Case Study: Incorporating Family Philanthropy into a Business Exit

As an advisor, you may work with clients who own family businesses. You’ve likely also considered the role strategic philanthropy can play in business succession planning and in preparing clients for their eventual exit. But how does that strategy actually come to life in a real client conversation? This case study illustrates that scenario.

When Mark and Elaine come into your office to update their estate and financial plans, retirement is only part of the future picture they’d like to discuss. At 66 and 64, they are financially secure, but the larger question looming in the background is the future of the family business. After three decades of ownership, they are beginning to explore a sale within the next few years.

The first part of your conversation is very familiar: income projections, portfolio sustainability, and how the family business’s corporate structure could evolve to allow Mark and Elaine to step back from day-to-day operations. If you are their financial advisor or CPA, you might run the models, stress-test assumptions, and outline what taxes and retirement could look like if a liquidity event occurs. If you are their estate planning attorney, you might review the company’s legal structure and emergency transition plans.

In any case, you know the numbers are strong. A sale would more than fund Mark and Elaine’s lifetime needs. But as your conversation deepens, a more complex issue surfaces: what does succession look like – not just operationally, but reputationally and relationally?

“Our two adult children are not active in the business,” says Mark. “A third-party sale is inevitable, and we are fine with that financially, but it’s a gut punch emotionally.” Mark shares that the company’s name carries a lot of weight in the community, and for years, the business has been closely associated with the family’s identity and local impact. “So what happens to that identity if we sell?” Mark wonders as he considers a sale to non-family members.

Elaine’s concern is more inward-facing. “I really want our children to stay aligned after a liquidity event. For so many years, company events and trips have been where we’ve all gathered. I hate to think of that ‘glue’ disappearing in an instant.” Elaine says she has seen other families fracture after a business sale. “They barely see each other anymore,” she remarks.

This is an opportunity to introduce a broader planning lens. You validate that a business sale is not only a financial event; it is deeply personal at the same time. You suggest that philanthropy – structured intentionally before a sale – can serve as a bridge. Mark and Elaine could explore the option to transfer shares in the business to a donor advised fund at the community foundation well in advance of any potential transaction. Then, when the business is sold, a portion of the proceeds lands in the donor-advised fund.

The tax advantages of the transaction are meaningful. By donating a portion of closely held stock before a legally binding sale process begins, Mark and Elaine are eligible for an income tax deduction, subject to AGI limitations, based on the stock’s fair market value at the time of the gift. Later, when the business is sold, the proceeds on the shares held by the donor advised fund are not subject to capital gains tax.

Still, you emphasize that tax efficiency is only one layer.

Creating a donor advised fund before the sale allows the family, working together, to articulate a charitable mission while the business is still operating. It signals continuity – although ownership of the business may change, the family’s commitment to the community does not.

You suggest to Mark and Elaine that the Arizona Community Foundation team join the next meeting, to help facilitate a broader conversation – one that goes beyond the corporate, legal, financial, and tax aspects and instead focuses on shaping the family’s philanthropic vision. The discussion would explore the deeper questions that often determine whether wealth transitions feel fragmented or purposeful, such as:

• What values built this business, and how should those values live on through our philanthropy?
• What role do we want the family name and legacy to play after a potential sale?
• What does “responsible stewardship” of this wealth look like across generations – not just financially, but culturally and emotionally?

You also explain that ACF can support the family beyond a single meeting- by facilitating structured family retreats, helping design a cohesive philanthropic strategy aligned with the business transition, curating thoughtful nonprofit opportunities that reflect their priorities, and sharing best practices for multi-generational governance and engagement.

Mark and Elaine immediately see the value in the approach.

“Let’s do it,” Elaine says. “This reframes everything – it feels less like we’re planning an exit, and more like we’re shaping what comes next.”

Mark and Elaine’s situation is one of many examples of cases where a family business may eventually change hands. But through an intentional philanthropic structure – designed in coordination with the Arizona Community Foundation – the family’s influence, values, and unity continue for generations to come.