Charitable Planning During a Liquidity Event: What to Consider Before You Sell

Liquidity events—selling a business, real estate, or a concentrated stock position—are rare moments that often define a business owner’s financial and philanthropic legacy. Before you sign the papers, thoughtful charitable planning can transform a tax liability into a purposeful legacy. The central rule is simple: start before the deal closes.

How donating appreciated assets works (in plain terms)

Before the sale, you can give a portion of the appreciated asset itself—shares, partnership interests, or real property—to a qualifying charitable vehicle. Here’s how that typically helps:

• You avoid paying capital gains tax on the donated portion.
• You may receive a charitable deduction equal to the fair market value of the gifted asset, subject to the AGI limits.
• If the charitable deduction exceeds what you can use in the year of the gift, you can generally carry forward the excess charitable deduction for up to five years.

The net effect: you convert what might have been a taxable gain into meaningful support for causes you care about.

Choosing the right charitable vehicle

Every family’s goals are different. The right vehicle depends on whether you prioritize speed and simplicity, control and legacy, or a mix of current income and future charitable impact.

Donor-advised funds (DAFs)

If your priority is speed and flexibility, a DAF is an excellent option. It lets you lock in a tax deduction now while allowing you to take time—months or years—to decide which charities to support. DAFs are ideal in a high-income year when you want immediate tax relief without committing to final grant decisions.

Private family foundations (PFFs)

If governance and legacy matter most, a private foundation gives a family a formal platform. Foundations let you hire staff, launch programs, and involve multiple generations in governance. They also come with reporting obligations, compliance rules, and a minimum annual distribution requirement that needs be planned for.

Charitable remainder trusts (CRATs and CRUTs)

If you want income while supporting charitable causes in the future, charitable remainder trusts let you convert appreciated assets into a predictable payment stream (CRAT) or a variable stream tied to asset performance (CRUT), with the remainder passing to charity. These trusts can smooth income, provide diversification, and deliver tax benefits—but they are irrevocable and more complex to set up.

Practical strategies to consider before the sale

Thinking strategically about your timing and vehicle choices lets you preserve wealth and amplify impact. Consider these approaches as starting points—each should be tailored with your adviser and legal team.

Before listing them, a word about coordination: complex transactions require teamwork. Your financial adviser, CPA, estate attorney, and deal team should be aligned on timing and documentation to ensure gifts clear before closing.

• Gift a portion of the asset pre-sale. Donating shares or interests before the transaction can remove that portion from taxable gain and preserve its full charitable value.
• Use a DAF to lock in tax benefits quickly. When timing is tight, contributing to a DAF secures a deduction and buys time for thoughtful grant decisions.
• Consider a charitable remainder trust if you need income. A CRAT or CRUT can provide lifetime or term income while ultimately funding charity and potentially deferring capital gains.
• Coordinate appraisal and transfer paperwork early. Noncash gifts often require appraisals, transfer agreements, and careful chain-of-title steps—start these well before closing.
• Review your tax-bracket and AGI planning. Match the timing of gifts to your anticipated income to maximize deduction utility, and plan for carryforwards if needed.

Charitable Strategies in Practice: Real-Life Scenarios

Philanthropy often comes alive through real stories. While every donor’s path is unique, certain strategies consistently help individuals and families make the most of their giving—financially and personally. Here are a few examples of how different approaches can unfold in practice:

• The founder who donated pre-sale stock to a DAF. Take a founder who contributes 10 percent of pre-IPO shares to a DAF before the offering. The gift avoids capital gains for that portion, produced a meaningful deduction, and created a multiyear plan for grants supporting education and workforce development.
• A family of real-estate moguls using blended tools. The family places a portion of core property into a private foundation to preserve governance and naming legacy while using a DAF for rapid grantmaking and anonymous gifts. The hybrid approach kept family leadership central while simplifying many operational aspects of their philanthropic giving.
• An executive who wanted income and legacy. An executive transfers appreciated securities into a charitable remainder unitrust, which provided steady payments and diversified exposure, while naming charities to receive the remainder—aligning income needs with philanthropic goals.

Bringing it together. These stories illustrate how charitable vehicles—whether alone or in combination—can be tailored to fit a donor’s goals, resources, and values. There’s no single “right” way to give; the most effective strategy is the one that balances impact with what matters most to you.

Common pitfalls to avoid

It’s easy to miss traps when you’re focused on the deal. These are the ones I see most often—and they’re avoidable with a little lead time.

• Waiting until after the sale. Once proceeds land in your account, you’ve lost many tax-efficient options.
• Failing to document the gift properly. Gifts of noncash assets typically need written transfer agreements and may require qualified appraisals. Poor documentation can delay or jeopardize tax treatment.
• Overlooking deduction limits. Charitable deductions for noncash gifts are subject to AGI limits; plan for timing and carryforwards.
• Neglecting family governance. If you want heirs involved, speak with them before you give the gift to ensure they are aligned and will participate with your charitable planning strategy.  

A friendly pre-sale planning checklist

Start these items as soon as a liquidity event becomes likely. Each step helps preserve options and reduces last-minute pressure.

1. Notify your adviser team. Tell your financial adviser, CPA, and estate attorney as soon as a sale is probable.
2. Identify which assets to gift. Decide whether shares, partnership interests, or property are appropriate for pre-sale gifting.
3. Select vehicle(s) and outcomes. Determine whether a DAF, foundation, charitable trust, or a combination best serves your goals.
4. Order appraisals and legal documents. Arrange qualified appraisals and prepare transfer paperwork early.
5. Model tax outcomes. Test scenarios for AGI limits, deduction timing, and carryforwards with your CPA.
6. Plan family involvement. Define who will participate in grant decisions and how the process will work post-sale.
7. Coordinate closing timetables. Confirm gift transfer dates with the deal team so gifts finalize before closing.

Final thought

A liquidity event can be the most meaningful chance to align financial success with your values. With early, intentional planning, you can convert a tax event into a philanthropic legacy that reflects your family’s priorities. The best outcomes come from collaboration—let your advisers, CPA, and attorney work together so you don’t lose a powerful opportunity to give with purpose.

Connect with Evensky & Katz / Foldes to map charitable strategies tied to your transaction timeline.