Why the Best Charitable Planning Advice Is Sometimes “Don’t Do This”
Charitable giving is not a product of the tax code.
This seems obvious when stated plainly, but over the past century, philanthropy and tax planning have become deeply intertwined.
Mutual aid, community support, organized generosity–these are woven into human experience, present in every culture and era. In America, philanthropy built hospitals, universities, libraries, and houses of worship long before anyone filed an income tax return.
The charitable deduction, introduced in 1917, was designed to recognize this existing impulse and ensure that taxes on income wouldn’t discourage the generosity that so many communities depended on. The deduction was never intended to create charitable giving. The intent was to avoid penalizing it.
Yet today, for many families and advisors, charitable planning has become synonymous with tax planning. The tools have been confused with the purpose.
The One Big Beautiful Bill Act (OBBBA), enacted last July, has changed the technical landscape. New floors, caps, and ordering rules have prompted fresh conversations about charitable giving strategies. But the most important question hasn’t changed:
Does this structure serve authentic charitable purpose?
I want to share two stories that illustrate why that question matters more than any tax calculation.
[These are anonymized composite anecdotes; crafted around real-world experiences but without revealing confidential client details.]
Two Families, Two Questions
The Thompson Family built a successful manufacturing business, eventually relocating operations and family to Asia. For more than twenty-five years, the Thompsons have lived abroad, with their charitable work– sophisticated programs in international development and education– centered entirely in Asia through a well-run foundation headquartered in Singapore.
They retained U.S. real estate holdings through a Delaware corporation, managed by an executive vice president with no family involvement. About a decade ago, that executive told a colleague, a CPA with some charitable-planning experience, that the corporation was “getting killed on taxes.”
The colleague had a suggestion: “You can save a ton on taxes by setting up a private operating foundation. You maintain control AND get higher deduction limits: the best of both worlds! Then you can give grants to charities you already support.”
The response was brief: “Sounds great. Let’s set it up.”
The foundation documentation was technically excellent, and the application for tax exemption was processed without issues. But notice what was absent from that original conversation: any discussion of charitable purpose, community need, family engagement, or mission alignment. The foundation was conceived as a tax solution. Purpose was expected to follow.
It never did.
Ten years later, the Thompson Family Foundation operates as a pass-through grantmaking organization while classified as an operating foundation (a mismatch that creates real compliance risk). It has no articulated U.S. charitable purpose. Nobody in the family is engaged with it. The tax advisors managing it lack specialized foundation expertise. Professional fees consume significant funds each year for a structure that serves no clear purpose.
And while the foundation’s grants do support U.S.-based charities, those contributions could be made by the family’s U.S. business with the same tax benefits. The foundation is an unnecessary complication with added costs and compliance issues with no added value.
Recently, the family office CEO proposed contributing $10 million in appreciated land to this foundation. The math showed meaningful tax benefits. Under traditional analysis, it looked attractive.
The recommendation from their new advisor, one with extensive foundation experience, was unexpected: Don’t do this.
The reasoning was simple, and came only after the advisor asked a series of questions about purpose, intention, and objectives, and then listened deeply as the CEO shared about the family and business dynamics.
The picture that emerged was clear. The family’s heart is in Asia. Aside from the potential tax benefits, there was no real interest in creating U.S.-based charitable structures. Building a fully staffed U.S.-based operating foundation (to align with its classification and remain eligible for more favorable tax treatment) would not serve the family’s well-established, longstanding global charitable work. It would likely create distraction and burden, and over time could leave you with two charitable entities whose values and program priorities diverge or even work at cross‑purposes. Contributing $10 million to a foundation without a mission doesn’t advance charitable purpose; it parks assets in a compliance-burdened structure seeking a reason to exist.
___________________
The Davidson Family has a different story.
They also built a successful manufacturing business, also relocated primary operations to Asia. But unlike the Thompsons, their connection to U.S. roots runs deeper, particularly through their adult children.
Sarah and James Davidson grew up in Tennessee, attended state universities, married locally, and are raising their families in the communities where they grew up. They hold ownership stakes in the family’s U.S. business through a family holding company. And living in Tennessee, working with local employers, they see something clearly: a workforce crisis threatening communities they love.
Production job openings far exceed the number of qualified candidates. Technical training can’t keep pace with demand. Young people don’t see clear pathways from high school to skilled careers. Meanwhile, manufacturing jobs pay well, and major employers are investing heavily in the region.
The gap isn’t opportunity; it’s the pathway that connects young people to those careers.
During a family visit, Sarah and James raised what they’d been seeing. They proposed partnering with a local community college to create an advanced manufacturing training center, with hands-on training, real equipment, and apprenticeships that lead to careers.
Their parents showed genuine interest: “What are you thinking?”
Later, when Mrs. Davidson discussed the idea with a friend experienced in charitable structures, that friend also asked clarifying questions:
What are you hoping to accomplish?
Who would this serve?
What might success look like?
What role do you see for yourselves?
Only after understanding the vision did the friend ask about structure: “It sounds like they want to operate programs directly, not just fund others?”
Yes. They wanted to build and run a training center, partner with evidence‑based educational programs, and measure outcomes by careers launched rather than grants made. They wanted to do this in ways that produced real‑world results and cultivated authentic relationships with like‑minded partners.
“Then let’s talk about what structure would serve that vision.”
___________________
Same Sophistication, Different Meaning
Here’s what makes these stories instructive: the technical planning for both families is similarly sophisticated. Both involve private operating foundations. Both involve complex asset contributions. Both involve professional advisors and multi-year tax planning.
The financial analysis for the Davidsons shows substantial benefits– and with a specialized DAF intermediary strategy for their appreciated real estate, those benefits can be amplified significantly. The planning is genuinely sophisticated.
But sophistication serves different purposes depending on where it starts.
For the Thompsons, technical complexity creates burden without meaning. For the Davidsons, technical complexity amplifies impact for a mission that exists independent of tax benefits.
The numbers don’t change. The purpose changes everything.
What OBBBA Actually Changes
The new tax rules under the One Big Beautiful Bill Act (OBBBA)–0.5% floor on individual charitable deductions, 1% floor for corporations, 35-cent cap on the value of all deductions for the highest bracket taxpayers–have changed the charitable giving landscape. Among other things, they make marginal, tax-driven giving less attractive.
This is arguably what Congress intended. The charitable deduction exists to recognize authentic generosity, not to manufacture tax avoidance strategies. By reducing marginal benefits for tax-driven giving while expanding deductions for the millions of non-itemizing taxpayers who give without tax motivation, OBBBA may actually restore the original alignment between tax policy and charitable purpose.
Whether this realignment was Congress’s conscious intent or simply the effect of revenue-focused drafting, the practical implication for families remains the same: when tax benefits shrink, authentic purpose must be clearer.
For families with genuine philanthropic vision, this creates opportunity. When tax-motivated donors exit the space, reduce activity, or become less visibly associated with what “philanthropy” means, those driven by authentic purpose can operate with greater clarity. Purpose-first planning becomes not just preferable but practically advantageous.
The Question Behind the Question
Every charitable planning conversation begins with a question. The nature of that question reveals everything about what will follow.
“We’re getting killed on taxes. What can we do?”
“We see a real need in our community. How can we help?”
Both questions can lead to sophisticated charitable structures. Both can involve foundations, complex contributions, multi-year planning. But they lead to fundamentally different places.
Advisors shape these conversations. Those who respond to tax complaints with immediate structural recommendations may be doing what clients expect– but they may not be serving those clients well. And advisors who subtly discourage their clients from philanthropy (which seems increasingly common) often haven’t taken time to listen to what the client actually wants or needs. Not every client is trying to maximize returns or lifetime wealth.
A better starting point is to explore: Tell me more about your charitable interests. What communities or causes matter to you? What would you hope to accomplish?
If authentic purpose emerges, technical excellence can serve it. If no authentic purpose emerges (beyond a desire to reduce taxes), the advisor can explain that charitable structures without authentic purpose tend to become burdens– and that there may be better ways to address the tax concerns.
This is not always easy advice to give. It may not generate immediate fees or showcase technical sophistication. But it often serves the client better, especially in the long term, than treating charitable structures as just one more tax‑savings tool in the planning toolbox.
The Honest Test
There’s a simple question that distinguishes purpose-first from structure-first planning:
If the charitable deduction disappeared tomorrow, would you still want this structure? Would you still fund this organization? Would you still pursue this mission?
The Thompson foundation exists because of tax benefits. Remove them and the rationale evaporates.
The Davidson foundation exists because Sarah and James see Tennessee workforce gaps that threaten communities they love. Tax benefits amplify their impact. They don’t create their commitment.
When the answer to the honest test is yes, when purpose exists independent of tax treatment, technical excellence becomes genuinely valuable. It puts more resources toward authentic mission.
When the answer is no, even the most sophisticated planning creates burden rather than meaning.
Choose Purpose First
The Thompson Family Foundation and the Davidson Family Foundation share surface similarities. Both are private operating foundations. Both involve substantial assets. Both were created by successful families with access to sophisticated advice.
Their futures could not be more different.
One is a compliance burden seeking a purpose. The other is a mission vehicle equipped with technical excellence.
The difference is not wealth, access, or sophistication. The difference is where they started.
OBBBA has changed the rules. But the fundamental question hasn’t changed:
Does this structure serve authentic charitable purpose?
When the answer is yes, technical excellence amplifies impact. When the answer is no, technical excellence amplifies burden.
The choice belongs to families and the advisors who serve them.
Choose purpose first.