For many people, one of the first questions after a liquidity event isn't about returns. It's about what they want the money to do, and often that includes giving a meaningful amount away. How you give can change how much reaches the causes you care about.
Give shares before you sell
If you sell stock and donate the cash, you pay capital gains tax first and donate what's left. If you donate appreciated shares directly to a qualified public charity or a donor-advised fund, you generally avoid capital gains tax on the appreciation and can typically deduct the shares' full fair market value.
Two conditions matter:
- The full fair market value deduction generally applies to shares held for more than one year. For shares held a year or less, the deduction is generally limited to what you paid for them. Shares from recently vested RSUs or recently exercised options may not have been held long enough yet.
- Deductions for gifts of appreciated stock to public charities are generally limited to 30% of your adjusted gross income in a year, with unused amounts carried forward for up to five years.
The takeaway: if giving is part of your plan, the order matters. Donate the shares first, then sell what you're keeping.
Comparing the main options
| Donor-advised fund | Private foundation | Charitable trusts (CRT, CLT) | |
|---|---|---|---|
| What it is | An account at a sponsoring public charity | A separate legal entity you control | A trust that combines giving with an income stream or a later gift |
| Tax deduction | Immediate, when you contribute | Available, with lower limits than public charities | Depends on the structure |
| Control | You recommend grants over time | Full control, including staff and programs | Set by the trust's terms |
| Administration | Low | Significant, with required annual distributions and public filings | Moderate to high, with legal setup |
| Privacy | Anonymous giving is often possible | Grants are publicly disclosed | Varies |
| Often used for | The simplest way to start | Large, hands-on, long-term giving | Larger gifts combined with income or estate planning |
Giving with evidence in mind
Some people want to be rigorous about impact, comparing causes by their scale, how solvable they are, and how neglected they are. That approach is often associated with effective altruism. Organizations such as GiveWell publish research on specific high-impact charities. Whatever framework you use, a donor-advised fund can give you time to decide where to give without losing the tax benefit of giving shares now.
Start with what you want the money to do
Before vehicles and tax rules, it helps to ask a simple question: what would you like this money to do? The answer shapes everything else, from how much you give to how you structure it.