Social Capital

Social Capital is a term that may have different meanings for different people. A common definition is that it is a set of shared values that allows individuals to work together to effectively achieve a common purpose. In the context of financial planning, it has meant money that is used to advance the common good, either through the payment of taxes or by philanthropic gifting. I believe that it is helpful to view social capital as an asset to be captured. Too often taxes and gifting are viewed as expenses to be undertaken without much thought or planning. The entire idea of tax planning and gift planning is to capture these expenses in hopes of controlling them and maximizing their effectiveness. Since the tax code looks favorably on gifting, there are numerous ways that the interplay of tax and gift planning can be so managed as to maximize Social Capital.