Overview
Planned giving is a set of strategies that allow small business owners to make meaningful charitable gifts using assets other than cash. These gifts can advance the owner’s philanthropic goals, reduce tax burdens, preserve business cash flow, and—when structured properly—support succession planning and legacy objectives.
In my 15 years advising small business owners and family businesses, I’ve seen planned giving move from a transactional act of charity to a strategic element of financial planning. The most useful techniques typically balance tax efficiency, administrative simplicity, and the owner’s desire for control or ongoing income.
Why non-cash gifts matter for small business owners
Cash is simple, but for many business owners the most valuable wealth sits in non-liquid forms: closely held stock, appreciated securities, commercial real estate, inventory or even life insurance. Donating those assets—rather than selling them and giving cash—can often produce superior tax outcomes and preserve operating capital.
Key non-cash options and how they work
1) Appreciated publicly traded securities
- How it works: Donating long-term appreciated stock or mutual fund shares directly to a public charity generally allows you to claim the fair market value as an income tax charitable deduction and avoid paying capital gains tax on the appreciation. This can make your gift more valuable to the charity.
- Practical notes: Gifts of publicly traded securities are simple for charities to accept and are generally exempt from the $5,000 appraisal requirement that applies to many other non-cash gifts. Follow the charity’s transfer instructions and document the transfer date.
- Learn more: For timing and tax trade-offs of selling vs donating publicly traded securities see our guide on Timing Capital Gains: Donating Stock vs Selling First.
2) Closely held business interests (LLC, S corp, partnership shares)
- How it works: Transferring ownership interests in a closely held business to a charity or into a charitable vehicle (like a donor-advised fund or private foundation) can achieve philanthropic and succession goals.
- Complexities: Gifts of closely held stock often trigger valuation, transfer restriction, liquidity and governance issues—especially for S corporations or businesses with buy-sell agreements. A charity cannot generally hold S-corporation stock without affecting S-corp eligibility, and the transfer may require consent from co-owners or triggering buy-sell clauses.
- Risk management: Work with your CPA and corporate counsel to evaluate tax effects, impact on minority rights, and whether to use a charitable trust or sale-to-charity structure instead.
- More: See our practical post on Charitable Giving of Closely Held Stock: Steps and Risks.
3) Real estate
- How it works: Donating appreciated commercial or residential real estate to a charity or placing it in a charitable trust allows you to avoid capital gains tax and claim a deduction equal to the property’s fair market value (subject to IRS limits and substantiation rules).
- Considerations: Gifts of real estate require an environmental review, title search, and often a qualified appraisal (generally required for non-cash gifts over $5,000). Also confirm the charity’s ability and willingness to accept, manage or sell the property.
4) Life insurance
- How it works: You can name a qualified charity as beneficiary of a life insurance policy or transfer ownership of a paid-up policy to charity. Premiums paid after the charity is owner may be deductible if certain requirements are met.
- Use cases: This is attractive when you want a large future gift but have limited liquid assets today. It’s also useful to remove insurance obligations from your estate.
5) Charitable trusts and annuities (planned-giving vehicles)
- Charitable Remainder Trust (CRT): You transfer assets (cash, appreciated property) to the trust, receive income for life or a term of years, and the remainder passes to the charity. CRTs let you convert illiquid or taxable assets into lifetime income while receiving an upfront charitable deduction. See our primer on Charitable Remainder Trusts: Income and Philanthropy.
- Charitable Lead Trust (CLT): The inverse of a CRT—charity receives income for a term, then the remainder returns to the donor or heirs, useful for estate-tax strategies.
- Charitable Gift Annuities: A contract where the donor gives cash or assets to a charity and receives a fixed income stream; suits donors seeking simple guaranteed payments.
Tax basics and documentation (what to watch for)
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Deduction limits and appraisal rules: The tax treatment depends on the type of asset, how long you owned it, and the recipient charity. Gifts of long-term appreciated property to qualified public charities are generally deductible at fair market value, but subject to adjusted gross income (AGI) percentage limits. Non-cash contributions over $5,000 typically require Form 8283 and, in many cases, a qualified appraisal—except for publicly traded securities. Consult IRS Publication 526 and related guidance: https://www.irs.gov/publications/p526 and the charitable contributions overview at https://www.irs.gov/charities-non-profits/charitable-contributions.
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Entity differences: How your business is taxed matters. For C corporations, charitable deductions historically differ from individual rules and are taken on the corporate return; partnerships and S corporations generally pass charitable items through to owners who claim deductions on their personal returns. If your business is a sole proprietorship, most personal charitable deductions remain on Schedule A. Always confirm with your tax advisor.
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Documentation checklist: Obtain written acknowledgement for any gift over $250, retain transfer confirmations for securities, keep qualified appraisals for non-public assets over $5,000, and properly complete Form 8283 when required. The IRS has substantiation rules—follow them to avoid penalties.
Practical strategies and decision flow
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Inventory assets and goals: List high-basis vs low-basis assets, illiquid holdings, and business interests. Clarify whether you want immediate income, long-term income, reduced estate tax, or immediate charitable impact.
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Pick the vehicle that fits objectives: For income now, consider CRTs or charitable gift annuities. For maximum immediate tax benefit and simplicity, gift appreciated public securities. For legacy and estate planning, CLTs or gifting business interests (with buy-sell coordination) may be appropriate.
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Coordinate with estate and corporate documents: If gifting business interests, confirm buy-sell agreements, shareholder agreements, and operating agreements allow the transfer. Update estate plans and beneficiary designations where needed.
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Plan for timing and valuation: Obtain appraisals early, especially for real estate and closely held interests. Coordinate transfers late in the tax year if you need the deduction for that year.
Common mistakes and how to avoid them
- Assuming all charities accept complex gifts: Not all nonprofits can accept real estate or closely held stock. Ask the charity’s development office early.
- Skipping appraisals and documentation: A missed appraisal or incomplete Form 8283 can cost the deduction.
- Ignoring business governance: Transferring business interests without owner consent or without following buy-sell rules can trigger disputes or forced sales.
Case examples (realistic, anonymized)
- Equity gift with community impact: A restaurant owner donated a minority equity stake to a local food bank’s social enterprise. The gift produced an immediate charitable deduction and kept cash flowing for expansion.
- Real estate legacy: A developer transferred an undeveloped lot to a land trust focused on conservation, avoiding capital gains on sale and securing the property’s long-term public use.
Steps to take next (action checklist for owners)
- Talk to your CPA and estate attorney early.
- Prepare an asset inventory with current basis, market value estimates and liquidity assessment.
- Contact the charity to confirm acceptance rules and transfer instructions.
- Obtain necessary appraisals and document transfers promptly.
- Coordinate gift timing with your tax filing and year-end planning.
Regulatory and ethical considerations
- Conflicts of interest: If your business receives benefit from the recipient charity (naming rights, contracts, sponsorships), document and assess the arrangement for conflicts and unrelated business income tax (UBIT) exposure.
- Transparency and stewardship: Ensure the charity has the capacity to manage non-cash assets and that you and your advisors document restrictions or conditions attached to gifts.
Authoritative sources and further reading
- IRS — Charitable Contributions: https://www.irs.gov/charities-non-profits/charitable-contributions
- IRS Publication 526 — Charitable Contributions: https://www.irs.gov/publications/p526
- Consumer Financial Protection Bureau — Guidance on charitable giving and fraud avoidance: https://www.consumerfinance.gov/
Internal resources on FinHelp
- Timing trades and tax impact of donating stock vs selling: Timing Capital Gains: Donating Stock vs Selling First
- Planning income and philanthropy with trusts: Charitable Remainder Trusts: Income and Philanthropy
- Risks and steps for giving business stock: Charitable Giving of Closely Held Stock: Steps and Risks
Professional disclaimer
The material here is educational and general in nature. It is not personalized tax or legal advice. Tax law is complex and changes regularly—small business owners should consult their CPA, tax attorney, or financial advisor before completing charitable gifts.
Concluding thought
For many small business owners, planned giving that uses non-cash assets can multiply philanthropic impact while protecting business cash flow and tax position. With careful planning, these strategies become an integral part of succession, estate and tax planning—not an afterthought.
