Donating Pre-IPO Shares to a Donor-Advised Fund

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For founders, executives, and early employees, a liquidity event can represent a once-in-a-generation moment of wealth creation. For advisors, it can also be one of the most important moments to help clients define how that wealth will be used, structured, and ultimately remembered.

Increasingly, philanthropy is becoming part of that conversation before liquidity occurs. Donor-advised funds (DAFs), particularly when funded with pre-IPO shares, can allow clients to align charitable intent with broader tax, estate, and liquidity planning strategies at a pivotal financial moment.

That opportunity is becoming more relevant as IPO activity rebounds. In 2025, the U.S. IPO market reached a four-year high, with 202 IPOs raising $44 billion, according to Renaissance Capital. As private company equity continues to drive significant personal wealth creation, advisors are increasingly helping clients think through charitable planning well before a public offering, acquisition, or secondary transaction takes place.

How does this work, in practice? In one example, a donor contributed pre-IPO shares of a technology company to a DAF prior to a public offering. When the company went public, the value of those shares increased significantly, resulting in substantially more charitable capital available for grantmaking.

While each situation is unique, this type of planning highlights how timing, structure, and coordination can shape both financial and philanthropic outcomes.

Positioning Philanthropy Before Liquidity Events

Pre-IPO equity is often highly appreciated but illiquid. A future liquidity event, whether an IPO, acquisition, or secondary transaction will trigger income realization (and taxation) of capital gains when the shares are sold.

For charitably inclined clients, contributing shares prior to that event can unlock meaningful advantages:

• Fair market value deduction for long-term held shares (subject to AGI limits, typically up to 30% with a 5-year carryforward for deductions that exceed limits)
• Potential avoidance of capital gains tax on the donated portion
• Preservation of more value for charitable use, rather than taxes
• Flexibility through a donor-advised fund, allowing clients to separate the timing of the tax event from the timing of grantmaking

Philanthropy is most effective when it is incorporated into the liquidity strategy itself, not treated as an afterthought. A DAF allows clients to act at a pivotal financial moment while building a longer-term, more intentional approach to giving that can involve family, advisors, and multi-year grantmaking strategies.

Where and When Complexity Matters

While the opportunity is compelling, execution is rarely straightforward. Donating pre-IPO shares requires early planning, technical coordination, and the right infrastructure.

Several factors must be evaluated in parallel:

• Timing and tax treatment: Contributions must generally occur before a liquidity event is effectively certain to preserve intended tax outcomes
• Transferability: Shares may be subject to shareholder agreements, company approvals, or rights of first refusal
• Valuation: A qualified independent appraisal is required to substantiate fair market value
• Equity structure: Common vs. preferred shares, restrictions, and vesting status can all affect feasibility

Just as important is the capability of the DAF sponsor. Not all sponsors are equipped to accept or manage private, restricted, or concentrated positions.

At scale, this requires the ability to:

• Conduct due diligence on complex assets
• Coordinate with company counsel and advisors
• Hold and manage illiquid positions through a liquidity event
• Execute a timely and compliant exit strategy

Organizations like National Philanthropic Trust bring this infrastructure to bear by supporting contributions of complex, non-cash assets and managing the lifecycle from acceptance through liquidation.

Because these transactions sit at the intersection of tax, legal, and philanthropic planning, coordination across advisors such as tax professionals, estate attorneys, and company counsel is essential.

After the IPO: Continuing the Strategy Post-Liquidity

While many benefits can result from pre-IPO planning, donor-advised funds can also play a valuable role after a company goes public.

Post-IPO, clients often face:

• Concentrated stock positions
• Ongoing liquidity decisions
• Lock-up expirations and staged sales

In these scenarios, DAFs can be used to:

• Donate appreciated public shares over time, continuing to optimize tax outcomes
• Diversify concentrated positions in a tax-efficient manner
• Fund ongoing philanthropic strategies without disrupting broader investment planning

This allows advisors to extend the conversation beyond a single event and can transform a moment of liquidity into a sustained philanthropic strategy.

In some cases, executives and insiders may also coordinate charitable planning alongside structured selling programs, such as Rule 10b5-1 plans, which can help establish predetermined trading arrangements for post-IPO shares. While these plans are securities-focused tools, they can complement broader philanthropic and liquidity strategies when coordinated thoughtfully with legal, tax, and financial advisors.

From Liquidity to Long-Term Impact

For advisors, an opportunity lies in helping clients structure philanthropy as an integrated component of their overall wealth strategy.

Liquidity events can be transformative, but they often unfold quickly. For clients who wish to incorporate charitable giving into that moment, preparation is key. DAFs offer a flexible framework to convert private company equity into long-term charitable impact — before, during, and after an IPO.