Elaine Gast Fawcett is the founder of PhilanthroComm, a communications and grantmaking advisory firm for families and philanthropies with over $30 million in net assets. Having interviewed more than 1,000 family foundation board members, executive leaders and staff over the past 25 years, she’s deeply attuned to the complex dynamics that undergird family relationships, including how divorce affects high-net-worth donors’ giving.
In a recent email, Fawcett recalled a particularly fraught anecdote. After a couple announced their divorce, the husband stepped back from their family foundation and the ex-wife became the new board chair. “The executive director was caught in the crossfire between them, and the dynamic became hard on the entire staff,” Fawcett said. “They were made to manage the foundation’s giving and reputation, and also were responsible for calling all of the couple’s friends and associates to tell them they were divorcing — in essence, managing the PR for the divorcing couple.”
The foundation ultimately decided to spend down, which caused a tremendous amount of anxiety among grantee leaders and staff who would eventually be out of a job. “The executive director needed the support of close colleagues and therapy to heal from the situation,” Fawcett said.
High-profile megadonor divorces generate headlines because of the enormous amount of philanthropic dollars at stake — think Bill and Melinda Gates or MacKenzie Scott and Dan Jewett. But Fawcett’s recollection underscores another set of complicated, heartbreaking and distressingly common factors endemic to high-net-worth donor divorces. The decision to split and its accompanying legal considerations can generate lasting interpersonal impacts across the donors’ community — foundation staff, grantee partners, professional colleagues — that must be managed and, in a perfect world, anticipated by the foundation’s leadership.
“We often think of how a divorce will affect the couple’s kids and extended family, and in some cases, even the closest friends of the couple,” said Fawcett, who’s written two white papers on how divorce affects family philanthropy. “For high-net-worth couples who have a large orbit with multiple entities — a family office and/or family foundation, for example — the rippling effects of the divorce extend much larger than just the closest contacts.”
Divorce with the family foundation context
Whether it’s a billionaire cutting a check for a medical wing or a middle-income donor supporting a local food bank, all giving has a psychological component. Funders are driven by a mixture of personal experience, relationships and the desire to have an impact.
Meanwhile, family foundation board members must navigate necessary and frequently difficult conversations about mission, along with where and how much money to disburse. And they must do so while navigating a set of unique events like divorce, sibling rivalries, inter-family schisms and health issues. These developments “can cause a crisis within the family system that ripples out into the extended family, friends and associates, and in the case of influential families, the wider community,” Fawcett said.
Most family foundations’ governing policies don’t anticipate these types of events because — let’s be honest — they’re touchy subjects. It’s difficult to envision a family kicking off a board meeting by talking about what happens if mom and dad divorce. But if trustees don’t put pen to paper, chaos can ensue.
“Having a roadmap available when circumstances like divorce arise is invaluable,” said Nick Tedesco, who, as president and chief executive officer of the National Center for Family Philanthropy, helps family foundation leaders become more effective stewards of their philanthropic dollars. “Pre-planned policies that are created before challenging scenarios arise are often done with logical, clear-eyed thinking and have widespread buy-in.”
Scenario planning
Talking about divorce is less taboo than it used to be and high-net-worth couples often have prenuptial agreements. However, few family foundations or trusts implement what Tedesco called a “roadmap” that lays out what will happen to the foundation, its staff and grantee funding in the case of a divorce.
For example, should one or both of the founding spouses remain with the foundation after the divorce? If this question isn’t answered in the foundation’s governance policies, things tend to unravel from there, and it’s easy to see why. These individuals rightfully feel attached to the foundation they created. They have built strong bonds with grantees and see how their support changes lives. It’s hard to walk away from that gratifying work.
As well, founding donors “tend to feel the foundation is their property — less of a legal structure established for the public good, and more of a reflection of who they are and their personal giving,” Fawcett explained. When a founding donor cuts ties to the giving vehicle they created, they’re extricating themselves from something that is fundamental to their identity and sense of self-worth.
Founding donor couples going through a divorce will ultimately be faced with a finite set of options. The foundation can spend down — which would require the board to allay grantee concerns that funding will dry up and help staff line up new jobs. Or if the foundation remains in operation, the founding donors can remain on the board or walk away. If the divorce is amicable, a spouse can retain an advisory role. Or they can start their own foundation or move money through a donor-advised fund.
Perhaps the most difficult scenario is when both donors refuse to step away and instead set off a prolonged and acrimonious battle over the future of the foundation. In this case, “it’s best if couples decide to split the foundation, or sunset the original foundation and transition their ‘shares’ to another giving vehicle such as a new foundation or a DAF,” Fawcett said.
Continuing the foundation comes with its own set of post-divorce challenges. For example, the family will need to revisit its foundation’s guiding principles, like how it wants to make a difference in the world and grow “its relational and philanthropic capabilities to make these aims a reality,” said Don Opatrny, principal at the Lovins Group, a boutique wealth advisory firm with offices on both coasts and in Canada. “Addressing these questions in an honest and thorough way is not easy in intact families, and often less so after a divorce. It can be done, but usually not without professional help from those skilled in post-divorce family dynamics.”
National Center for Family Philanthropy’s Tedesco encourages divorcing couples to ask a set of similar questions, like whether they can work together well and make decisions that are in the best interests of the family foundation. “This goes beyond considering whether it’s possible,” Tedesco said, “to asking whether it is beneficial and valuable to continue to work together.”
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When divorcing spouses don’t act gracefully
In May 2021, the philanthropshere was abuzz after news broke that Bill and Melinda French Gates were divorcing. Three years later, French Gates announced that she was resigning from the board and is now building out her mega-giving footprint through her philanthropic and investment LLC, Pivotal Ventures.
Looking back, Fawcett applauded the Gateses’ measured post-divorce announcement PR strategy. “They kept a party line that the foundation would stay intact, with them both running it business as usual, probably to quell anxieties of what could happen if the foundation dismantled,” she said. (I’d wager that the Gates Foundation’s current grantees’ anxieties hinge less on Melinda’s departure and more on Bill’s plans to spend down his $75 billion operation within 25 years.)
Unfortunately, “not all couples handle it [the divorce] — or position themselves — as gracefully” as the Gateses, Fawcett said.
Often, according to her research, affluent philanthropic couples — much like those who aren’t millionaires and don’t run family foundations — become so immersed in navigating the traumatic experience that they don’t consider how their behavior affects people around them. Parents may pit one child against the other parent or get hurt when they perceive that someone in the family isn’t taking their side. And when children “come to believe that either of their parents were ‘wronged’ in the marriage and/or the divorce proceedings,” Opatrny said, “they are in a terrible loyalty bind that will play out the rest of their professional life.”
Wendy Paris, an IP staff writer and the author of “Splitopia: Dispatches from Today’s Good Divorce and How to Part Well,” points to scenarios in which a divorced spouse criticizes their ex to their child, which can tarnish the child’s perception of the family’s philanthropy.
“When one parent says, for example, ‘Your dad is a worthless narcissist,’ that says to the kid, ‘Part of you is a worthless narcissist,’” Paris said. “In a family foundation, it would be amazing to have a way to say, ‘Philanthropy is part of our family legacy and a value your father and I (or mother and I) share, and one we want to pass down to you. Whether or not the parents remain involved in a shared foundation, I think the positive message for children is that ‘we as a family care about the world around us, we care about others and we use our good fortune to support and lift up others.’”
For Fawcett, the worst-case scenario in a family philanthropy context is “when a board member blocks a grant or partnership with a community organization or a cause as a ‘dig,’ or a way to hold something against their soon-to-be or ex-spouse.” In this case, ripple effects extend to the community that is denied funding. As implausible and petty as the scenario may sound, “it happens,” Fawcett said.
Best practices
Fortunately, Fawcett’s quarter-century in family philanthropy is replete with instances where divorcing couples navigated the process with grace, patience and magnanimity. Others minimized disruption by planning ahead.
Fawcett encourages boards to proactively draft a detailed government policy that answers questions like how trustees define “family” and who — spouses, ex-spouses, stepchildren, adopted children — can serve on the board. (In what was perhaps the most interesting takeaway from our exchange, Fawcett said that “depending on the relationships, it’s difficult to get the kids — or the grandkids — to join the foundation if mom isn’t on board.”)
The foundation’s governance policy should also define who will take over the foundation when the original donors or leaders step down or age out, and the eligibility criteria that would allow these individuals to come on board. Family foundation boards will want to engage with a family philanthropy advisor or governance expert to proactively create policies “based on principle, not on personality,” Fawcett said.
Experts I contacted also stressed that divorcing spouses, whenever possible, should commit to an ongoing dialogue with the broader family foundation community.
“Like many things, the effects [of the divorce] can be mitigated with clear, transparent communication that is well timed,” Tedesco said. “Donors ought to communicate early and often about their plans for the philanthropy, be honest, and address concerns, such as potential lack of funding, directly.”
Paris, meanwhile, encourages divorcing donors to write a “divorce elevator speech, something that quickly explains the divorce in a way you want it to be seen” to mitigate confusion and uncertainty. “It could be something like, ‘We’ve decided that divorce is the best way for us to go forward as individuals and to be good parents to our children. We intend to keep working together on family giving, and creating our own, individual giving vehicles. Check our foundation website for updates, and please consider upping your own commitment to our shared cause of K-12 education’ — or whatever your foundation focuses on,” she said.
