Legal

How Divorce Affects Philanthropy

Rachel Buckley 11 July 2024

How Divorce Affects Philanthropy

The author of this article poses the question of whether divorce necessarily impact philanthropy negatively or can separated couples continue as co-trustees?

Divorce cases affect a range of activities, and can be disruptive to philanthropic activities, including how charitable organisations are run and controlled. To examine this topic, we carry the following article from Rachel Buckley, who is joint managing director and head of divorce and finance at The Family Law Company. The editors are pleased to share these views; the usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com if you wish to respond.

Whilst according to this year’s Sunday Times Rich List charitable giving dropped in value this year, with the top 100 on the list giving away a total of £3.233 billion ($4.13 billion) compared with £3.431 billion in 2023, it remains a priority for many ultra-high net worth and HNW individuals and can often be their primary business.

When a couple separate, their philanthropic activity can become a cause for debate and, potentially, antagonism. It is important to consider how to separate these activities to ensure that benevolent aims continue to be met.

Splitting the philanthropic programme
The starting point during financial proceedings in divorce is to consider who owns what and to consider all the circumstances of the case such as income, financial resources, needs, standard of living, length of marriage and age. If a family-owned business or charity forms part of the couple’s assets, the court will look particularly at whether it was formed prior to or during the marriage, as well as the contributions made by both parties. The process of dividing a family’s charitable programme can depend on its structure. At its most intricate, it involves a thorough review of UK charity and trust law. These are the main factors to consider:

Funds earmarked vs donated
If the couple has set aside funds for charity but still control them, these can be divided like any other asset during a divorce. Once money has been given to a charity, it is no longer under the couple’s control. These funds are now public and must be used for the charity’s purposes.

Continuing as co-trustees
Some couples may choose to remain co-trustees of their family charity, much like Bill Gates and Melinda French Gates chose to do with the Gates Foundation when they first divorced. Remaining as co-trustees requires the couple to:

-- Act in the charity’s best interests; trustees have a fiduciary duty to prioritise the charity’s beneficiaries; 
-- Set aside personal differences; they must work together harmoniously for the charity’s mission; and 
-- Consider adding new trustees: they can offer fresh perspectives – but remember that they might also bring potential conflicts of interest, especially if they are family members.

To maintain an organisation’s value, it is vital that both parties believe that they will be able to rise above their emotions and focus on the shared goal. If this does not appear possible, or fails after an initial attempt, further consideration should be given to the other options available.

Pursuing separate philanthropy and charitable paths
If the couple decide they want to manage their charitable efforts independently post divorce, reallocating funds can be challenging. This is especially true if their interests diverge, such as one wanting to support animal welfare and the other, the arts. They will not be able to simply split the funds without potentially altering the charity’s mission, which would require approval from the Charity Commission.

It might, of course, be the case that just one party controlled the charitable giving during the marriage. Therefore, post separation, the other party has the chance to think about where their personal philanthropic goals lie and how they wish their activity to change or continue in the future.

Public disclosure
It is important to remember that the activities of registered UK charities are public records. Changes such as the retirement of a trustee will eventually become public knowledge. Charities must inform the Charity Commission of any changes in trustees, and if the charity is also a company, they must notify Companies House within 14 days of a director stepping down.

To manage public disclosure and maintain privacy, couples should plan for how and when this information is released.

Handling charitable giving during a divorce involves careful planning and consideration of both legal and practical aspects. Whether divorcees continue as co-trustees or decide to go their separate ways, it is essential to approach this process with a clear understanding of the rules and implications. 

Consulting with legal experts will help navigate this complex terrain and ensure that the couple’s philanthropic goals are met while respecting the charity’s mission. An experienced family law firm will be able to recommend skilled wealth management and philanthropy advisors to support clients with the best advice for their individual situation.

About the author
Rachel Buckley is Joint MD and head of Divorce & Finance at The Family Law Company. She qualified in 2002 and has been a member of the Family Law Panel since 2006. She has expertise in complex, high net worth divorce cases involving family businesses, pensions sharing, and high-ranking members of the armed forces, police and fire service. 

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