The 3 Dimensions of Wealth - Social
The third or social dimension of wealth is where you make a choice on how you will benefit society. Suppose I gave you $1 million that you couldn’t keep, give to family or friends - you could only choose to give it to the IRS or charity, which would you give it to? Where would it have the greatest impact?
Charity is the easy answer. You have a choice, charity or the IRS. What’s puzzling is that while people have the opportunity to execute financial and estate planning that eliminates the federal government from receiving their wealth, most choose not to. According to the Center on Philanthropy at Indiana University about 67% of households in the United States give to charity each year. However, only 8% report leaving a charitable bequest in their wills and therefore end up giving more to the government than to charity.
Webster’s Dictionary defines a philanthropist as “a benevolent supporter of human beings and human welfare.” Typically we think of philanthropists as the mega-wealthy - Bill Gates, Warren Buffett, the Carnegie or Rockefeller families. A taxpayer is defined as “Someone who gives up one fifth of their capital gains or one half of their family wealth to support the general welfare of our country.” The United States tax code makes all of us philanthropists. Choose to do nothing and let federal income and estate taxes make the decision for you or plan how you want your social wealth to be spent.
There is a general misconception about where charitable giving comes from within your wealth picture. For example there are two parts: Social Capital and Financial Capital. You may think Social Capital is the amount paid to the IRS and Financial Capital is what passes to heirs. If a charity suggests that you make a current gift or planned gift to benefit them, you may picture that gift coming from your Financial Capital and reducing the amount for your heirs. As a result, you don’t take action and don’t include charity in your planning. Charity doesn’t have to reduce your family’s share of wealth. The Social Capital portion can be redirected to charity, disinheriting the IRS. Amazingly, you can use this technique to potentially increase your income, leave more for your heirs and give more to charity.
The skillful blending of the three dimensions of your wealth - Financial, Personal and Social allows you to build a legacy of your values, influence, and money so you can truly make a difference in the world.
Greg Hammond, CFP®, CPA is a wealth impact strategist who works with women, families, closely‐held and family‐owned businesses, helping them grow and preserve wealth, plan for retirement and manage their charitable giving. You can reach Greg at 1-800-416-1655 or firstname.lastname@example.org for financially intelligent guidance or a Wealth Impact Assessment to show how you can skillfully blend the three dimensions of your wealth to build a legacy of your values, influence, and money.