The end of a marriage can be complicated, especially when it comes to matters such as finances and spousal support. While these matters alone can be difficult to navigate, it is particularly important for Ohio readers to consider the tax implications of any agreements made in a high-asset divorce. The highly publicized divorce of Johnny Depp and Amber Heard illustrates this important point.
The famous actors have been the subject of headlines recently as they exchanged accusations against each other during their tumultuous divorce. Heard accused Depp of verbal and physical abuse while Depp has vehemently denied it. Just recently, they agreed on a settlement of a one-time payment from Depp amounting to $7 million. Immediately, Heard announced that she would donate the entire amount to charity.
It is always commendable when a person donates money to charity, but Ms. Heard may not have considered how her settlement and her decision to donate it could bring negative tax consequences. Depending on how the settlement is structured, it may be tax free under the Internal Revenue Code. Donations to charity are deductible, but Heard’s donation may be limited depending on how the money is categorized and the organizations to which it will be donated. Based on an analysis of her income, she may not be able to afford the tax penalty of simply giving away all of the money.
This contentious and public divorce serves as a sobering reminder of the importance of carefully considering all financial agreements and decisions before moving forward. In a High Asset divorce, securing a certain asset or settlement may lead to untenable tax implications, ultimately resulting in a negative financial situation. It is best to work with an Ohio lawyer experienced in complex financial matters during divorce.
Source: Forbes.com, “Amber Heard Donates Johnny Depp’s $7 Million Divorce Settlement To Charity; Could Face Huge Tax Bill“, Tony Nitti, Aug. 21, 2016