When someone sells a business, the questions usually come fast. How much tax will I owe? Should I set up a Donor Advised Fund? How much should I give, and should it happen before or after the sale?
Good questions, all of them. But many owners, and more than a few advisors, ask them in the wrong order.
Sophisticated planning isn't just about choosing the right strategies. It's about sequencing them correctly. Two plans can use the same tools, pursue the same charitable goals, and invest the same way, yet land on very different tax outcomes simply because of the order in which they were executed.
A simplified example:
A business owner sells a company for $25 million with a $5 million tax basis, creating a $20 million capital gain. They also want to contribute $5 million to a Donor Advised Fund.
Contributing before the sale looks like the obvious move: donate a portion of the business pre-close, avoid the capital gain. They also want to contribute $5 million to a Donor Advised Fund.
Contributing before the sale looks like the obvious move: donate a portion of the business pre-close, avoid the capital gain on those shares, and create a charitable deduction, subject to applicable tax rules and limitations. It's a well-established strategy, and often the right one.
Now add one variable. Assume the owner also plans to run a tax-loss harvesting strategy, and that starting it mid-year (for illustration only) generates roughly half of what a full twelve months would produce.
If the charitable gift comes first, only $20 million remains to fund that strategy. Under those assumptions, the owner finishes the year with roughly $7 million of remaining taxable capital gain.
Change one thing: invest the full $25 million first. The tax-loss strategy now works off a larger base. Later in the year, the owner contributes about $5 million of the invested positions to the Donor Advised Fund, the same charitable outcome, more capital working during the year.
Same assumptions. Remaining taxable capital gain: roughly $3.75 million.
That's the real point. This isn't a story about Donor Advised Funds, it's a story about coordination. Charitable planning, tax planning, investments, estate planning, and cash flow rarely operate in isolation, even though they're often treated that way. The larger the transaction, the more that disconnect costs.
Every owner's goals, tax picture, and charitable priorities differ, so there's no single sequence that fits every deal. But there is one principle that holds: when generational wealth is on the table, execution matters. The difference between an exceptional outcome and an average one often isn't a new strategy. It's knowing which one goes first.
At AFE Private Wealth, we treat wealth planning as one integrated system, not a collection of separate strategies. Our job is to see the whole board before the first move.
Disclosure: Case studies/Scenarios presented are not indicative of all client experiences with AFE Private Wealth. Each client has unique circumstances, and the case studies presented are intended for illustrative purposes only. These examples should not be interpreted as a guarantee of future results or success.