{"id":29047,"date":"2025-05-05T08:24:02","date_gmt":"2025-05-05T13:24:02","guid":{"rendered":"https:\/\/www.aae.org\/specialty\/?p=29047"},"modified":"2025-05-02T15:34:54","modified_gmt":"2025-05-02T20:34:54","slug":"how-physicians-and-dentists-can-enhance-their-estate-plans-using-charitable-contributions","status":"publish","type":"post","link":"https:\/\/www.aae.org\/specialty\/how-physicians-and-dentists-can-enhance-their-estate-plans-using-charitable-contributions\/","title":{"rendered":"How Physicians and Dentists Can Enhance Their Estate Plans Using Charitable Contributions"},"content":{"rendered":"

Contributed by Jeff Wherry<\/em><\/p>\n

As a physician or a dentist, when you are looking at ways to optimize your estate plan, there are a number of charitable contribution strategies to consider including but not limited to Charitable Remainder Trusts (CRTs), Private Foundations, and gifting appreciated property.<\/p>\n

Charitable remainders trusts, or CRTs, are excellent vehicles for charitably inclined taxpayers who want to create an income stream for a period of years or life, defer their income taxes, create an income tax deduction, and reduce federal estate tax exposure. CRTs are tax-exempt entities, so assets held in these trusts are not subject to income tax. The two types of CRTs to consider are Charitable Remainder Annuity Trusts (CRAT) and Charitable Remainder Unitrusts (CRUT). CRATs provide a fixed annuity payment to the non-charitable beneficiary and CRUTs provide a fixed percentage payment based on the fair market value to the non-charitable beneficiary.<\/p>\n

The Charitable Lead Trust (CLT) can be thought of as the reverse of the CRT because the charitable organization receives the income payments, and the remaining amount is distributed to the non-charitable beneficiary. CLTs are excellent vehicles for charitably inclined individuals who do not need a current income stream from the contributed assets and are looking to provide a current benefit to a charity, generate an income tax deduction, reduce federal estate tax exposure, and ultimately pass the assets onto certain non-charitable beneficiaries.<\/p>\n

A private foundation is a nonprofit charitable entity created and controlled by the donor. The donor is tasked with ensuring that the foundation follows IRS regulations to maintain its nonprofit status. Private foundations are required to make an annual distribution equal to roughly 5% of their prior year\u2019s average net investment assets. Unlike a public foundation, which receives its funding from the general public, a private foundation usually has one source of funding, typically an individual, family, or corporation.<\/p>\n

Funding a private foundation will provide a charitable income tax deduction for any amount contributed up to 30% of the donor\u2019s adjusted gross income (AGI).\u00a0 Any amount above this limit can be carried over for 5 years.\u00a0 In addition, donors may also be able to avoid paying capital gains taxes by donating highly appreciated assets to a private foundation.\u00a0 Also, when assets are contributed to a private foundation, they are excluded from the donor\u2019s estate and are not subject to either federal or state estate taxes.<\/p>\n

Rather than gifting cash to a charitable organization, a more tax advantageous strategy is to donate appreciated stock to avoid capital gains tax that would be due on the sale of the stock. For example, assume a donor wishes to make a $100,000 gift to charity. The donor has a stock that was purchased for $20,000 and is now worth $100,000.\u00a0 If the donor sold this stock, they would incur $80,000 of taxable gain income. If the donor gifts this stock to charity, they will avoid the capital gains tax entirely. The limit on a charitable deduction for stock held more than one year is 30% of Adjusted Gross Income (AGI).\u00a0 Any amount above this limit can be carried over for 5 years.<\/p>\n

Although many studies show that donors are not primarily motivated by tax benefits, federal income, gift, and estate tax laws do support America\u2019s charitable contribution tradition by providing significant tax benefits to donors. So, as you make plans for your family\u2019s future, it is important to take these possibilities into consideration and to work with a trusted professional to maximize the impact to your estate.<\/p>\n

Jeff Wherry is Director of Planning & Research, MAI Capital Management. He can be reached at jeffrey.wherry@mai.capital<\/a>.<\/em><\/p>\n

MAI Capital Management, LLC and Treloar and Heisel, LLC are affiliated companies of Galway Holdings, LP. Investment Advice offered through MAI Capital Management, LLC, an investment adviser registered with the Securities and Exchange.\u00a0 Insurance products offered separately through Treloar & Heisel, LLC and Treloar & Heisel Property and Casualty.\u00a0 \u00a0MAI Capital Management does not provide legal advice.<\/em><\/p>\n

TH-25-004<\/p>\n","protected":false},"excerpt":{"rendered":"

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