As 2012 came to a close, most estate planners struggled to keep up with the flood of giving their clients engaged in to lock in the $5.12 million federal gift tax exemption before the amount went back down to $1 million on Jan. 1, 2013 (which, of course, never happened). Their primary focus was on tax minimization. But, as the authors of The Cycle of the Gift: Family Wealth and Wisdom point out, there are many more aspects of giving within families than just saving taxes. Most of us have seen examples of how a well-intentioned gift can have a destructive influence on the recipient’s life and leave the individual making the gift with “donor’s remorse.” The authors have written a thoughtful book about “giving well;” providing a practical, yet philosophical, roadmap to ensure that intra-family giving will have the most positive effects not just on the recipients, but also on the person making the gift.
The central premise of the book revolves around a concept the authors call the “spirit of the gift.” Spirit combines the giver’s intentions with the gift’s own qualities. A gift with spirit causes both the giver and the recipient to grow and to feel free. And, it spurs recipients to give in turn, perpetuating the cycle of the gift. The authors refer to a gift without spirit as merely a “transfer.” If the concept of the spirit of the gift sounds like new-age mumbo jumbo, it’s important to note that it’s not. In fact, the advice in the book is steeped in ancient Greek and Roman philosophy, Buddhist concepts of mindfulness, along with advice from the medieval Jewish philosopher, Maimonides, who famously described eight levels of giving, somewhat like the rungs on a ladder. The top rung of giving is where one takes the other’s hand and gives him a gift or loan, makes a partnership with him or finds him employment, to strengthen him until he needs to ask help of no one. According to the authors, when done well, giving is like a stone dropped into still water, which has a ripple effect that will continue to expand and grow in positive ways.
Although some of the concepts discussed in the book are quite complex, the book is organized around the following three dimensions of giving:
1. The chapters on the “Who of Giving” focus on understanding the needs and expectations of all of those most involved in family giving, especially the recipients and givers, including parents, grandparents, spouses and trustees.
2. The chapters on the “How of Giving” focus on the delicate balance between many givers’ needs for control and the recipients’ need for freedom.
3. The chapters on the “What and Why of Giving” focus on the gift options available—from cash to business interests, as well as gifts of non-financial assets, such as family values and rituals. The authors describe and endorse their family bank “concept,” which is a model for family giving that combines loans, trusts and outright gifts and offers a framework and set of practices to support long-term family growth.
This book is an important addition to the literature on effective estate planning. It should be recommended reading for wealthy individuals seeking to make large intra-family gifts. It’s also a great reference for advisors to remind them when planning for clients that there’s more to giving than just taxes