The structure of any society is usually financed by various methods of taxation. The history and foundation of our society is unique. As Alexis de Tocqueville discovered and wrote about two hundred years ago, the third force, i.e., the non-profit sector, plays an invaluable role in offering services along side the private and government sectors.

The tax structure of the U.S. has long recognized the importance of encouraging its citizenry to support this “independent sector” by offering various tax incentives or off-sets, or, in other words, methods to financially support non-profits in lieu of paying certain taxes.

The basic concept is simple: 1) we earn income, 2) this amount is reduced by taxation, 3) what remains is what we keep. The part we don’t keep (taxes) is called Social Capital and is used by the government to fund various programs. As individuals, we have little or no means (other than by Congressional representation) to direct the government’s share of Social Capital.

However, we can personally control and direct Social Capital to causes we favor. The continued support by the U.S. government for the individual’s direction of Social Capital is reflected in major legislation over the decades. None is more indicative than the keystone act of 1969 (Section 664 of Internal Revenue Code) as amended. Several “split-interest” gifting vehicles are provided for under this act. These deferred or planned gifts usually provide life-time income to one or more income beneficiaries, with the “remainder” interest going to a qualified 501 (C) (3) charitable entity at the death of the last income beneficiary.

Social Capital can be a very efficient strategy to re-direct taxes and thereby eliminate the “middle-man” (government) in the taxation process. We, at Sage, have a developed a very strong bias that everyone should be exposed to the concept of Social Capital, to have the opportunity to increase retirement income, to give something back to society, to do good, and to die with a Sense of Significance rather than face the aspect of insignificance.

Many of our Sage clients have considered and taken advantage of controlling their Social Capital accounts and thereby directly benefiting their favorite causes and charities. We have been honored to assist these clients in their efforts.