By John Goralka
Sacramento, CA
As we observe the very public $50 million defamation lawsuit Johnny Depp brought against his ex-wife, Amber Heard, we realize that this all seems to be related to or carried over from on their very public divorce proceedings. The couple were married – without the benefit of a prenuptial agreement – in 2015 after meeting in 2011 on the film set for The Rum Diary. They split up when Heard filed for divorce in 2016. That divorce was final in 2017, but it certainly didn’t end their legal battles.
At the time of their divorce, Depp’s net worth was estimated to be more than 18 times larger than Heard’s. She initially sought $50,000 per month in spousal support to maintain her marital lifestyle. The property settlement provided for Depp to pay her $7 million. Heard declared that she would donate the divorce proceeds to charity. So, Depp paid a portion of the divorce settlement to the Children’s Hospital of Los Angeles and to the ACLU. Heard’s attorney then demanded that Depp donate $14 million to charity to reflect a net payment of $7 million for Depp after the projected $7 million in tax savings from the charitable contribution deduction.
Amber and Johnny’s dispute still rages on now, five years after their divorce was final in 2017. Note that the marriage itself lasted only 16 months, yet it appears to have inspired six years of litigation and controversy. The couple are currently back in court, with Depp suing over an op-ed Heard wrote in 2018 alleging she was the victim of domestic abuse.
How a Prenup Could Have Helped
A premarital agreement could have made a world of difference. It would almost certainly have protected Depp from such a sizable financial settlement for a 16-month marriage. A prenuptial agreement may even have protected Johnny Depp from today’s very public litigation, as the use of a confidentiality agreement in conjunction with a premarital agreement may help prevent ongoing public arguments, accusations or bickering. As it stands, without such protections, we can all read about and watch videos of Depp’s testimony on the news and online.
How could a prenup have protected Heard? The confidentiality agreement may have minimized some of the very public discussions of her problems. A prenuptial agreement might have protected specific assets owned or income earned by Heard from being characterized as community property or being included in the determination of the final settlement amount.
Divorce is emotionally charged and often involves many issues beyond just the financial settlement. We have all heard stories or even observed instances where cars, artwork or even houses are destroyed or sold at garage sale prices to prevent the asset from going to an ex-spouse. These decisions are often made for reasons that defy logic or common sense. Establishing boundaries for divorce may help prevent greater financial and emotional pain later.
A TV Star’s Prenup Made for Smooth Sailing
Let’s contrast Johnny Depp and Amber Heard’s divorce with that of actor Kaley Cuoco and professional tennis player Ryan Sweeting’s divorce. Cuoco was a star on the hit television show The Big Bang Theory in 2015. She currently stars in the series The Flight Attendant. At the time of her divorce, Forbes magazine named Cuoco TV’s highest paid actress, tied with Sofia Vergara in 2015. Cuoco received $28.5 million in earnings that year, including a salary equal to $1 million per episode. Her husband, on the other hand, had an estimated net worth of $2 million, about $42 million less than Cuoco’s net worth as reported by Forbes.
Unlike Depp and Heard, Cuoco and Sweeting signed a prenuptial agreement approximately one month before their wedding. The couple separated in 2015 after a 21-month marriage. The binding premarital agreement provided Cuoco full control of her assets and income. The premarital agreement also provided protection from claims for greater support or additional assets beyond the level or amount agreed.
Premarital agreements are an important tool to avoid drawn out financial and emotional battles, such as battles over spousal support, when a marriage fails. We can never know for sure whether such an agreement would have prevented the six years of litigation between Johnny Depp and Amber Heard. However, such an agreement would have significantly limited the areas and potential of their dispute. Some of the more emotionally charged claims, such as a demand for support in the amount of $50,000 per month by Heard, may have been avoided. Depp’s and Heard’s situation further underscores the value of combining a confidentially agreement with a premarital agreement.
Should You Consider a Prenup?
Prenuptial agreements and confidentiality agreements are particularly important for the following people getting married:
- Those with children from a prior relationship.
- Older couples.
- People getting married with significant assets prior to marriage.
- People or public figures seeking to keep such matters private.
- People seeking to protect their partner from his or her debts or liabilities (or those seeking to protect themselves from their partner’s debts).
If you fall into one or more of these categories, then you should take a lesson from the two celebrity divorce cases described above and consider entering into a prenuptial agreement before marriage. Here are six other protections to consider, too:
- Pair the prenuptial agreement with a confidentiality agreement for greater privacy.
- Identify separate assets that are acquired prior to the marriage. Consider whether income from those separate assets will be community or separate property.
- Consider whether the wages or earnings from work or efforts during marriage are community or separate property. Are debts to be considered community or separate? An often-overlooked alternative for a prenuptial agreement is to insulate one spouse from the debts and liabilities of his or her partner.
- If one spouse has substantially greater assets or income (which is frequently the case), consider designating certain assets to go to the less wealthy spouse over time so that a divorce after a long-term marriage does not otherwise leave one spouse with insufficient assets. Such a provision in some cases substantially enhances the effectiveness of the prenuptial agreement.
- Consider pairing the prenuptial agreement with an asset protection trust, which provides a second, considerable layer of protection from lawsuits, divorce and other claims. This trust, which should be created and funded before the prenuptial agreement, is a trust specifically designed to provide greater creditor and asset protection for the creator or grantor of the trust. An asset protection trust can be domestic and, currently, 17 states, including Nevada, South Dakota and Wyoming, have laws that permit these trusts. Additionally, foreign asset protection trusts, or hybrid bridge trusts, can be used, such as trusts settled under the laws of the Cook Islands. A hybrid bridge trust begins life as a domestic asset protection trust but converts to a foreign offshore trust in the event of a crisis.
- Consider including an estate planning provision to permit portability of the deceased spouse’s unused estate tax exemption (the “DSUE”) to a surviving spouse. Even a carefully crafted estate plan can be derailed with an unplanned death particularly if coupled with a change in marital status.
