Faith & Finance Blog: Giving and Righteousness

Having worked with dozens of households over the years on charitable planning, and having spoken with dozens of CPA’s, tax advisors, and estate planners on the topic, I can describe in just a few sentences what happens when most families talk to their financial professionals about charitable giving.

The client- let’s call him “Moshe”- is a middle class head of household. He goes to his accountant and starts the conversation on charity something like this: “I heard that the Koch brothers don’t pay any taxes because they have charitable giving strategies to avoid all taxation. How can I do that?” Or perhaps it goes more like: “I want to pay less taxes and I’d like giving to charity to be the way I accomplish that.” The accountant then explains that giving to charity may not actually reduce the tax burden on the family at all, or there will be so negligible a tax pickup that it cannot justify itemizing deductions for everything in the first place (you can only get a deduction if you itemize your taxes 3). The accountant may conclude that “it might not be worth it” to make charitable giving a financial goal. I couldn’t tell you how many times I’ve been told by clients that a professional told them it isn’t worth it to give to charity.

While this is useful and accurate information for the client to be armed with from a purely tax-benefit driven perspective, and this may be all that a client truly wants to know, it is not necessarily a Torah approach. It’s not a coincidence that I’m publishing this blog post during the week of Parsha Vayakhel, after all…

In Jewish tradition, charity is not voluntary. It is a mitzvah– a commandment from G-d. In Deuteronomy 11, we get one of the clearest expressions of this commandment:

Give to (your needy kinsman) readily and have no regrets when you do so, for in return the Lord your G-d will bless you in all your efforts and in all your undertakings. For there will never cease to be needy ones in your land, which is why I command you: open your hand to the poor and needy kinsman in your land. 4

For context, the Israelites at this stage were not exactly a high income people. They left the society they had known not long before in their journey out of Egypt. This scene takes place in Exodus. The gifts the people made were not certain to be replaced the next year or the next decade, and that’s an important distinction from how much of the finance profession and wealth management culture of our times thinks.

I’m not saying that the position of Chaim Investment Advisors is officially that you should go out, take everything, and give it all to charity. That isn’t Jewish either. The tradition I draw on for ethical inspiration, and the perspective I’m writing from, is actually quite well defined on how much is too much. The Kitzur Shulchan Aruch, an influential reference code on Law, puts it about as succinctly as it gets:

You should not give away more than a fifth, so that you will not become dependent on others. One who is extremely wealthy may give more than a fifth. In situations of saving lives and for the support of Torah it is also permitted to give more than a fifth. This rule applies only during your lifetime. But as a dying bequest, you are permitted to donate up to a third of your estate to charity. 6

I say this to make clear that in encouraging novel approaches to charity in wealth management that look to do more than the minimum, I can’t in good conscience violate the ethical framework I am referencing to support this approach!

What I am saying is that in some measure, I want to take profound inspiration from a Hassidic leader of the 18th century, Nachman of Breslov (aka Rebbe Nachman). In his book Likutei Moharan, Rebbe Nachman makes clear that tzedakah (a word often translated as charity but translated best as “righteousness”) is an imperative act of social justice:

For tzedakah (charity) is itself a product of justice, as in Psalms 75:8, “The Lord is judge, He brings down one and lifts up another.” He impoverishes one and enriches another. And when a person gives charity, he corresponds to “brings down one and lifts up another.” He “brings down one,” because he subtracts from his own money; and he “lifts up another,” because he enriches the poor man. Consequently, through this he embraces the attribute of justice.

There’s no way I could state my own views more lucidly, so I will not attempt to do so. What I will say is that here, Rebbe Nachman is talking directly about the most righteous person (tzadik) who is bringing himself down to the level of the people so as to lead them, in the spirit of Moses. And what a perfect link from this week’s Torah reading of giving and doing righteousness from last week’s (where Moses comes down to the people to find them with the golden calf…).

I wrote last Fall on “spiritual accounting.” Now, I’m talking about a much more mundane kind of accounting- the kind you probably pay a professional to do. I may have started out this blog by pointing out the difficulties accountants face in assisting with charitable giving. You still need to talk to your accountant. There are smart ways and less smart ways of giving money, and your accountant can help you with doing things the smart way. That’s the place to start.

How you approach your financial professionals matters a great deal. Be very clear about your intentions, as this is the place I see the most disconnect between clients and their professional services. If you tell an accountant that you want to minimize taxes, that is the lens that they will look at your charitable intentions through. If your intention is to go beyond the point of tax minimization and into substantive wealth transfer, it is up to the professional to help to the best of their abilities or to acknowledge the limitations on their ability to assist.

This is where Financial Planners, such as myself, and Estate Planners come into the picture. Conversations about when giving happens, and what kind of giving is intended, are important to have. Some Financial Planners have a preference for end of life giving. It’s always fair to ask them why they prefer that. Some prefer consistent giving. For some, allocating a 10% of income donation to charity in every year is comfortable. Some are freaked out by it, in my experience. In any case, do your best to clearly put your intentions forward. Many wealth managers are trained in planning only for tax minimization purposes if it is not clear that you have other giving intentions in mind.