With the news of the Bill and Melinda Gates divorce breaking, the public has given attention to the fate of the Bill and Melinda Gates Foundation, a nonprofit fighting disease, gender inequality, poverty, and inequity all over the world and works to help with global economic development and growth. Through marriage, couples may acquire substantial wealth that enables them to engage in philanthropy. This may include creating private foundations, making donation pledges, and establishing donor advised funds. When going through a divorce, spouses must consider how their philanthropic endeavors will be impacted.
It is important to note that the assets held by philanthropic entities are not considered the property of the parties in a divorce case. Contributed assets are no longer part of the marital estate – the philanthropic entity owns them. Further, neither spouse owns the charitable entity. Nonetheless, spouses will have a position on who will control a charitable entity or funds set aside for charitable purposes and they may not agree.
When including provisions in a Marital Settlement Agreement relating to charitable entities or gift-giving, consideration as to tax effects must be given. For example, if a Marital Settlement Agreement were to obligate a former spouse to contribute funds into a charitable entity, the contributing spouse will likely not be able to utilize an income tax charitable contribution deduction because they are complying with a legal obligation.
If spouses, like the Gates, control a private foundation, they may agree to direct the entity to take certain actions in a Marital Settlement Agreement. If the spouses are on the board of an entity to which they support, if they are unable to serve together, the Marital Settlement Agreement may provide that one party agrees to step down.
The separation of philanthropic ventures may be a multifaceted matter and the specific organization of a couple’s gift-giving must be given detailed consideration. Divorcing couples should consult with experienced family law attorneys, accountants, and estate planners to achieve their post-divorce philanthropic endeavors without any unintended consequences.
Michael D. Sevin, Partner
For more information about Mr. Sevin, please visit: www.beermannlaw.com/team/michael-d-sevin.