It is a well-known fact that philanthropic activities contribute to the greater good of society, and helping others just makes us feel good about ourselves. It is a physician’s job to help people with injuries and illnesses feel better every day, and with so many charities needing in-kind as well as financial assistance, implementing a philanthropic program seems to be a logical step to take. These contributions, however, offer several additional benefits to a physician.

To begin with, there are tax benefits that result from charitable giving. Philanthropic contributions are often deductible against a physician’s (generally) high income. Or, if appreciated stock is donated the physician can avoid paying capital gains taxes that would otherwise result if the stock were sold.

Perhaps a larger reason for philanthropy is the “leverage” potential that a physician’s charitable gift may bring. By directing their own money to a specific institution or cause, the physician sends a powerful message to other potential donors that they have confidence in that particular institution or a strong commitment to the cause. How physicians direct their own giving can have a significant impact on how other potential donors will feel about giving as well.

When introducing philanthropy into their practices, physicians should always consult with their tax/legal/financial advisors prior to undertaking a formal program of charitable giving. Certain assets the physician holds may be more efficiently donated from both an income and estate tax perspective.

Likewise, if a physician is interested in an ongoing philanthropic program, certain legal structures (i.e. foundations, charitable trusts, etc.) may be preferable to outright gifts. These structures could provide not only tax benefits, but also some measure of asset protection as well as vehicles to be used by the physician to introduce their children to the concepts of philanthropy.

When beginning a philanthropic program, physicians should make sure that their philanthropy is truly charitable and not primarily a means to protect assets or shift income to other family members. For example, if a physician establishes a foundation through which to funnel their charitable giving, the foundation should follow all of the proper formalities and transactions should remain at arm’s length. The foundation should not be used as the vehicle where the main purpose would appear to be the employment of family members with the primary expense being the payment of family salaries.

Physicians should also be aware of the image that they project in their patient communities and should use caution if their charitable causes are at odds with their espoused practice philosophies.

Disclosures

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