July 2001
Social Capital - Are You In Control?
One of the most important functions of the Marshall County Community Foundation is to offer education to individuals as to how they may control their social capital...giving them an opportunity to control their wealth, an opportunity to benefit their special causes and to help build a stronger community for their children and future generations here in Marshall County.
In the next 8 to 10 years an amazing phenomenon will happen in the United States. We will witness the largest intergenerational transfer of wealth that has ever been seen in modern civilization.
America has enjoyed tremendous growth from the post World War II period to the present day. This wealth accumulation will be passing to the next generation between now and the year 2050. Economists estimate that this intergenerational transfer may range from as low as 40.6 to as high as 136.1 trillion dollars. Thanks to decades of hard work, smart financial planning and robust markets, this wealth transfer is underway. Many experts believe there is now, more that ever, a greater need for financial planning for those who will pass on the assets, as well as for those receiving them.
This intergenerational wealth transfer is expected to affect many segments of our society. Research indicates that approximately one third of the upcoming wealth transfer will originate amongst the bottom 90% of families in terms of estate size. These families typically will own a combination of businesses, personal property, life insurance, investments and other assets. Their estates, income plus their net worth, consists of two parts.
First there is a person's personal financial capital and may be given to his/her heirs. Their heirs will be required to pay federal and state estate taxes. To help reduce the impact of estate taxes, more families need to consider proper estate planning. Reducing estate taxes are one of the main purposes for estate planning. But more importantly, a properly structured estate plan can help families control their assets today, while detailing what will happen to these assets at the time of the owner's death. It is important to realize that a simple will is not estate planning. Estate planning often involves trusts and various charitable instruments allowed under the Internal Revenue Service Code.
The second part is Social capital, destined by law to go to social uses beyond the individual and his/her family. Social capital is that part of a family's wealth that cannot be kept, cannot be spent and cannot be given to their heirs. It is typically given up in the form of taxes and the majority of people just let it go at that. But when that happens they also give up CONTROL of that part of their wealth. A glance at the federal budget shows immediately that most people have very little understanding of where the wealth goes and virtually no control at all over how it will be used.
Estate planning can begin with the Marshall County Community Foundation, as a source of information with which to have many questions answered and a way to consider controlling all their wealth. By engaging in “charitable estate planning” individuals can part with their social capital without giving up the control of its use. By utilizing some of the more sophisticated charitable planning instruments (allowed by IRS Regulations) a person can achieve his or her philanthropic goals without detracting from present financial goals. In many cases financial goals for both the donor and their heirs can be augmented. In essence, individuals have the choice to turn what would be tax dollars spent at the government's discretion into charitable gifts that can be directed to causes they choose.
The Foundation can provide illustrations as to possibilities for charitable estate planning. With the Foundation's help and working with financial advisers, CPA's and personal attorneys, there is the opportunity for people to control all their wealth, to benefit their special causes and to help build a stronger community for our children and future generations here in Marshall County. With estate planning, you can control the use of all your wealth.
For further information, contact the Marshall County Community Foundation offices at (219) 935-5159. The Foundation's offices are located at the Key Bank Building at 2701 N. Michigan St., Plymouth, IN.
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