Gary, Planning with Purpose: Purpose Trusts, Charitable Gifts, and Business Succession Planning

A business owner who has built a successful business over a lifetime of hard work may want to leave behind a charitable legacy, while also ensuring that the business will continue to operate in alignment with the owner’s social, environmental, and community-focused values. This article discusses three strategies that will allow the owner to leave a philanthropic legacy. The owner could use the proceeds of a sale of the business to create a foundation or perhaps operate the business within the foundation, but these options have drawbacks, as the article explains. The third strategy, and the focus of the article, involves the sale or gift of the business to a noncharitable purpose trust. The trust has no beneficiaries and operates the business for the purposes the owner identifies in the trust instrument. These purposes can include benefits for employees, the continuation of environmentally sound practices, and community engagement, as well as charitable giving. Purpose trust ownership can protect the way the business operates and allow the business owner to leave a social, environmental, and philanthropic legacy.