KanalyBlog

Benefits of Philanthropic Giving for Physicians

By Scott Hill, Sr. Vice President and Financial Advisor with Kanaly Trust

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 deductable 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 undertaking 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.

Scott Hill has been named to Medical Economics 150 Best Financial Advisers for Doctors list in 2008, 2009 and 2011.

What is the attraction of private equity?

Although private equity and debt offerings have caused a great deal of anxiety in recent years, investors continue to show interest in them. Kanaly Trust Chairman and CEO Drew Kanaly was quoted in the May 20, 2011 New York Times article, "An Investment Asks, How Much Can You Afford to Lose?" which focuses on the attributes of these risky deals.

Read the article.

Reducing Commodity Exposure

This week we cut exposure to commodities by roughly 50% by selling down a diversified commodity fund we began purchasing in July 2009.  Since that time, and especially since last summer when the Federal Reserve began hinting about its Treasury buying program (known as QE2), commodities have been in a strong uptrend until this month.  Our position in gold remains unchanged.  Below is why we have reduced exposure to commodities:

• Price Action - after hitting a new high shortly after Ben Bernanke's historic press conference in April, commodities lost about 10% on average in the first two weeks of May.  Crude oil declined 15% and silver is off over 30% from its high.  Although commodities have since bounced off the lows, the strong uptrend has been broken.
• End of QE2 - the imminent end of the Fed's money printing operation, at least in the short term, reduces the speculative appetite for commodities and other risk assets.  Most of the commentary written on Wall Street argues that the Fed will follow up with some version of "QE3", thereby supporting commodities and other inflation hedges.  However, we believe the bar is set high for new Fed stimulus, requiring fresh deterioration in growth and more signs of deflation.
• Global Growth Risks - commodities have been in a secular bull market primarily due to the emerging market demand theme led by China.  China's spectacular growth has been driven in part by cheap credit and abundant supply of cheap labor.  Now China is experiencing labor shortages in some areas, driving up wages.  As China and other emerging countries take more aggressive actions to deal with accelerating inflation, global growth is likely to slow and commodities could get hit hard.

Kanaly Trust Second Quarter Investment Outlook & Strategy Conference Call

On April 20, Kanaly Trust CIO James Shelton and CEO Drew Kanaly hosted our quarterly conference call via webinar. The presentation covers on our economic and market outlook, with a focus on strategy for current and future market conditions. Key investment issues covered during the call included:

• The U.S. economy continuing to show surprising strength although few investors believe it.
• The on-going bull market supported by strong corporate earnings and a very friendly Federal Reserve policy.
• Expectations for the bull markets to continue in 2011, although certain factors could pose a threat late in the year.
• Key risks to the present bull market.
• The three-decade bull market in bonds, which is likely to end soon.
• Commodity prices, which are likely to continue higher before rising interest rates threaten later in 2011.

Watch a recording of the webinar.

 

 

The Disconnect Between Wall Street, Main Street

This week, Kanaly Trust chairman and CEO Drew Kanaly was a featured guest on Fox Business News to discuss why Wall Street remains bullish on the markets. "Earnings are spectacular; everyone has been surprised at how robust earnings have been, which continues to drive stocks. Interest rates are at zero, so marginal decisions are easy in the face of rising earnings - investors are going to own stocks and other risky assets. That's what's driving stocks."

Watch the segment.

How to Lend to Family Members

Transferring or loaning assets to your family and future heirs can become a challenging situation. Careful, thoughtful planning should be at the forefront of any family transaction and should not be taken lightly. Today, Drew Kanaly offers his thoughts on Rueters.com's "Prism Money" blog and suggests strategies for wealthy families to consider when loaning money to family members.

Read the article.

Market Thoughts

In our view, the market remains in a Fed-induced, liquidity-driven bull market that is likely to stay in place until rising interest rates, higher valuations and too much optimism cause another bear market. This could potentially take place in the second half of 2011.

The market has weathered the near-term concerns it is currently faced with (Mideast upheaval, the disaster in Japan, and the European debt crisis) correcting overbought conditions and overly optimistic sentiment. We are not convinced we have the all-clear signal on these risks in the near term, but we view further pullbacks as buying opportunities. We expect interest rates to rise as concerns over Japan and the Middle East abate.

Kanaly Trust CIO James Shelton was a guest on CNBC "Squawk on the Street" this morning, and discussed these and other market viewpoints, live from the NYSE. Watch the segment.

Market Correction Perspective

This morning, our Chairman Drew Kanaly appeared on CNBC "The Call" to offer perspective on the recent market correction. "We think it's a temporary pullback and if you can be patient, it's likely an opportunity to be adding to some positions," he explained. "We need to be ultra-diversified in this market...Kanaly Trust has strategies for long and short - we look at alternatives, equities and bonds," he added.

Watch the segment. 

How will the Markets View a Government Shutdown?

Kanaly Trust CEO Drew Kanaly offered his thoughts to CNNMoney.com regarding how the markets will react to a government shutdown. Visit CNNMoney.com and read "Government shutdown? Wall Street isn't worried, " published February 28.

Kanaly Trust Continues its Bullish Outlook

Yesterday, our own Drew Kanaly joined a bull vs. bear debate on CNBC "Squawk on the Street." Drew asserted that while interest rates, commodity prices and tax fears are a long-term concern, the next six to nine months still look positive. Drew pointed to corporate profitability in the domestic market as a key factor in why Kanaly Trust is bullish on the markets in the short term.

Watch the segment.