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The Philanthropic Journey

For many business owners, success and giving back go hand-in-hand.

The Philanthropic Journey image

What words best describe the qualities of successful entrepreneurs and business owners? Most people would include creative, hard-working, demanding and optimistic. But there’s another word that might not automatically make the list, yet absolutely belongs there: philanthropic.

Did you know that 72% of business owners actively support nonprofit organizations and causes?1 Perhaps it comes as no surprise that those who are skilled at identifying a problem or need and building a business to address it, often marry that skill with their values and invest both time and money in working to address problems that society faces. For many, philanthropy presents both an opportunity to infuse mission into their business culture and to further their personal legacy goals.

As a business owner yourself, you’re familiar with the concepts of risk and reward, making strategic use of limited resources and the importance of sound money management. This awareness, combined with the business acumen you bring to the table, may position you as an important resource to the philanthropic community — as a strategic partner, donor, volunteer or board member. As you start, build or transition a business enterprise, it could be worthwhile to consider how philanthropy might contribute to the success and personal fulfillment that you experience along the way.

At Merrill Lynch Private Banking & Investment Group, our clients tell us that, along with financial considerations, one of the primary motivations for incorporating philanthropy into both their business and personal lives is a desire to deepen the connections between themselves, their employees, their company and the communities in which they live and work. Sharing philanthropic experiences within a company culture brings people together in a way that daily operations cannot and reflects appreciation toward the communities that support the business, while building a personal legacy.


a natural connection

“In preparing to sell the business, I often thought about what would come next. I realized that I had the opportunity to engage much more deeply in giving and giving back, and ultimately decided that my philanthropy would be my next career.”


Many owners envision their business not only supporting their families, but also supporting the causes they are concerned about and organizations that reflect their values. This can take many forms, from an informal endorsement of employee volunteerism, through the creation of a formal corporate philanthropy program. Along this spectrum, we see business owners sponsoring charitable events and volunteer activities, establishing matching gift programs for employee donations, and/or creating corporate foundations. The mission of the organizations and activities you support can help communicate to your employees and the community who you are and what you stand for, your personal and corporate values and your commitment to the company’s philanthropic culture. Some companies will go on to draft a formal mission statement of their own, which serves to guide all of their philanthropic activities.

Any level of philanthropic engagement can have a positive impact on how you, your employees, your communities and society view your company. Depending on the structure of your business and the nature of your gifts, philanthropy may also create tax efficiencies for you personally or for the business.


A prominent business owner and her family had historically been quite charitable, but it wasn’t until they began considering the sale of the business that they truly began building a personal philanthropic plan.

With significant income to be realized from the sale, our client began to engage with her advisory team to explore how she might defer capital gains, achieve more philanthropic impact, and better engage and educate her children on her value of giving back. By articulating these goals and beginning her planning ahead of the sale, she and her family were able to consider multiple options and ultimately chose the family foundation structure.

The foundation would allow them to take advantage of certain tax benefits, come together to build a philanthropic vision, and implement a long-term giving initiative in the areas they cared most about for maximum impact.


Business owners stand out as distinctly committed to making a positive difference in the world. Not only do they see business ownership as an important way they help to create economic opportunity for others, they are actively engaged in supporting nonprofit organizations and causes through philanthropy.


As we advise on wealth creation, we encourage focused conversations about the purpose of the wealth. Your approach to giving will be informed by multiple factors, among them your family history, personal and philanthropic belief systems, charitable interests, and the current and future state for your business.

While some business owners prefer the ease, spontaneity and focus of direct giving — simply writing a check or offering a one-time gift of stock to satisfy very specific needs — many of today’s dedicated donors are turning to more formal mechanisms for giving. They are using charitable giving vehicles as part of a more deliberate charitable strategy that better allows them to integrate their giving with their broader wealth management strategy and pass on the values of personal commitment, involvement and contribution to younger generations.

As your life and business evolve, you may decide to use philanthropy as a means for integrating wealth and family by bridging generations and uniting family members around common causes and shared concerns. Three charitable vehicles often selected by entrepreneurs and business owners to advance their goals are described here.

Donor-advised funds

Donor-advised funds (DAFs) appeal to business owners who want both tax advantages and a degree of decision making over where their money goes. With a DAF, the business owner/donor contributes assets to a nonprofit fund operated by a charity that acts as administrator and typically as custodian. Donors recommend how and when their funds will be distributed.

Charitable lead and remainder trusts

Charitable trusts can enable business owners to support charitable causes while at the same time addressing personal tax, income or estate needs. Charitable lead trusts are helpful in passing assets to heirs at a reduced valuation for gift and estate tax purposes. Charitable remainder trusts provide support for charitable causes as well as a stream of payments to the business owner or any individual they select.

Private foundations

Business owners wishing to build an enduring philanthropic legacy may choose to start a private foundation. Private foundations are separate charities that can be named for the owner or the business and are set up and managed by an individual, a family or an independent board of directors or trustees. They offer the greatest degree of control, and may be passed down from generation to generation.





Eligible organizations you can support

IRS-qualified public charities

IRS-qualified public charities and, generally, private foundations

IRS-qualified public charities, and potentially to other types of organizations and individuals

Growth potential of gifted money through investments

Donation of non-cash items

Income tax deduction

50% for cash
30% for appreciated assets
Depends on the type of charity supported by the trust and the type of trust 30% for cash
20% for appreciated assets

Tax on investment income

None Depends on the nature of the trust 1% or 2% of net investment income

Privacy/anonymous giving



  • Which of your business or leadership skills might you apply, whether in giving, volunteering or participating on a board?
  • Is it important to you to give back to the communities that helped you succeed?
  • Is it important to you to incorporate philanthropy into your business culture?
  • What are your corporate values and how might they tie to your philanthropic purpose?
  • Do you want your personal giving tied to, or separate from, your corporate philanthropy?
  • Have you spent time thinking through your personal philanthropic planning?


Your overarching philanthropic focus and the legacy you hope to build may remain constant over the life of your business. Yet, the ways in which you engage in giving may vary significantly as your business grows, changes direction, or you begin to position for a sale. As you consider the wealth structuring dynamics tied to each phase of your business life cycle, having a philanthropic advisor on your wealth management team may be beneficial. A philanthropic advisor can provide you with guidance on educating and engaging family generations in philanthropy and can recommend the appropriate strategies and vehicles at every step in your philanthropic journey.


Over the span of your life and your company’s life cycle you will make many decisions that impact you, your family, your legacy, your company, your employees and your community.

To learn more about U.S. Trust’s approach to business owners and philanthropy, please contact your private wealth advisor.

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