Charitable Trust an Option for Practice Transition

In the next 20 years, the United States will witness the largest transfer of wealth in its history as baby boomers settle their finances and leave their legacies. Included in this passing on of assets will be thousands of practices from California dentists who are expected to retire.

This anticipated exodus from dentistry unleashes a barrage of considerations about the future of the profession and the individuals retiring from it. One idea that addresses concerns of retiring and future generations is the option of transferring a practice to a charitable remainder trust then selling the practice, thus creating a benefit to a charitable cause and a tax break for the donor. California dental schools and the Dental Board of California have had inquiries about charitable remainder trusts, and an Internet search on the subject turns up a plethora of Web sites, all signaling increasing interest in this area.

In some cases, the idea of donating a practice to a charitable remainder trust has been presented as an easy tax break, but anyone looking into the subject will find it to be legally complex with many professionals issuing caution about the actual feasibility.

A charitable remainder trust is a special tax-exempt irrevocable trust arrangement written to comply with federal tax laws and regulations. In a financial give-and-receive arrangement, a charitable remainder trust does offer a tax benefit, but experts in the field are clear on the fact that establishing such a trust should be viewed as an act of goodwill, and approached only with the assistance of legal and financial counsel familiar with the process.

Berney Neufeld, PhD, director of development for the University of the Pacific School of Dentistry in San Francisco says the idea of donating a practice to a charitable remainder trust is not for everybody.

"This situation would work for approximately 30 to 40 percent of dental practices. Specific requirements about corporation codes and earned income make it a complicated transaction. But for the practices that meet the requirements, this could be something special.

"The way to think about the key structure is that an asset has two parts; the actual practice and the income it generates. With a charitable remainder trust, you divide the two and give away the asset but keep the income."

In the case of a charitable remainder trust, the trust is established and assets (money, stocks or property) are transferred to the trust. The assets are then sold without creating a taxable event, thus increasing the income potential of the assets. The proceeds from the sale are used for investments to generate income for the donor and spouse. The amount of income a beneficiary receives can vary between a minimum of 5 percent and a maximum based on IRS actuarial tables, which take into account the amount invested and the donors’ ages. A practice transferred to a charitable remainder trust will generate an income tax deduction for the donor. At the death of the donor or donors, the remaining assets in the trust go to the charity.

"The downside is that assets are given away," Neufeld said. "The upside is that you have more money to invest and generate income than if you had kept and sold the practice. For instance, say you sell your practice for $1 million. After taxes, you may have $600,000 left to invest. With a charitable remainder trust, the full $1 million from the sale of the practice can be reinvested in order to generate income.

"While a charitable remainder trust has a cash net value, at its core it’s a way to make a gift," Neufeld stressed. "It’s essential that the donor think about it in this way and not just a way to avoid taxes."

"The first consideration of an ‘estate gift’ is to benefit the cause," said Michael Haggin, a assistant dean for development with the University of California at Los Angeles School of Dentistry. For instance, a donation to the school could be used as an endowment for a professorship in a specialized area such as endodontics or for student financial aid. "We are especially interested in assisting those students who have hearts for public service. We want them to be able to leave UCLA with low enough debt loads to be able to practice dentistry in underserved areas," Haggin said.

"In addition to helping the cause, an often overlooked benefit of a charitable remainder trust is that the donor doesn’t have the burden of managing assets," Haggin said. "The university is prepared to act as the trustee, if the donor wishes. It’s comforting to some people to have the burden of asset management on the university."

"There is also the tax advantage," Haggin added. "It’s almost as if the IRS is offering to share the net cost of the donation."

"A drawback to an estate gift is that it limits the flexibility of how assets are used," Haggin said. The type of person for whom an estate donation would work well is someone who cares about a cause and enjoys giving. "This type of person usually has established a record of giving throughout his or her life. It is also best for someone who has a settled pattern of life and doesn’t expect drastic changes."

"Charitable remainder trusts are universally accepted, and the area of charitable giving is expected to explode in the next 20 years" said Thomas Harding, registered securities principal with Raymond James Financial Services and author of Charitable-Remainder-Trust.com, who says he has seen medical offices, law firms, and veterinary practices transferred to such trusts.

"However, charitable remainder trusts are a very specialized area, and anyone considering this option must be absolutely certain they are working with professionals who are well-versed," Harding warned. "There are catches with charitable remainder trusts, and they have to be overcome in certain ways. Anyone thinking about establishing such a trust should consult their attorney and accountant and be sure they are familiar with the different kinds."

Harding does not recommend self-administration of a trust. "The trustee is responsible for filing tax returns, distributing income checks and proper record keeping. A third-party administrator, such as an accountant, is best for proper financial management of a charitable remainder trust."

"It’s an interesting idea, and I have heard it discussed," said Mark Kenny, senior vice president of the Keller Group, Investment Management, Inc. "But from our standpoint, a dentist considering donating a practice to a charitable remainder trust should be cautious. There are legal issues, such as the restrictions of a professional corporation, which must be clearly defined. It’s common for assets such as stocks and appreciated securities to be transferred into a trust, but the idea of donating a practice is not common. This isn’t to say it can’t be done, or that it isn’t an appealing concept, but it appears to be somewhat unproven and untested."

Orthodontic Needs Increasing Among Special Needs Patients

During the past 30 years, more than three-fourths of people with mental retardation/developmental disabilities have been deinstitutionalized, and there has been a corresponding need to increase awareness among orthodontists about the growing necessity for treatment of these individuals within their communities, according to the an article in the July 2000 issue of the American Journal of Orthodontics and Dentofacial Orthopedics.

The authors -- H. Barry Waldman, DDS, PhD; Steven P. Perlman, DDS; and Mark Swerdloff, DDS -- noted that changing social policies, favorable legislation for people with disabilities, and class-action legal decisions have led to the establishment of community-oriented group residences, and enhanced personal family residential settings, accompanied by the closure of many large, state-run facilities. However, the success of community-based programs depends on the availability of support services, the authors stated -- particularly private practitioners who are convenient and accessible to deinstitutionalized individuals and trained and willing to deliver care.

To provide some insight into the need for orthodontic services for these youngsters and adults, the authors asked: "Do we believe that persons with disabilities need functional and esthetic considerations comparable to those of ‘normal’ persons?"

The reality is that youngsters with mental retardation/developmental disabilities grow older and that periodontal disease is an increased possibility with a maloccluded dentition, they answered. Severe esthetic malocclusions can compromise already difficult social relationships and potential employment opportunities, the authors added.

Children and adolescents with special needs exhibit a higher percentage of malocclusions than the normal population. Children with mental retardation/developmental disabilities may have dentition difficulties resulting from habits such as mouth breathing and tongue thrusting, diets lacking enough rough and coarse foods that require thorough chewing, increased levels of caries, and the loss of teeth and space maintenance, the authors explain. Individuals with mental retardation may not comprehend the need for oral hygiene, the authors note, and those with physical disabilities may lack the dexterity to accomplish the needed oral hygiene.

More Internet Users Seeking Health Info

Nearly 100 million people have gone online in search of health care information, according to the results of a recent Harris Poll.

At 98 million people, the number of Internet users looking for health information is up 81 percent from two years ago. Researchers attribute the increase to the continued growth in the online population, which they estimate at about 56 percent of American adults, or 114 million people.

An increased proportion of those online who have used the Internet to look for health care information also accounts for the growth during the past two years. According to the latest poll, 86 percent of all users sought such information, as compared with 71 percent of all users in 1998.

The Harris Poll on online health care information was conducted by telephone in May and June among a cross section of 1,001 adults in the United States. The results do not include people under 18 who have looked for health information online.

Decline in Medical School Applications Continues

Applications to the 125 U.S. medical schools declined by 6 percent in 1999, the third consecutive year that the number of applicants has decreased, according to an article in the Sept. 6 issue of the Journal of the American Medical Association.

Barbara Barzansky, PhD, and colleagues from the American Medical Association used data from the 1999-2000 Liaison Committee on Medical Education Annual Medical School Questionnaire, which had a 100 percent response rate, and other sources to describe the status of medical education programs in the United States.

The authors found that there were 38,529 medical school applicants in 1999. The total number of male applicants decreased by 9.1 percent, from 23,216 to 21,096 and women applicants decreased by 2.0 percent, from 17,787 to 17,433.

The researchers also found that new subject areas are entering into the medical curriculum. For example, in 1999-2000, 82 schools (66 percent) reported including content related to alternative/complementary medicine as part of a required course. According to the authors, the need for physicians to possess skills related to cultural competence has been recognized by medical schools. There was one medical school that had a separate required course covering cultural diversity, and 109 schools (87 percent) included content on this topic as part of a required course or clerkship.

Physicians Easing Use of Antibiotics

The use of antibiotics to treat children with respiratory diseases has declined steadily in recent years, according to results of a survey conducted by the Centers for Disease Control and Prevention presented at the 38th Annual Meeting of the Infectious Diseases Society of America.

"The decreased use of antibiotics coincides with increased awareness that many bacteria and other disease-causing organisms are developing resistance to antibiotics. Our survey suggests that physicians are getting the message that the overuse of antibiotics can be harmful," said Linda F. McCaig, MPH, survey statistician with the National Centers for Health Statistics of the CDC.

According to the survey, the annual rate at which office-based physicians prescribed antibiotics for infectious respiratory diseases (otitis media, upper respiratory infection, bronchitis, sinusitis, and pharyngitis) in children younger than 15 decreased by 34 percent between 1989-1990 when approximately 669 antibiotic prescriptions were written for every 1,000 children and 1997-1998, when the rate was 439 per 1,000 children. In 1989-1990, 737 antibiotic prescriptions were written for every 1,000 office visits among children with respiratory diseases (some children visited their physicians’ offices more than once) compared with 647 per 1,000 office visits in 1997-1998, a 12 percent decrease, according to McCaig.

"We are extremely encouraged by the reductions in antibiotic prescribing for pediatric respiratory infections. Activities are taking place around the country, reflecting partnerships between the public health community, medical societies, industry, and others to promote appropriate antibiotic prescribing. It appears that prescribing behavior is changing," said Richard E. Besser, MD, medical epidemiologist with the National Center for Infectious Diseases and director of the campaign to promote appropriate antibiotic use for outpatient respiratory diseases.

Tongue Piercing Can Pose Infection Hazard

Tongue piercing can not only chip a tooth, but can also lead to life-threatening infections, according to a report given at the Infectious Diseases Society of America annual meeting in September.

Dr. James D. Richardson, from Indiana University School of Medicine in Indianapolis, described two cases of serious complications that have arisen in people who had tongue studs and did not remove them when there were signs of local infection.

In each case, the patient developed life-threatening secondary infections. The first case involved a 29-year-old waitress who reported pain in her tongue and chest a week after having her tongue pierced. When doctors examined her, they detected abnormal fluid around her heart that was infected with a bacteria that can cause meningitis.

In the second case, a 22-year-old woman presented to the doctor a year after having her nipple and tongue pierced. This patient developed a chest abscess that needed to be drained and treated with antibiotics.

After treatment, she took out the nipple ring, but kept in the tongue stud, Richardson said. Three months later, she was back with a recurrence of her chest abscess.

"With tongue piercing, initially, if infections develop, there can be swelling and pain and tenderness of the tongue, and then there can be pain and tenderness in the neck," Richardson said. "If the infection remains locally, the tongue stud should be removed. If the tongue stud is left in place, it remains a foreign body and can become a jumping point for other infections," he said.

Nicotine Addiction Can Hit Within Days

In contradiction to earlier reports, addiction to nicotine may start within a few days of starting to smoke and after just a few cigarettes, according to an article in the journal Tobacco Control.

"The first symptoms of nicotine dependence can appear within days to weeks of the onset of occasional use, often before the onset of daily smoking," the researchers wrote.

The study by researchers from the University of Massachusetts and Harvard Medical School of about 700 teenagers aged between 12 and 13 from seven schools in central Massachusetts in 1998 showed that 95 students smoked at least one cigarette a month.

Of these 95 monthly smokers, one in five reported nicotine dependency symptoms within four weeks of starting to smoke and 16 developed symptoms within two weeks.

In total 60 out of 95 monthly smokers said they had experienced one or more symptoms of nicotine dependence.

The researchers said experiments on mice showed the number of nicotine receptors in the brain increased rapidly after just the second dose of nicotine, providing a mechanism for the quick development of dependence.

Comfort Book on Dentistry

The popular Chicken Soup for the Soul series of books has added dentistry to its list of topics.

Chicken Soup for the Dental Soul is a collection of 61 heartfelt stories that portray dentistry as a warm and caring profession. The contributors include dentists, hygienists, assistants and lay people. Among the Californians are Luz Abrera-Crum, DDS, of Westlake Village; Julie Karnazes, DDS, JD, of San Francisco; Michael Kowalski, DDS, of Castro Valley; and Armand A. Lugassy, DDS, PhD; of Novato.

The Chicken Soup series encompasses titles for many groups -- including mothers, teens and Christian families. Several of the titles have spent time on bestsellers lists.

Chicken Soup for the Dental Soul costs $12.95 plus shipping and handling and can be ordered by phone at (800) 247-6553 or by mail from DMD House, 1250 Oakmead Parkway, Suite 210, Sunnyvale, CA 94085

New NIDCR Director Named

Lawrence A. Tabak, DDS, PhD, has taken the reins as director of the National Institute of Dental and Craniofacial Research.

Tabak is the former director of the Center for Oral Biology, Aab Institute of Biomedical Sciences, at the University of Rochester. He replaces Harold C. Slavkin, DDS, who left the position to become dean of the University of Southern California School of Dentistry.

As NIDCR’s seventh director, Tabak will lead an institute of more than 400 scientists and administrators on the National Institutes of Health campus and hundreds of grantees around the world. NIDCR scientists conduct research on the full spectrum of topics related to craniofacial, oral, and dental health and disease. Oral cancer, chronic pain conditions, salivary function and dysfunction, the genetics of craniofacial development, and biomimetics and tissue engineering are among the many issues addressed by NIDCR researchers.

Web Watch

The National Institutes of Health is one of the world’s foremost medical research centers, and the Federal focal point for medical research in the United States. Its mission is to uncover new knowledge that will lead to better health for everyone. NIH works toward that mission by conducting research in its own laboratories; supporting the research of non-Federal scientists in universities, medical schools, hospitals, and research institutions throughout the country and abroad; helping in the training of research investigators; and fostering communication of medical information.

NIH has a comprehensive Web site. Among the topics and subtopics addressed are:

Health Information -- including consumer health publications, a clinical trials database, a list of toll-free information lines, and health literature references such as PubMed.

Grants & Funding Opportunities -- Including information about grant and fellowship programs and research training opportunities.

News & Events -- Including the NIH budget; press releases, which are released almost daily; and special reports.

Institutes, Centers & Offices -- including links to various related office, such as the National Cancer Institute, National Institute of Dental and Craniofacial Research, National Center for Complementary and Alternative Medicine, and the Center for Scientific Review.

NIH can be accessed at www.nih.gov.

Honors

Eugene Sekiguchi, DDS, has been named the new associate dean for professional and legislative affairs at the University of Southern California School of Dentistry. Sekiguchi is the 13th District Trustee of the American Dental Association, representing California.

George Davis, Jr., DDS, was named Dentist of the Year by the Southern California Academy of General Dentistry.

Upcoming Meetings

2000

Nov. 5-11 U.S. Dental Tennis Association Annual Meeting, Palm Desert, Calif., (800) 445-2524.

Nov. 15-18 American College of Prosthodontics annual session, (312) 573-1260, Ext. 15.

Nov. 29-Dec. 2 FDI World Dental Congress, Paris, http://www.fdi.org.uk/congress/index.htm

2001

Feb. 21-22 American Equilibration Society 46th Annual Meeting, Chicago, (847) 965-2888, www.occlusion-tmj.org.

March 4-10 U.S. Dental Tennis Association Spring Meeting, Longboat Key, Fla., (800) 445-2524

April 19-22 CDA Scientific Session, Anaheim, (916) 443-3382, Ext. 4470

May 4-8 Australian Dental Congress, Brisbane, +61 (0) 7 3369 0477

Sept. 14-16 CDA Scientific Session, San Francisco, (916) 443-3382, Ext. 4470

To have a meeting included on this list, please send the information to Upcoming Meetings, CDA Journal, P.O. Box 13749, Sacramento, CA 95853 or fax the information to (916) 443-2943.