Married couples often establish joint long-term financial goals, and they do not necessarily change those goals simply because they decide to divorce. Frequently, high-asset couples have established philanthropic goals that they may still share despite the decision to end their marriage. They may also have outstanding commitments to charitable causes to address. A portion of their regular income may have gone toward specific nonprofit organizations and charitable causes. The spouses may want to continue making charitable contributions despite the decision to end the marriage or ensure they fulfill prior commitments.
There are strategies that couples can use to continue their philanthropy despite the end of a marriage. What strategies are among the most common?
1. Private foundations
When couples have significant resources and a structured plan for distributing them to others, a private foundation can be a reasonable solution. Foundations are separate legal entities created for the express purpose of managing assets and controlling their distribution to specific recipients or charitable causes. Foundations can be a means of creating a lasting legacy and may possibly even allow spouses to work together by sharing positions on the board that runs the foundation.
2. A donor-advised fund
Frequently, those engaging in philanthropy provide resources to specific charitable causes. They may then create a donor-advised fund, which is a special fund or financial account technically operated by the nonprofit entity. The divorcing spouses can arrange for a regular donation to the fund to help ensure that there is a constant stream of support for the charitable cause that they previously both valued. Frequently, those who have already established a donor-advised fund or who intend to create one as part of a divorce may have to decide which spouse ultimately advises the fund.
3. Planned gifting via pledges
Pledges to nonprofit entities, such as public broadcasting institutions, may be a one-time commitment. Other times, they require years of regular gifts to fulfill the financial obligations of the donors. If a divorce occurs midway through a pledge established by the spouses, they may need to negotiate to ensure that they fulfill their obligations despite the end of their marriage.
There are drawbacks and benefits to each of these strategies, especially when integrating charitable contributions into a property division settlement as part of a divorce. Donations required as part of a divorce order may not be eligible for tax benefits, which can influence how spouses address their philanthropic interests when they divorce.
Working with lawyers who are familiar with the unique challenges of philanthropic giving during divorce can be beneficial for those with significant resources. Careful planning is typically necessary for spouses facing high-asset divorces who want to continue having a positive impact on others despite changes in their own circumstances.