Among financial planners who work with clients on their giving the following three step analysis is traditional. (We call it values-based planning or donor-centered philanthropy.)
- Compute how much of the client's current and future income is needed for self and spouse.
- Determine how much is enough for heirs as a legacy
- Work to shift the excess, if any, to charity rather than taxes.
Note, however, if the client has suffered a significant loss in assets during the recent stock market gyrations, the brunt of the loss on this traditional process will come out of the charity's potential gift.
I believe we will need a better, more community-centric, values-based planning process if we are to achieve a better social result. Giving can be treated, per the steps above, as a luxury that we engage in only after other needs and wants are met, and even then mostly from what the planner can recover from taxes. But giving can also be considered a duty, a pleasure, a necessity, or a cost of doing business if we are to have a world worth leaving to our children.
Tithing is another model. Giving is built in as a living expense in step one. If expenses must be curtailed, it would suffer a proportionate drop perhaps but not bear the full brunt. As for estate planning, what does it benefit the next generation to inherit great financial wealth in a world grown increasingly sick and unsustainable?
The moral case, or community case, for giving, and social investing, has to be made by someone. Will it be advisors? Fundraisers? Or nonprofit leaders? I am betting it won't be advisors, but that advisors can be trained and educated to be responsive to the donor intentions, including the intention to give reliably and consistently. The leadership, though, will have to come from the nonprofit sector and donors themselves. For advisors, it is all to easy to write giving off today as an unaffordable luxury.