After the Liquidity Event: Launching a Foundation and Building a Long-Term Investment Strategy

A liquidity event such as the sale of a business or real estate can be life changing. While it creates new opportunities, this event also introduces a new level of complexity across taxes, investments and future planning. Following a liquidity event, families are often faced with important decisions that can have lasting financial and personal implications, making it critical to step back, organize priorities and build a thoughtful strategy for what’s ahead.

For families exploring charitable giving through a foundation while developing an investment strategy, several key considerations can help shape the path forward.

What a Liquidity Event Means for Families

A liquidity event typically occurs when an illiquid asset, such as a business, real estate holding or concentrated investment, is converted into cash or marketable securities through a sale or inheritance. These events create opportunities for diversification, increased flexibility and control over wealth, enhanced financial security, greater philanthropic impact and the ability to pursue more strategic planning. However, they can also introduce complexities across taxes, cash flow, investment strategy, estate planning, risk management and family governance. How these areas are addressed in the early stages can have a lasting impact on a family’s ability to preserve wealth, achieve financial goals and build a legacy for future generations.

Why Families Consider Launching a Foundation

Families often consider launching a foundation following a liquidity event to create structure, consistency, family participation and a sense of legacy. A foundation is a legal entity that provides a formal framework for holding assets and distributing funds to charitable causes over time. Many families choose this approach because it offers a dedicated framework for philanthropy, allowing them to formalize their charitable giving strategy, define their goals and give in a thoughtful and strategic manner aligned with their values.

For some families, starting a foundation creates an opportunity to involve multiple generations in giving decisions, helping establish shared values, encourage stewardship and make philanthropic efforts more intentional and impactful over time.

Choosing Between a Private Foundation and Donor-Advised Fund

A donor-advised fund (DAF) is a charitable account that allows donors to make grants flexibly, receive immediate tax benefits and invest assets for future giving. For families seeking a streamlined approach to philanthropy, a DAF can offer administrative simplicity and flexibility.

A private foundation is an independent charitable entity controlled by an individual, family or business that also provides tax advantages and offers greater control through its own bylaws and governance structure. However, it is generally more complex, costly and administratively demanding to establish and maintain than a DAF.

While both vehicles support strategic philanthropy in different ways, the right approach depends on a family’s philanthropic objectives, desired level of involvement and administrative preferences. In some cases, families may choose to use both a private foundation and a donor-advised fund to complement one another and enhance their overall charitable strategy.

Building an Investment Strategy to Support Long-Term Giving

Foundations typically invest using two approaches: Strategic Asset Allocation (SAA) and the Total Portfolio Approach (TPA). SAA is a long-term, buy-and-hold strategy that sets target allocations based on risk tolerance, time horizon and goals, helping align the portfolio with a foundation’s mission, grantmaking needs and the need to balance current distributions with future growth. TPA evaluates each investment by its contribution to overall portfolio objectives, risk, liquidity and relative value with a focus on improving portfolio resilience, liquidity management and sustainable outcomes.

It’s also important to understand the role of an Investment Policy Statement (IPS). IPS defines asset allocation, risk tolerance and liquidity needs, creating a disciplined framework for decision-making and alignment with investment objectives.

Together, these frameworks provide a disciplined foundation for building an investment strategy that supports both the foundation’s immediate grantmaking needs and its mission.

Example foundation investment framework

After a liquidity event, the investment strategy should align with the foundation’s needs and goals. One approach is to allocate assets based on timing and purpose.

• Cash and cash equivalents should cover short-term needs, including grantmaking and operating expenses, helping ensure these commitments are not affected by market volatility.
• Fixed income can provide portfolio stability and predictable income.
• Public equities typically serve as the primary driver of long-term growth and can help preserve purchasing power over time.
• Alternative investments, where appropriate, may enhance diversification and improve risk-adjusted returns for larger portfolios.
• Mission-aligned investments may allow some families to reflect their philanthropic values while continuing to pursue financial objectives.

Coordinating Your Broader Wealth Planning Strategy

Tax planning is a primary consideration in any liquidity event due to the significant tax exposure involved. Working with a certified public accountant (CPA) can help evaluate strategies related to timing, charitable giving and overall tax efficiency while helping families preserve more of their wealth and avoid unintended tax consequences.

As wealth increases, estate and generational planning becomes more important. This includes reviewing estate and trust documents and being intentional about how wealth is invested and distributed across generations. Families should also reassess cash flow and lifestyle with a clear plan for spending, income generation and sustainability after transitioning to liquid assets. Additionally, it’s important to revisit risk management to align insurance coverage and liability protections with the new level of wealth. Charitable planning can also support both tax efficiency and personal values, whether through a foundation, donor-advised fund or other vehicles.

Family governance and education are also essential to success and establish clear communication, decision-making processes and preparedness for future generations.

How Weaver Can Help

A liquidity event can be a pivotal moment that requires thoughtful planning in many areas of a family’s financial life. By bringing together charitable giving, defining an investment strategy and tax and estate planning, families can make more informed decisions and position their wealth to support their specific objectives for years to come.

Weaver works with families to help coordinate these decisions, offering guidance and a tailored plan that reflects your family’s values and further helps you to achieve your priorities. Contact us to learn how we can support your planning needs.

Authored by Andy Greenawalt

©2026

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