Gifts for Life
Charitable Giving Programmes for Orthopaedic Surgeons and Their Patients

John F. Brown
John Brown Insurance,
Toronto ON
for the Canadian Orthopaedic Foundation

Introduction by Belinda Chun, Business Development Officer
Canadian Orthopaedic Foundation

There is a saying, "People don't give to causes; people give to people with causes".

As we all know, Canada's population comprises of almost ten million baby boomers - these are people born between the years of 1946-1964. Boomers are entering their early 60's with a number of joint, muscle and bone issues arising from improper early prevention, accidents or simply aging.

Musculoskeletal ailments account for the majority of visits to doctors' offices these days, and according to the Canadian Institute for Health Information, the number of hip and knee replacements rose dramatically in the past decade. The current and future orthopaedic manpower shortages as detailed by the COA's National Standards Committee, sets the stage for a perfect storm for Canadians in need of orthopaedic care.

Unlike the generation before the boomers, people today are not prepared to sit back and let these kinds of obstacles deter them from seeking a better quality of life - whether it is the freedom of mobility or keeping an active lifestyle to remain healthy. And today, everyone recognizes that prevention will play a critical role in the future, and so for every one of us this is a cause.

To fulfill this cause, giving to the Canadian Orthopaedic Foundation benefits all Canadians on many levels. It creates opportunities to seed research for young orthopaedic surgeons, provide funding to further technological advances in the field of orthopaedic surgery, creates a basis of long-term value for the Foundation to continue to foster educational and patient programmes such as OrthoConnect - a peer support programme through which newly referred orthopaedic patients are matched with volunteers who have already undergone similar surgical treatment.

To consider establishing a Planned Giving Strategy in your total financial plan, John Brown simplifies these general terms:

1. The rationale for giving to your Foundation
2. Tax rules for charitable donations
3. Forms of charitable donations
4. Gifts of publicly Traded Shares and Stock Options
5. Gifts of Life Insurance

Rationale

Why should we consider establishing a Planned Giving Strategy in our total financial plan?
Someone once said, "After having lost our focus, we have doubled our efforts!" This must certainly be true of health care in Canada. When I wrote the precursor to this article in 2002, ambulances in Toronto were scrambling to meet the emergencies of the day. Five years later it appears that little has changed! I have a client who had to wait ten months to begin treatment for prostate cancer. The wait for orthopaedic surgery in Canada is just as distressing with patients waiting up to two years or longer for treatment. Yet surgeons are working harder for less money. The average income of a medical professional, including but not limited to orthopaedic surgeons, has decreased in real dollars. On the other hand, I have seen the remarkable outcomes of orthopaedic surgery. At the Foundation's Hip Hip Hooray! event two years ago I met a young man who was told that he would never walk again. He had 21 operations and was standing with two canes thanking me for doing the walk! I have also someone very close to me who recently went through serious spinal surgery. This person feels much better thanks to the surgery and is deeply appreciative. Would these results be possible without the vast amounts of money spent on research, development and fellowship grants, etc.?

My sense is that the collective voice of the orthopaedic community is not strong in comparison to other professional organizations. My opinion is that the average Canadian has little knowledge of the factors working against physicians and surgeons. The only real information we consumers receive is what we read in the daily news, what we watch on television and what we hear on the radio during our daily travels. Most of this information has been "engineered" for profit and partisan purposes, and has but a small kernel of truth to it.

The benefits of Giving to the Foundation are numerous. Charitable Giving creates a base of cash to provide a strong political voice at all levels of government. Charitable Giving creates ongoing and sustainable cash flow to finance grants and provide funding to further technological advances in the field of orthopaedic surgery. Charitable Giving creates value for members of the COA in terms of continuing education and research. It provides a basis for long-term planning for the Foundation.

Tax Rules for Charitable Donations

(1) To obtain a tax receipt, a donation must be:

• A gift
• To a registered charity (including certain foreign charities)

(2) The donation may be:

• Cash, capital property (e.g. shares, real estate, artwork)
• Life insurance policy or life insurance proceeds
• Ecologically sensitive land/certified cultural property

(3) What is the Tax Credit for Donations?

• 15.25% of first $200.00 of gifts each year, and
• 29% of the balance of gifts each year (up to the annual limit based on net income)
• Provincial tax credit is now a percentage of donation amount (like the federal credit) and is not based on provincial rates times the federal tax credit
• The combined federal and provincial tax credit is now 46.41% for residents of Ontario in the top tax bracket (i.e., taxable income > $120,000, approximate)

(4) What are the Donation Limits for calculating the Tax Credit?

• 75% of net income each year for gifts made during lifetime (to charities or Crown agencies)
• 100% of net income for gifts made in the year of death
• Additional increase to donation limit by 25% of the taxable capital gain on property

(5) Charitable donations may be carried forward or carried back for tax purposes

• 5-year carry forward for gifts made during lifetime
• 1-year carry back for gifts made at death (to year preceding year of death)

Favourable Tax Treatment of Capital Gains on Donated Securities

• Taxable portion of gains has been reduced from 50% to 0 %

For your patients who have the benefit of having stock options, this is indeed, a great opportunity to give to the Foundation because of the tax benefits. One of my clients has been able to reduce his taxable income to zero for the last two years by exercising options, and within 30 days donating the shares to charity.

Gifts of Life Insurance
A Gift of Life Insurance offers a way for even people of modest means to make a meaningful gift to the Foundation.

(1) The strategy for obtaining a tax receipt equals insurance premiums paid during lifetime and after transferring a policy to the Foundation

• Individual assigns a new or existing policy to the charity
• The charity becomes the owner and beneficiary of the policy
• The charity issues donation receipt equal to the premiums paid each year (plus cash surrender value if an existing policy is transferred
• The charity gets insurance proceeds on the death of the life insured
• The life insured may be someone other than the donor
• Insurance proceeds go directly to the charity
• Confidentiality is preserved

Example:

• Doctor John (age 45) earns $200,000 annual income
• He wants to create a $250,000 charitable endowment for the Canadian Orthopaedic Foundation
• Doctor John purchases a $250,000 Universal or Whole Life policy and assigns it to the Foundation
• Doctor John continues to pay premiums during his life either to the insurer or to the Foundation

Annual premium                          =        $15,000 (for 6 years - projected)
Tax credit for annual premium
@ 46% tax rate each year          =        $6,900
Net annual cost of premium        =        $8,100
Total Premiums                           =        $90,000
Total net cost of premiums         =        $48,600

Future TAX-FREE Benefit to the Foundation (Projected) at death of Dr. John

Age 65  =        $403,064
Age 75  =        $489,851
Age 85  =        $641,647
Age 90  =        $755,963

TAX-DEFERRED Cash Available for Use during Lifetime Expressed as Percentage of Insurance Value

Age 65  =        $153,064 or 38%
Age 75  =        $239,851 or 49%
Age 85  =        $391,647 or 61%
Age 90  =        $505,963 or 67%

N.B. Values assume "net credited rate of return" (net of MERs but inclusive of funding and loyalty bonuses of 5.75%, which is neither an estimate nor a guarantee). Values are certain to be greater or less than the assumed rate of return.

There are more ways to give to the Canadian Orthopaedic Foundation than the channels listed above. It is incumbent on us as professionals, whether we be orthopaedic surgeons, lawyers, financial advisors or insurance professionals, to give back to our professional association and foundations. Think of the possibilities. A little gift can go a long way!

Mr. Brown can be reached at 1-800-927-5288 or This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Disclaimer: This article is not to be construed as legal or tax advice. You are strongly advised to seek professional counsel before making any significant investment decision.