movies, Conan the Barbarian and Terminator, had already been released.

Stewart also identified two primary difficulties in determining value of the estate: determining and then dividing any illiquid investments the couple has together, which would include private equity investments, venture capital investments, and limited partnerships and finding the value of each investment of either party or jointly.

For divorce proceedings, especially ones like this with so much at stake, each side will need to retain a financial expert to do valuations on the estate and all the investments that make that up. In a collaborative divorce, both parties can agree on a single financial professional, called a financial neutral, to do all those evaluations for negotiation purposes – effectively halving the cost for that component of the divorce process.

And, in large part because of that piece of it, Stewart’s number one piece of advice for the couple is to get a collaborative divorce. For a high-profile case like this one, the media attention of a courtroom divorce proceeding would put undue pressure on the couple, and create a media circus that would complicate an already complicated divorce process. In addition to the benefit of increased privacy, a collaborative divorce will allow them to craft a financial agreement unique to their undoubtedly unique situation.