Charitable giving is a great way to give back to your community and support causes that really reflect your values. Whether you’re giving away $30 a month or $30 million a month, any charitable giving can be addressed in a prenuptial agreement if desired. If your clients are in the high-net-worth category, then it’s definitely worth addressing charitable giving in these marital agreements because philanthropic ventures are common with the ultra-wealthy.
Charitable giving can become a source of marital conflict if not discussed early. For instance, one spouse may want to donate most or all of their wealth, while the other spouse may want to reinvest it into new ventures. Even in the best of marriages, this is not an easy debate to settle. With a prenup, it’s not just about divorce. It’s also about aligning future spouses on all financial matters, and for the ultra-wealthy, that often includes charitable giving.
Outlining separate property vs. marital/community property
The “meat and potatoes” of a prenuptial agreement is the categorization of separate property versus marital/community property. When an asset or debt is considered separate property, it is not to be divided in a divorce. When it’s categorized as marital/community property, that means it is joint and subject to division in a divorce.
When a couple wants to donate money to a charity, the funds must come from somewhere. The question is: Is the money coming from separate property funds or marital/community property funds? The major source of conflict will generally come from a couple trying to donate from joint property sources. By explaining this to clients and addressing the impact of the categorization of assets, you can help them de-escalate issues regarding the source of funds for charitable giving in the future.
Specific charitable giving clauses to consider for a prenuptial agreement
Outside of categorizing assets properly and educating clients on which funds are separate versus joint, there are other clauses that may also address charitable giving. Here are examples of charitable giving clauses:
A clause that pre-approves certain types or amounts of contributions annually.
A couple may agree to include a clause that specifies the types of charitable donations that may be made and the amounts. For example, the parties may agree that each spouse may donate up to a specified dollar amount per year to pre-approved charitable organizations without requiring the other spouse’s consent.
A clause identifying which assets may be used for charitable purposes.
For example, a couple may agree that only income from a specific asset may be used for charitable purposes. This may mean that donations are limited to business income or investment income, rather than a different source of income.
A clause setting an annual cap or threshold for charitable giving
If the couple is less concerned about where it’s from or where it’s going, they may instead choose to simply put an annual cap on the dollar amount. For example, the couple may agree that a specific dollar amount is approved annually without the need for both spouses to agree.
A clause that requires real-time approval from both spouses in writing to go above any pre-set annual cap or threshold
If the couple is unsure of exactly what they want to donate now, they can also simply agree to agree later. For example, the couple can state that all charitable donations must be agreed upon between the spouses, in writing, regardless of the amount.
A clause that clarifies that charitable gifts are not to be considered marital waste or dissipation of assets.
Marital waste may be established in a divorce where a court finds that one spouse intentionally misused marital funds. If this claim is successfully established, then the court may distribute the assets unevenly to benefit the non-wasting spouse. For example, in Maggiore v. Maggiore, the New York Appellate Division found the husband wastefully dissipated marital assets through multiple acts of financial neglect and misconduct, including failing to make mortgage payments, using money from retirement for personal reasons, and permitting vehicles to be repossessed. A prenuptial agreement should declare that the couple are in agreement: charitable giving cannot be considered as marital waste.
A clause addressing the increase in giving depending on the financial situation
Another clause to consider including is what happens if one party wants to give more or less, due to a changed financial situation. This may be simply stating that donations are static or subject to change in the future through a written agreement.
Questions to ask clients about charitable contributions during the marriage
If you are faced with an ultra-wealthy client (or just a particularly generous one) who is looking to commit a significant amount of money to charity, then here are some questions you should consider asking them to better understand how to craft their prenuptial agreement:
- What organizations matter most to each spouse?
- What are the limits each person is comfortable with giving each year, or overall?
- Should any and all donations be approved by the other spouse, or is there some amount that is acceptable to agree to prior to the marriage?
- Should donations increase with income or remain fixed?
Starting with these questions can help you understand their goals and which clauses in the previous section would make sense to include in the agreement.
The bottom line on including charitable donations in a prenuptial agreement
For the ultra-wealthy, philanthropy is part of the parties’ legacy, and it is often central to their identity, family values, and long-term estate planning. Major charitable gifts, such as the ones referenced in this article, can shape estate plans, affect tax strategies, influence how children are provided for, and even determine how a family name is remembered. When significant assets are involved, charitable commitments are rarely afterthought decisions, but instead, they are financial choices that can materially impact the marital estate. Without clear expectations, marital (or even divorce) disputes over how much to give, when to give, and which causes to support can create tension.
A prenuptial agreement can help honor the couple’s generosity while also avoiding future conflict in the marriage and potential future divorce. Addressing charitable giving upfront in a prenup can help couples align on their life goals, avoid disputes, and streamline a potential divorce.
