Is your business exit on the horizon, and have you already decided that some of your wealth will one day go to causes you care about? On this episode of the Vital Wealth Strategies Podcast, host Patrick Lonergan, founder of Vital Wealth and advisor to high-level entrepreneurs, sits down with Phoenix Hafen, Director of Advisor Solutions at UI Charitable. UI Charitable manages more than $550 million in donor-advised funds for high-net-worth individuals and families. Together they break down why cash is the least tax-efficient asset you can give, and how entrepreneurs can donate appreciated stock, private business interests, real estate, and even venture fund stakes to a donor-advised fund to avoid capital gains tax and capture a charitable deduction.

Pat and Phoenix walk through the real mechanics of charitable planning before a liquidity event. They cover why the IRS wants the deal “still at risk” when you give, how qualified appraisals work, the AGI deduction limits that can catch donors off guard, and when a private foundation makes more sense than a donor-advised fund. Phoenix also shares a creative example of a venture investor who turned illiquid LP interests into a charitable deduction, and he explains how families use donor-advised funds to bring the next generation into philanthropy. If you’re charitably minded and expecting a significant sale in the next few years, this episode shows you how to give more intentionally and more tax-efficiently. For more on tax strategy and wealth building, visit vitalwealth.com/resources, and send your own questions for future episodes to vitalwealth.com/questions.

Key Takeaways

• Never donate cash. Appreciated assets with large capital gains are usually the most tax-efficient gifts.
• Donate appreciated stock and use the cash you would have given to buy it back. You keep your exposure and reset your cost basis.
• Almost anything that can be appraised can go into a donor-advised fund, including private business interests, real estate, precious metals, and LP interests.
• Give before the sale, not after. The IRS wants the deal to still be at risk when you make the gift.
• For a charitable gift, you want the appraisal as high as possible, the opposite of estate planning, where you often seek discounts.
• AGI limits apply to charitable deductions, but unused deductions can carry forward up to five years.
• A donor-advised fund fits most donors. A private foundation is mainly needed to pay staff or give grants directly to individuals.
• Measure charitable impact by outcomes, not outputs.

Resources to Link

• UI Charitable: uicharitable.org

Resources:

• Visit vitalwealth.com/resources to download FREE resources
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• Follow on LinkedIn at https://www.linkedin.com/in/patricklonergan/

Credits:

• Sponsored by Vital Wealth
• Music by Cephas
• Audio, video, research and copywriting by Victoria O'Brien