Through your involvement in the medical profession, you know how much private philanthropic gifts help fund medical research and technological advances to help heal and treat the sick. But have you ever taken the time to examine the best avenues to donate to the charities and causes of your choosing?

Designing your philanthropic giving strategy can hold significant tax and wealth management benefits. When you discuss charitable gift vehicles with your family, an experienced private wealth adviser can moderate your family’s discussion of a range of philanthropic options within the context of your overall tax plan.

Getting Your Family Involved
It is important to share your philanthropic beliefs and values with your family. Determine which causes are most important to you and your loved ones, and how the giving will affect other financial goals, such as estate planning and long-term investments. Children can be included in these conversations, to help educate them at an early age about charitable giving.

Once you and your family have determined what charities and organizations are most important, you can discuss the issues to consider when developing a philanthropic strategy, which include:

• Creating a Giving Legacy—Setting up a philanthropic strategy gives you an opportunity to pass on charitable values and ideals to future generations. A private wealth adviser can help you incorporate your estate planning goals into your overall financial strategy.

• Examining Tax Liabilities—If you are managing a concentrated stock position with low tax basis, selling off some or all of the appreciated stock would result in a 15 percent capital gains tax (assuming the stock has been held long enough). Donating the stock instead to a qualified charity can create a significant income tax deduction without triggering the capital gains tax.

• Fitting the Financial Portfolio—A philanthropic strategy should not be set up in a vacuum. Think about how your giving goals can complement your financial portfolio. Saving for retirement or a child’s education normally will take precedence over philanthropic giving, but if you plan well enough ahead, you likely will be able to achieve all your financial goals.

Philanthropic Giving Vehicles
Several philanthropic options may benefit your tax situation and the chosen charitable recipient.

• Charitable Lead Trusts—A charitable lead trust is a great way for you to pass on a portion of your wealth and fulfill your passion for philanthropy. The lead trust holds assets you contribute and makes fixed or variable payments at least annually to one or more charitable organizations you select. When the term of the lead trust ends, any remaining assets pass to you or your beneficiaries. A CLT enables you to achieve various tax benefits, depending on the type of trust you establish and the way it is structured.

• Charitable Remainder Trusts—A charitable remainder trust is structured so you make an irrevocable gift of stock, property, or other assets to the trust, and you and your beneficiaries retain the right to receive a regular payment stream for life or a designated period. At the end of the term, the remaining assets will go to the charities that you choose. A CRT enables you to receive a current charitable tax deduction and can provide distinct tax advantages if you hold a concentrated stock position and/or highly appreciated assets.

• Donor-advised Funds—A donor-advised fund is a charitable fund established at a public charity and typically is one of the simpler and less structured philanthropic vehicles. Through the fund, you can make tax-deductible, irrevocable contributions to the charity, often a community foundation, which is managing the program. Donor-advised funds are a valuable way to involve family members in philanthropy because you retain the right to recommend grants to the charities of your choice and can involve family members in grant-making decisions.

• Family Foundations—A private family foundation can be a powerful means of philanthropic giving. It provides important tax advantages and can give you control over which charities receive distributions from your foundation and how funds are invested. You can start your private foundation so your family maintains complete control over the foundation’s distributions, and, as an added benefit, a foundation creates a personal legacy.

A Piece of Your Overall Financial Portfolio
These philanthropic strategies should be a small part of your overall financial strategy. It is crucial to analyze your total financial situation and charitable goals with a financial adviser as well as your tax and legal advisers to help ensure a smooth and successful charitable giving strategy.

Bill Corbellini, CFM, is a private wealth adviser with the Private Banking and Investment Group at Merrill Lynch in Dallas. He has been working with the ultra-high-net-worth sector at Merrill Lynch since 1989. He provides expertise in strategic financial analysis and asset allocation and can be reached at 214-303-5810 or william_corbellini@ml.com.

Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither Merrill Lynch nor its private wealth advisers provide tax, accounting, or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting, or legal implications with their personal professional advisers.