Commentators react to Obama's plan to reduce itemized deductions, including the charitable deduction, for high income tax payers. Indiana Center on Philanthropy estimates that giving could drop $3.9 billion. My understanding, though, is that the capping or reducing of deductions for the wealthy is not a new battleground. Under earlier law there had been a reduction of itemized deductions for high income earners. That reduction in turn was being phased out. Now, back something like it comes. I seriously doubt that most donors are motivated by these tax machinations at the margins. Professionals get deeply into them. Fundraisers and journalists may express concerns, but what donors want to talk about in my experience, candidly, is the donor and the donor's family, and the life the donor wants to lead, and the values he or she wants to stand for, and the impact he or she wants to have, during these very difficult times.
Put it this way, in a financial or estate plan, the bulk of a wealth person's money may be misaligned with his or her ideals. The tax driven planning process gets so caught up in details, taking tax as its focus, it fails to confront the big issues: What kind of person do you want to be, in what kind of world?
95% of clients who do not finish an estate plan say it is because the plan was out of whack with their goals. That is not a fine point. To get more money moving to better purpose, open a conversation about the donor's life history, the crossroads they confront, the life determing choices they face, the person they want to be, the example they want to set. Then, convene the bean counters to find the most tax effective and tax efficient way to acheive those ends in view, but do not let the the conversation sidetrack the purpose conversation. How much donors gives depends in part on how well counseled they are. As advisors is our responsibility to help clients and donors keep things in persptive and aligned with their aspirations and ideals.
