Legacy Planning for Entrepreneurs: Charitable Giving Tips

If you're an entrepreneur thinking about your legacy, charitable giving can help you make a lasting impact while offering tax benefits. Here’s what you need to know:

• Align giving with values: Define your purpose and involve family to create a mission-driven approach.
• Plan ahead for business exits: Donating appreciated shares before selling a business can reduce capital gains tax.
• Use Donor-Advised Funds (DAFs): These accounts offer immediate tax deductions and flexible grant-making.
• Consider private foundations or trusts: For more control over your contributions, explore these options.
• Donate business interests: Giving non-cash assets like private shares can maximize tax advantages.
• Structure lifetime giving: Treat philanthropy as a financial goal with a clear plan and timeline.
• Involve family in decisions: Engage successors to ensure your legacy spans generations.
• Coordinate with estate plans: Use tools like Qualified Charitable Distributions (QCDs) to optimize giving.
• Review your plan regularly: Update strategies to reflect changes in tax laws or personal priorities.
• Document your legacy: Create a statement to guide your family and advisors on your philanthropic goals.

Quick Tip: Start planning 1–3 years before a major liquidity event, like selling your business, to maximize tax savings and impact.

For tailored advice, consult experts who can integrate philanthropy into your financial and estate strategy.

Jaimi Cortes: Strategic Philanthropy & Legacy Planning

sbb-itb-e766981

1. Align Charitable Giving With Your Personal and Family Values

Start by defining your giving purpose. Whether it stems from gratitude, a sense of responsibility, a religious calling, or a desire to address specific community issues, this purpose becomes the foundation of your philanthropic approach. A clear purpose not only guides your donations but also ensures they reflect the legacy you want to create. Without this clarity, charitable giving can become reactive - responding to requests rather than aligning with what truly matters to you ^[13][14].

"Philanthropy is more than giving - it's a strategy." - Todd M. Villarrubia, Attorney at Law, Wealth Planning Law Group ^[1]

A practical way to begin is by involving your family. Informal settings, like a dinner conversation, can be a great opportunity to ask each family member about the causes they care most about. Look for common threads in these discussions. Using these insights, draft a simple family mission statement that encapsulates the change you want to support. It doesn’t have to be elaborate - just a single clear sentence can serve as a compass for future decisions ^[7][9].

The best giving happens where personal connection meets meaningful impact. The most effective philanthropists focus on areas where their passions align with measurable results ^[8].

To make a real difference, narrow your focus to one or two themes, such as education or economic mobility. This approach allows you to create deeper, more impactful relationships with the causes you support ^[10][12].

"The most impactful giving doesn't happen by accident - it happens by design." - Kris Marney, Partner, Advisory, BPM ^[9]

2. Integrate Charitable Giving Into Your Exit and Liquidity Plan

Exiting a business can be a financially rewarding moment, but it’s also an opportunity to make a meaningful impact through philanthropy. incorporating charitable giving into your exit strategy not only helps to reduce taxes but also allows you to leave behind a legacy that reflects your values.

Here’s how it works: if you donate appreciated business shares to a charitable organization before the sale of your company is finalized, you can sidestep capital gains tax on those shares while claiming a deduction for their fair market value. For instance, donating $10 million in appreciated shares prior to a sale can offer tax benefits that wouldn’t be available if you waited until after the sale closes ^[2].

Timing is everything. The IRS enforces what’s known as the "binding agreement" rule. If you’ve already entered into a binding sale agreement before making the gift, the IRS may treat the transaction as fully taxable ^[18]. This is why many advisors recommend starting philanthropic planning 1–3 years ahead of a planned exit, long before you finalize deal terms or identify a buyer ^[18].

"Once a binding agreement is in place, the IRS may treat the transaction as fully taxable - even if shares are gifted afterward." - Fusion Wealth Management ^[18]

Here’s a surprising statistic: while only 7–10% of business owners’ wealth is held in cash, nearly 95% of charitable donations are made in cash ^[19]. That leaves a lot of untapped potential. Donating equity - rather than cashing out and writing a check - is where the real tax and philanthropic advantages lie. Firms like Phoenix Strategy Group, which specialize in exit planning and M&A advisory for growing companies, can help entrepreneurs structure transactions early enough to incorporate these strategies.

Keep in mind, donating non-publicly traded shares requires a bit of preparation. You’ll need to obtain an independent appraisal (within 60 days of the donation) and review your shareholder agreements to ensure there aren’t any restrictions on transferring shares ^[16][17]. By aligning exit planning with philanthropy, you can also pave the way for creating a structured giving plan that extends well into the future.

3. Use Donor-Advised Funds for Flexible, Tax-Efficient Giving

A Donor-Advised Fund (DAF) is like a charitable savings account. You contribute assets, get an immediate tax deduction, and then decide when and where to recommend grants to nonprofits of your choice ^[20][21]. This approach works well with exit planning, offering tax perks while allowing you to give at your own pace.

The tax benefits are hard to ignore. For example, donating appreciated stock held for over a year directly to a DAF lets you avoid the 23.8% capital gains tax. Plus, you can deduct the stock's full fair market value - up to 30% of your adjusted gross income (AGI) for non-cash assets, or up to 60% for cash donations ^[20][22]. If your deduction exceeds these limits, you can carry the excess forward for up to five years ^[23][25]. Timing matters too. Making a large contribution in a high-income year, like during a business exit, lets you maximize deductions when your tax rate is highest, while spreading out grant-making over the years. For instance, in early 2026, a tech entrepreneur in Austin, Texas, donated $800,000 in company stock to a DAF before finalizing a $3.2 million sale. This move saved over $190,000 in capital gains taxes and provided nearly $296,000 in total tax relief ^[27].

"A large DAF contribution acts as a 'shock absorber' during a business sale, decreasing taxable income when it is highest." - Bridgewater Advisors ^[24]

However, not all DAF sponsors are equipped to handle complex assets like private company stock, restricted shares, or cryptocurrency. To ensure a smooth process, choose a sponsor experienced with illiquid assets and start the process 30–45 days before the transaction closes ^[27]. A qualified appraisal will also be needed to confirm the value of any private shares donated ^[20][26].

DAFs also support long-term family giving. By naming children or grandchildren as successor advisors, you can pass down the responsibility of recommending grants, transforming this tax-efficient tool into a lasting family tradition ^[21][24].

4. Consider Private Foundations and Charitable Trusts for Greater Control

If you're looking for more direct control over your charitable contributions beyond what a Donor-Advised Fund (DAF) offers, private foundations and charitable trusts might be worth exploring. These options provide a hands-on approach to managing and distributing your philanthropic dollars.

A private foundation operates as an independent nonprofit organization with its own board, investment strategy, and grant-making process ^[28][30]. This setup allows you and your family to play an active role in decision-making, from serving on the board to determining how funds are allocated each year. Private foundations are particularly suited for those aiming to establish a multigenerational legacy. However, this level of control comes with responsibilities, including annual filings, a mandatory 5% distribution of net assets, and a 1.39% excise tax ^[28][29][30]. Additionally, donation deduction limits are lower - typically 30% of adjusted gross income (AGI) for cash contributions and 20% for long-term appreciated assets ^[2][33]. Given the administrative costs, many experts recommend having at least $5 million to $10 million in assets before setting up a foundation ^[22][31]. While private foundations involve more structure and oversight, they can work well alongside DAFs to ensure multigenerational involvement.

"Serious control comes with structure. And for many entrepreneurs and families, that structure is exactly what makes private foundations so valuable."

• Emily Hibard, Hibard Group ^[6]

Charitable trusts take a different approach. A Charitable Remainder Trust (CRT) provides you with an income stream for life or a set period, with the remaining assets going to charity afterward ^[29]. This setup can help defer capital gains taxes while generating steady income, especially during the sale of a business. On the other hand, a Charitable Lead Trust (CLT) directs an income stream to a charity first, with the remaining assets eventually passing to your heirs. This can help reduce gift and estate taxes ^[29][32]. As Anna N'Jie-Konte, CEO of Poder Wealth Advisors, points out:

"A charitable trust is usually more of a tax play. If there's a liquidity event or we're repositioning assets that may have a low tax basis or cost basis, then that makes a lot of sense." ^[29]

One key consideration: if you're contributing closely held business interests to a private foundation, your deduction is generally limited to the cost basis, unlike other vehicles that allow deductions based on fair market value ^[28][30]. For a balanced approach, you might use a DAF for liquidity events while leveraging a private foundation for long-term governance. This hybrid strategy can maximize tax benefits while ensuring your philanthropic goals endure across generations.

Here's a quick comparison of private foundations and charitable trusts:

For expert advice tailored to your goals, consult seasoned professionals at Phoenix Strategy Group.

5. Donate Privately Held Business Interests Before a Sale

For many entrepreneurs, their business represents their largest asset. Yet, interestingly, only 7% to 10% of the typical business owner's balance sheet is held in cash, even though about 95% of all charitable contributions are made in cash ^[19]. This creates a unique opportunity: donating a portion of your business interests directly to charity before selling can leave a lasting impact while offering meaningful tax advantages.

As discussed earlier, contributing appreciated shares before a sale allows you to bypass capital gains tax and claim a deduction based on the shares' fair market value, provided they’ve been held for over one year ^[16].

"The pre-sale gift of closely held stock can reduce the tax burden on what is often the largest financial event in a business owner's life while enabling a more meaningful commitment to the causes that are most important." - Nicholas Smith, Crewe Capital ^[17]

However, timing is critical due to the IRS's anticipatory assignment of income doctrine. If a sale is deemed practically certain at the time of the gift, you could be taxed on the full gain as if you had sold the shares. For example, in the Estate of Hoensheid v. Commissioner case, shares donated just two days before a sale were taxed because the court ruled the sale was inevitable - even without a signed agreement ^[34]. To avoid this, careful planning is essential. Here’s how to proceed:

• Get a qualified appraisal within 60 days of donation. The IRS mandates this for non-publicly traded interests, and it must be completed before your tax return deadline ^[36].
• Check your operating or shareholder agreements. These may include transfer restrictions or rights of first refusal, which could require additional approvals.
• Select the right charitable vehicle. Donations to a donor-advised fund (DAF) typically qualify for a deduction based on fair market value (up to 30% of AGI), while contributions to private foundations are often capped at 20% of AGI and may be limited to your cost basis ^[35].

If your business is an S-Corp or LLC, be aware that donating interests might generate Unrelated Business Taxable Income (UBTI) for the charity, potentially reducing the funds available for grants ^[17]. Consulting a tax advisor is a must if your business is structured this way. Additionally, a fractional CFO can help model the long-term impact of these donations on your company's liquidity and growth.

Incorporating pre-sale donations into your overall giving plan can transform your business into a key element of a tax-efficient philanthropic strategy.

6. Build a Structured Lifetime Giving Plan

Relying on last-minute, year-end donations can limit the impact of your generosity. Instead, treating philanthropy as a structured financial goal - like saving for retirement or planning a major purchase - can help you give with intention and clarity.

"We tell our clients to think about giving much like you think about saving for retirement, college or a family vacation." - Jennifer Cords, Wealth Advisor, Cedar Cove Wealth Partners ^[39]

Start by revisiting your values and financial situation. Define your purpose for giving and decide which causes resonate most with you. Consider whether you want your contributions to be public or anonymous. Then, take a close look at your financial picture to identify any surplus resources that go beyond your personal and long-term needs. This kind of honest evaluation allows you to give in a way that aligns with both your values and your financial stability.

Choosing the right tools is just as important. Depending on where you are in life, options like Donor-Advised Funds, Charitable Remainder Trusts, or Qualified Charitable Distributions can play different roles in your plan. These vehicles can adapt to your income, age, and liquidity needs, ensuring that your giving remains both thoughtful and effective. Adding a detailed timeline or schedule to your plan can further refine your approach.

Establish an annual giving budget and set clear priorities. Whether you schedule donations quarterly, at the end of the year, or tie them to specific financial events, having a plan helps you avoid impulsive decisions. This keeps your philanthropy aligned with your broader goals.

"A structured plan doesn't limit generosity, it enhances it. It ensures that your giving is proactive, not reactive, and that it reflects your deepest values." - Christian Salgado, Attorney, Kirk & Simas ^[37]

Once your plan is in place, surround yourself with the right team to bring it to life. Collaborate with a financial advisor, CPA, and estate attorney to ensure your gifts are well-timed, tax-efficient, and legally compliant. As Donald Kent of Bernstein Private Wealth notes, "Early planning maximizes impact." ^[38]

If you're an entrepreneur, integrating philanthropy into your overall financial and legacy planning can be particularly rewarding. Consulting experienced professionals, like those at Phoenix Strategy Group, can provide tailored advice to help you achieve your goals. Ultimately, a well-structured lifetime giving plan lays the groundwork for the legacy you want to leave behind.

7. Involve Family and Successors in Philanthropic Governance

Strengthen your philanthropic efforts by involving family members and future successors in the process. Engaging the next generation in decision-making is a powerful way to ensure your legacy endures across generations. This approach creates a seamless transition from your structured giving plan to a legacy that spans decades.

Think of charitable giving as a "living lab" for younger family members. It offers them a hands-on opportunity to develop skills like stewardship, accountability, and collaboration - without the high stakes of managing the core business. Whitney Webb, Managing Director and Head of Family Governance at Cresset, explains:

"Philanthropy can engage the rising generation in the stewardship of the broader family wealth, serving as a platform for conversations about responsibility, legacy, and governance." ^[12]

The trick is to go beyond surface-level involvement. Give younger family members real decision-making power. For example, you can assign individual giving budgets - allowing each person to research and allocate funds to causes that resonate with them. They can then present their choices to the group. This not only builds financial literacy but also fosters empathy and a sense of ownership. Another idea is to reserve rotating board or council seats for family members aged 24 to 35. This ensures that fresh perspectives are always part of the conversation.

A written family philanthropic policy can also help. This document outlines shared goals, grant parameters, and methods for resolving conflicts. Pair this with visits to supported nonprofits to make the impact personal and tangible.

"A signature does not create a prepared successor. The two are very different things." - Kelsey Picken, PhD, Senior Director of Legacy Giving, The Dallas Foundation ^[41]

Preparing successors is critical to maintaining your legacy. Introduce them early to your advisory team, community foundation contacts, or financial professionals. This way, they can grasp not only the mechanics of your giving but also the deeper values driving it. Including them in your advisory circle helps ensure the legacy you’ve worked to build remains vibrant and enduring.

8. Coordinate Charitable Giving With Your Estate and Tax Plan

Blending charitable giving into your estate and tax strategy can help you leave a meaningful legacy while optimizing financial outcomes. For business owners, aligning your contributions with your overall plan ensures both your philanthropic goals and financial objectives work hand in hand.

One key factor to consider is the type of assets you choose to donate. Kenneth J. Dean, Senior Director of Financial Planning at Winthrop Wealth, highlights this point:

"Some assets are significantly more tax-efficient to leave to charity than to family members." ^[40]

For example, retirement accounts like traditional IRAs and 401(k)s are more tax-efficient when left to charities rather than heirs. While heirs must pay ordinary income tax on withdrawals from these accounts, charities can receive the full value tax-free. By naming a charity as the beneficiary of your IRA and leaving assets with a stepped-up basis - such as appreciated stocks or real estate - to your heirs, you can reduce your estate's tax burden and maximize the impact of your charitable contributions ^[40].

Timing Matters
The timing of your charitable giving also plays a crucial role. Starting in 2026, the federal estate and gift tax exemption is set at $15 million per individual ($30 million for married couples). However, state-level exemptions can be significantly lower, making charitable bequests an important tool for state tax planning. Additionally, recent tax changes impose a 0.5% Adjusted Gross Income (AGI) floor on itemized charitable deductions, and for those in the top 37% tax bracket, the benefit of these deductions is capped at 35 cents per dollar ^[15]. These updates make it essential to revisit your giving strategy with a tax advisor.

Strategic Tools for Retirees
If you're 70½ or older, Qualified Charitable Distributions (QCDs) offer a powerful tool. You can transfer up to $111,000 annually from your IRA directly to charity tax-free. This transfer counts toward your Required Minimum Distribution but doesn’t increase your AGI, which can help lower Medicare premiums and reduce the taxable portion of your Social Security income ^[40].

For those making larger gifts, remember that contributions exceeding AGI limits (60% for cash, 30% for appreciated assets) can be carried forward for up to five years ^[42][4]. This flexibility allows you to spread out the tax benefits of a significant gift over time.

To ensure your charitable giving aligns with your broader financial goals, consider working with seasoned advisors - like those at Phoenix Strategy Group. With expert guidance, you can craft an estate and tax plan that balances financial efficiency with a lasting philanthropic legacy.

9. Review and Adjust Your Philanthropic Plan Over Time

A charitable giving strategy isn’t something you set and forget. Your financial circumstances, tax laws, and personal priorities shift over time, and your plan should evolve right along with them. Regularly revisiting your strategy ensures it stays relevant and effective.

Take, for example, the tax law changes introduced by the 2025 One Big Beautiful Bill Act (OBBBA). Starting in 2026, the value of charitable deductions will be impacted by a new 0.5% AGI floor. This means only donations above that threshold qualify for an itemized deduction. For someone with $500,000 in AGI, the first $2,500 of donations won’t be deductible at all ^[15]. If your plan hasn’t been updated to account for these changes, now’s the time to act.

It’s also smart to align your reviews with major life events. Turning 70½, for instance, makes you eligible for Qualified Charitable Distributions (QCDs) from your IRA, allowing you to donate up to $111,000 per year tax-free starting in 2026 ^[11][15]. Similarly, selling a business, experiencing significant stock appreciation, or retiring can all reshape your financial landscape. As Kristopher Jones, Founder of Legacy Advisors, explains:

"Charitable giving after an exit works best when it's intentional - not reactive." ^[3]

Another key consideration is whether your giving is still meaningful and impactful. If your donations feel scattered or disconnected from your core values, it might be time to refocus. Conduct a quick impact audit: review your giving history and ask yourself if your contributions are reaching the right causes and driving real change. As Goldman Sachs points out:

"A primary purpose of measurement is to learn what's working and what could be improved." ^[7]

Here are some common triggers that signal it’s time to revisit your philanthropic plan:

Rather than scrambling in December, schedule your annual review in January or February. This early planning window allows you to make thoughtful decisions - consult with your tax advisor, evaluate your charities, and time your contributions strategically. Regular reviews not only help you maximize tax benefits but also ensure your giving aligns with the legacy you aim to create.

10. Document and Communicate the Legacy You Want to Leave

A well-documented charitable strategy lives on long after you're gone. Without proper documentation, even the most thoughtful giving plan can lose direction or be misunderstood over time. As Evan Lange, a Charitable Planning Specialist at StoryOne, puts it:

"Aligning charitable strategy with a family's mission, vision, values and goals is what transforms a tax strategy into a lasting legacy." ^[5]

Before diving into legal structures, take a moment to define your why. This clarity forms the backbone of the legacy planning process discussed earlier. What drives your giving? Is it gratitude, a sense of duty, or a passion for solving a specific problem? As Kristopher Jones, Founder of Legacy Advisors, says:

"The goal isn't visibility. It's meaning." ^[3]

Once you've identified your purpose, put it into words with a legacy statement. This document should outline your values, vision, and the impact you hope to achieve. From there, create a set of essential documents to guide your family and trustees. These might include:

• A family priorities memo that sets expectations for heirs on topics like education funding, financial reserves, and inheritance.
• A capital allocation policy that details how you plan to allocate liquid assets.
• A letter of wishes offering non-binding context to trustees and beneficiaries about your intentions.

If you've recently sold a business, aim to complete these documents within 60 days. Here's a quick overview of the key tools for capturing your legacy:

Once your legacy is documented, share it thoughtfully. Communicating your intentions as guiding principles - not rigid rules - can reduce misunderstandings and prevent future disputes. Clear communication also strengthens family governance, aligning with earlier advice on involving family in philanthropy.

To ensure everything stays organized, consider using a secure digital vault with clear access instructions. This allows beneficiaries to find key documents quickly when needed. Pair this with an annual family meeting to review your philanthropic activities and revisit your mission statement. These steps will help keep everyone on the same page as circumstances change. Documenting and sharing your legacy ensures your philanthropic vision continues to inspire and guide future generations.

Comparison Table

Choosing the right charitable giving vehicle depends on how much control you want, the level of administrative effort you're comfortable with, and the tax benefits you're seeking. There's no one-size-fits-all solution here. As one financial planning expert notes:

"The decision between a Donor-Advised Fund and a Private Foundation is a profound step in securing your family's legacy. Your mission, not simply your means should guide that decision." ^[28]

Here’s a quick comparison of three popular charitable giving options to help you align your goals with the right strategy:

One thing to keep in mind for 2026: the One Big Beautiful Bill Act (OBBBA) will introduce a 0.5% AGI floor on itemized charitable deductions. This change impacts contributions to both DAFs and private foundations ^[24]. As a result, many donors may find the "bunching" strategy - combining several years of giving into one large DAF contribution during a high-income year, like after selling a business - an even more effective way to meet the threshold and maximize deductions.

For entrepreneurs, a DAF is often the easiest and quickest way to secure a tax deduction during a liquidity event. Private foundations, on the other hand, are ideal if your focus is on long-term family governance, public visibility, or managing your own charitable programs. Meanwhile, a CRT can be the right fit if you want to turn a concentrated, low-basis asset into a steady income stream while still supporting a cause that matters to you.

Conclusion

Creating a charitable legacy as an entrepreneur goes far beyond writing checks or securing tax deductions - it’s about reflecting and sustaining your core values. As Kris Marney, Partner at BPM, explains:

"The most impactful giving requires deliberate design." ^[9]

The foundation of effective philanthropy lies in early planning, selecting the right tools, and involving your family from the start. Whether you opt for a Donor-Advised Fund for its ease, a private foundation for greater family involvement, or a charitable remainder trust to manage income from appreciated assets, the structure should always align with your mission - not the other way around.

Beyond the logistics, the personal impact of your giving is equally important. For instance, research shows that 81% of children with philanthropically active parents engage in charitable activities themselves ^[46]. Including your family in the process now isn’t just practical - it’s a way to ensure your values are carried forward.

Make it a habit to review your philanthropic plan annually with your advisors, adjusting it as your goals and priorities change. This ongoing refinement helps shape not just your giving but the legacy you leave behind.

"Legacy is measured not by buildings or named institutions, but by clarity and confidence passed to the next generation - just as your detailed plan reflects a lifetime of values." - Studemont Group ^[45]

If you’re preparing for a liquidity event or restructuring your estate, Phoenix Strategy Group can help weave charitable planning into your broader financial strategy. This holistic approach ensures your financial decisions today align with your personal values, laying the groundwork for a lasting entrepreneurial legacy.

FAQs

How early should I plan charitable giving before selling my business?

It's important to plan charitable giving right from the beginning - ideally during the LOI (Letter of Intent) stage or the early phases of the sale process. Why? Because transferring equity to a charitable vehicle, such as a Charitable Remainder Trust (CRT), must occur before signing any binding agreements. This timing ensures that the IRS treats the gains as intended.

Starting early also gives you enough time to handle necessary steps like approvals, valuations, and appraisals. Delaying these can potentially limit the tax benefits you might otherwise achieve.

Should I donate cash or company shares for the best tax outcome?

Donating appreciated company shares or other assets can often save more on taxes compared to giving cash. When you donate these assets directly to a charity, you may sidestep capital gains taxes and still qualify for a federal income tax deduction based on the asset's full fair market value. On the other hand, selling the assets first would trigger capital gains taxes, which could shrink both the amount you’re able to donate and the deduction you can claim. That said, cash donations are still a simple and effective way to make an immediate impact.

DAF, private foundation, or charitable trust - how do I choose?

Choosing between a donor-advised fund (DAF) and a private foundation largely comes down to your priorities - whether you value simplicity or control. A DAF is straightforward, budget-friendly, and offers excellent tax advantages, making it perfect for those who prefer privacy and minimal administrative work. On the other hand, private foundations are more intricate and expensive to manage but give you greater control over grants and the ability to involve future generations in charitable efforts. For entrepreneurs, starting with a DAF can provide flexibility, while integrating a foundation later can help establish a lasting philanthropic legacy.

Related Blog Posts

• Tax Strategies for SaaS Founders Post-Exit
• Estate Planning After Business Exit
• 7 Capital Gains Tax Strategies for Business Exits
• Top Tax Strategies for Charitable Giving in 2026