Child Support Loophole May Doom Michael Jordan’s Prenup Agreement

Child Support Loophole May Doom Michael Jordan’s Prenup Agreement

Rumor has it the NBA legend’s new bride is planning a backdoor cut to score a bigger slice of his $650 million fortune if their marriage disintegrates.

From Kobe Bryant to Tiger Woods, we’ve seen a lot of extremely high-powered athletes get badly burned when their wives take them to divorce court.

Michael Jordan, whose endorsements still bring in $80 million a year a decade after he retired, has done his best to ensure he never gets socked with a nine-digit alimony bill again.

But while the prenuptial contract looks ironclad this time, Jordan and every pro baller need to watch the child support bills as well as the alimony.

Once bitter, twice wary

Marriage has already been a bittersweet note in Jordan’s otherwise spectacular career.

When his previous relationship finally broke up in 2006 after 17 years, the settlement awarded his ex-wife Juanita a full $168 million – one of the biggest celebrity divorces in history and enough to keep her living in penthouses for life.

As it turns out, Jordan got Juanita to sign a postnuptial agreement, but it evidently didn’t hold up.

This time around, he got new bride Yvette to sign what insiders call an “ironclad” contract to keep her from making a claim for a full marital share of his wealth.

She apparently gets $1 million every year they stay together, converting to $5 million a year if the marriage lasts a decade.

That might be enough for her, and in any event neither member of the newly wedded couple seems too eager to split up a week after they finally tied the knot in the first place.

However, the tabloids are muttering about how Yvette is hoping to get pregnant as fast as possible in order to buy herself a little insurance.

Having a kid or two could get a family court to carve away a few million a year more for child support over and above what the paperwork establishes as hers and hers alone.

And it hits Jordan right where he lives.  He only married Juanita in the first place after she sued for paternity for their first son – and even then, it took another 18 months of legal wrangling to cement the financial terms.

Meanwhile, his lawyers just fought off another paternity suit, this one buried since the mid-1990s. If it had gone to court, Jordan would have had another mountain of child support to pay off.

Add in the fact that most states would allow a judge to open up even a fully seasoned and specially designed asset protection trust for child support claims, and the prospect of new paternity suits becomes an advisory nightmare.

Abuse is rising and no remedy is in sight

No jurisdiction will let any parent sign away support for existing children, much less unborn offspring. Once a son or daughter has been acknowledged, that’s it.

The system is designed to protect the welfare of the kids and their relationships with both mom and dad, whatever happens to the marriage.

But because the parent with custody controls the kids’ lifestyle – and maybe pad a few household bills in the process – high-profile attempts to game the system are spreading.

Jordan doesn’t even have to leave the world of basketball to find cautionary tales of child support gone wild.

All-star Lakers point guard Steve Nash already settled $5 million on his ex-wife and still writes her a $30,000 monthly check for her personal expenses.

That’s over and above the roughly 90% of their three kids’ school, nanny and medical bills he pays out of his own pocket.

With his track record of charity work and only endorsing “sustainable” and “socially conscious” products, he’s probably okay with feeding his kids.

But now that she’s requested additional support, he’s worried that money will either spoil the kids or simply disappear into the household budget.

The problem is that even if he doesn’t want them raised like billionaires, as non-custodial parent, he doesn’t really get much say. All he can do is write the checks.

The rising cost of child support is also a factor encouraging Kobe Bryant to try to make his fraying marriage work.

Kobe famously didn’t have any kind of prenup in place, so he would already have been on the hook for maybe $1 million a month in alimony plus a huge share of the marital assets.

At a minimum, the California formulas would probably add another $4 million a year in child support to the bill, and as we’ve seen, that’s not necessarily a hard ceiling should the custodial parent decide the kids need better.

And there’s just no way around that short of hiding wealth in an asset protection trust that’s good against child support claims – or, if the issue is the ex-spouse skimming the income, putting it in a formal trust earmarked for the kids alone.

When even asset protection fails

Steve Nash, for example, could easily peel off some of his $100 million fortune to ensure his three children are raised as luxuriously or as austerely as he sees fit. The trustee would see to it and his ex-wife would never see that money.

Nobody has to take a special trip to Las Vegas to squeeze out the kids, but the spirit behind the prenuptial agreement will be upheld, keeping the estranged spouse out of the equation.

Likewise, if Michael Jordan’s current marriage runs into trouble, unexpected child support bills will only be a problem if he can’t trust the way those funds are delivered to any unborn children Yvette may – or may not – be planning.

Ironically, that seems to be exactly where Steve Nash’s apparently well-crafted prenup puts his family.

Because that contract took long-term spousal support off the table, the $30,000 checks could be going away very soon – which may be why his ex-wife is getting creative with the arrangements.

Unfortunately for the former Mrs. Nash, their five-year union ran aground in November 2010, so if the settlement gave her half that period of support, her time is nearly up.

Scott Martin, senior editor, The Trust Advisor

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