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.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.
There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.