The Moment Guide to Donor Advised Funds: How to Give More and Pay Less in Taxes After a Liquidity Event

Most business owners think about charitable giving the wrong way.

It usually looks like this:

· You sell your business · You write a check to your favorite charity · You feel good about it

Here is what it could look like instead:

· You sell your business · You reduce your tax bill by tens of thousands of dollars · You keep giving to the causes you care about for years

Welcome to the Donor Advised Fund, one of the most powerful and least understood tools in financial planning for business owners.

A Donor Advised Fund, or DAF, is a charitable giving account that lets you contribute money or assets, take an immediate tax deduction, and then distribute that money to charities over time, on your schedule.

The year you sell a business is one of the best times in your life to use one. I will explain exactly why.

In this guide, I break down how Donor Advised Funds work, why a liquidity event is the ideal moment to use one, and what the 2026 tax rules actually say about the numbers.

Before you think about giving, you need to make sure the sale itself is structured correctly. We break that down in our guide to planning a business exit.

Donor Advised Funds Guide - How They Work

The mechanics are simple.

You open a DAF through a sponsoring organization, a 501(c)(3) like Fidelity Charitable, Schwab Charitable, or a community foundation. You make a contribution. From that point on, the sponsoring organization holds legal control over the assets. The gift is irrevocable.

Here is the part that makes a DAF different from writing a check.

You get the tax deduction the year you contribute. You decide when and where the money goes to charities.

That separation, deduction now, distribution later, is what makes a DAF so useful in a high-income year.

Now, why should you not fund a DAF with cash? That is almost always the wrong move if you have appreciated assets available.

Here is why.

When you donate cash, you get a deduction. That is it.

When you donate appreciated securities, stocks, mutual funds, or other assets that have grown in value, you get two benefits at once.

First, you avoid the capital gains tax you would have owed if you sold those assets yourself. The DAF sells them. Because it is a tax-exempt organization, it pays zero capital gains tax on the sale. The full value goes to charity.

Here is what that difference looks like in real numbers:

You bought $50,000 of stock years ago. It is worth $150,000 today. Option one: you sell the stock, pay capital gains tax on $100,000 of growth, which could result in $20,000 or more of taxes, and donate the remaining cash to a DAF. Option two: you transfer the shares directly to the DAF. The DAF sells them tax-free. You deduct the full $150,000. The charity receives the full $150,000. Same $150,000 position. You would then reinvest the cash you were going to donate to reset your cost basis.

It's a great way to rebalance your portfolio in an efficient way while having an amazing impact.

Why the Year You Sell Is the Right Year to Give

The year you sell your business is likely the highest-income year of your life.

Most owners focus entirely on that number, the sale price, the structure, the tax hit. Very few think about what that year means for their giving.

It should be the most generous year of your life. Not just because you can afford it. Because the tax code rewards you for it in ways that never come around again.

Here is the core idea.

A charitable deduction has more value when your income is higher. If you are in the 37% federal bracket in the year of your sale, every dollar you deduct saves you 35 - 37 cents in federal taxes.

The deduction does not change. The income does. And higher income means the deduction is worth more.

The window is one calendar year.

Once December 31st passes, the high-income year is gone. You cannot go back and take a deduction against income you already reported. The DAF contribution must happen in the same year the sale closes to offset that income.

This is not a strategy you plan in January after the sale. It is a strategy you build before the deal is done.

Here is what the math looks like in a real scenario.

A business owner closes a $5,000,000 sale in October. Before the end of the year, they contribute $400,000 in appreciated securities to a DAF. They avoid capital gains tax on the appreciation in those securities. They deduct the full fair market value against the highest-income year of their life. The deduction saves them over $140,000 in federal taxes at the 35% effective rate. The $400,000 stays invested inside the DAF and grows tax-free. Over the next several years, they direct grants to the charities and causes they care about most.

They gave generously. They kept more of what they built. And they never had to rush the decision of who receives the money.

That is the opportunity the year of a sale creates. Most business owners miss it because no one tells them early enough.

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The Perfect Outcome

The business owners I work with who get this right have two things in common.

1. They planned before the sale closed. Whether it was a contribution of appreciated securities or private company stock, both strategies required action before the calendar year ended or the deal was signed. Once those windows close, they are gone.

2. They gave on their own terms. A DAF lets you make a meaningful tax move in your highest-income year without rushing your charitable decisions. The contribution is committed. The deduction is taken. You can take months or years to decide exactly which organizations receive the grants.

That is the real value of a Donor Advised Fund. You do not have to choose between smart tax planning and thoughtful generosity. You can do both.

If you are a business owner approaching a liquidity event and want to understand how a donor-advised fund fits into your broader tax strategy, schedule a call with our team.

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Frequently Asked Questions

Here are some answers to questions I received frequently about this topic.

1. Are you a fiduciary? Moment Private Wealth serves clients as a fiduciary 100% of the time.
   

2. How does Moment Private Wealth make money? We are only paid in one transparent way, by our clients. We receive no kickbacks or participate in any profit-sharing arrangements. Our fees are simple, transparent, and clear for our clients.
   

3. How are you different than other financial advisors? We are specialists in working with professional athletes and entrepreneurs. We limit the number of new clients we take on. This allows us to provide unparalleled value and highly personalized service to professional athletes. We work as a team to service our clients. We believe in building a team of “A” players. This ensures our clients receive world-class tax, estate, insurance, and investment strategies. We focus on educating first, then executing.
   

4. Where do you hold my investments and how can I see them? Moment Private Wealth uses Fidelity Investments as a third-party custodian for our client investment accounts. As a third-party custodian, Fidelity safeguards and provides reporting to you and the IRS each year. Clients can also access all financial information via the Moment Private Wealth Client Portal.
   

5. How do you work with other members of my team? We believe in the power of the team. For most of our clients, their team consists of Moment Private Wealth, an accountant, an attorney, a banker, and an insurance specialist. We help our clients build out their team of individuals or work with existing partners that clients have. Our goal is to ensure every family has a team of experts to protect their interests.
   

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7. What does your average client look like? Our clients are nearly all athletes and entrepreneurs. Our average client has a net worth greater than $10M. The strategies, solutions, and planning that we implement have a high-net-worth and ultra-high-net-worth client in mind.
   

8. Why should I consider hiring Moment Private Wealth? Great question! But first, let us explain why you shouldn’t hire us. If you’re looking for an advisor who will pitch shiny object investments or be a “yes man” you are in the wrong place. Why? Because we believe in being truth tellers and only giving advice that we take ourselves. The investments, strategies, and planning we do are all things our advisors do with their own money. If you are an athlete or entrepreneur interested in things like lowering your tax bill, investing smarter, and finding a trusted partner, we might be a good fit.

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*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.