Everyone knows that divorce can trigger considerable tax issues. With high-net-worth assets switching hands and property of enormous value being sold, this is definitely something spouses need to keep in mind as they end their marriages. Financial experts can help them limit these tax issues in a number of different ways, and lawyers also have more than a few tricks up their sleeves. But what about donating to charity? Is this a viable strategy to minimize taxes after a divorce?
One thing’s for sure: Many celebrities seem to donate to charities after receiving considerable divorce settlements. But are they just doing this out of the goodness of their own hearts, or are there deeper, more nuanced financial motivations behind these donations? Perhaps it is a little of both.
Qualified Charitable Distributions
In most cases, charitable donations are exactly what they appear to be — acts of altruism intended to make the world a better place. That being said, donors should carry out these acts in ways that limit tax consequences as much as possible. Those over the age of 70.5 can distribute up to $100,000 of their IRA accounts tax free to qualified charities. These are known as Qualified Charitable Distributions, or “QCDs.” These would otherwise be highly taxed, and QCDs are not subject to the percentage of adjusted gross income limitations by which cash and stock donations are restricted. Perhaps the most important benefit of these donations is that they are tax-deductible.
Which Celebrities Donated to Charity After Divorce?
Perhaps the most well-known modern example of a post-divorce donation was made by MacKenzie Scott, who recently donated $436 million to Habitat for Humanity International after her split from Amazon billionaire Jeff Bezos. She had previously pledged in 2019 to give away the majority of her wealth. Scott is apparently worth about $48 billion, which means that she has plenty more to give – if she actually follows through on her promise. She has reportedly donated billions of dollars so far.
Another celebrity who pledged to give away a significant portion of her divorce settlement was Amber Heard. The actress’ split from Johnny Depp made headline news, and it became an incredibly divisive topic. Heard eventually promised to donate $8 million of her divorce settlement to charity – but Depp later claimed that she never actually made the donation. In August of 2021, a New York judge granted a petition to determine whether Amber had actually donated the sum as she had pledged.
Depp’s legal team claimed it had evidence that the donations were never made, and that the Children’s Hospital in Los Angeles wrote to Depp to inform him that they had never received any money from Heard. Depp’s ex-wife fired back and claimed that she had promised to “make the payments over a period of 10 years.”
What is the Purpose of Donating to Charity After Divorce?
The real purpose of charitable donations after divorce depends entirely on the person. For some spouses, the donations help them make a statement: “This divorce wasn’t about the money.” By donating to charity, they are showing the world that their legal battle was fought on principle rather than being motivated solely by financial goals. Others simply want to donate to charity out of the goodness of their own hearts, while some lie about it and never actually follow through with their donations at all.
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