Page 1

VOL. 38, NO. 45

NOVEMBER 6 - 12, 2017

Source Lunch

Akron Kent State aeronautics program has a focus on drones. Page 44

Tom Yablonsky is downtown Cleveland’s secret weapon. Page 47

CLEVELAND BUSINESS

The Business of Holiday Giving | First in a series

Tip for bosses and employees: Have a good time at the office party. But not too good. By JOE CREA

The List Largest colleges and universities Page 42 GOVERNMENT

Tax plan could hit builders in big way By JAY MILLER

clbfreelancer@crain.com jmiller@crain.com @millerjh

T

ime was, when it came around to the office Christmas party time, you ordered a couple of party trays, set up a bar, hung some mistletoe and turned your head when Ralph from sales and Sally from accounting slipped off to canoodle back by the Xerox machine. The boss handed out cartons of Chesterfields and bottles of Old Grand-Dad, and everyone went home with a nice holiday ham. Man, THOSE days are gone. Just how many workplace violation lawsuits can you find in that scene alone? The phrase “Christmas party” alone is enough to set off debate. Booze? That means management’s just begging for a liability suit (or worse). Then there are assertions of placing temptation in the paths of employees, coercing workers to show up after normal business hours, possible sexual harassment claims. Oh, and that gift: Ham? Really?? “Damned if you do” seems to have become the new down side of hosting the annual holiday gathering. For all the time, money and effort put into the event — for every gesture of intended kindness — the opportunity for misinterpretation, discontent or an outright lawsuit simmers.

Sections of the Congressional tax plan announced Thursday, Nov. 2, could thwart the goal of growing the residential population of downtown Cleveland to 20,000 people by 2020 and make it harder to attract businesses to the under-construction Opportunity Corridor and other underdeveloped areas of the city, local observers say. The tax bill that started its trek through the House of Representatives last week would end or alter three programs that have stimulated much of the commercial and residential development and redevelopment Northeast Ohio’s struggling cities have seen in recent years. The Historic Tax Credit (HTC) program, which has been critical in attracting developers to renovate downtown office buildings into apartments and condominiums, would be eliminated, as would the New Market Tax Credit (NMTC) program, which provides tax incentives for business investments in low-income areas. The tax plan also could have an impact on affordable housing and its developers, even though the Low-Income Housing Tax Credit program (LIHTC) would continue under the new bill. That’s because private activity bonds, often used in conjunction with the LIHTC program, no longer would be tax exempt, reducing their value as low-cost financing.

SEE PARTY, PAGE 9

Illustration for Crain’s by LeeAndra Cianci

Focus: Legal Affairs Win-win: Legal Aid for Cleveland’s Act 2 program matches retired lawyers with clients in need. Page 13 Entire contents © 2017 by Crain Communications Inc.

SEE TAX BILL, PAGE 8

REAL ESTATE

Tenants continue to march away from The Avenue at Tower City By STAN BULLARD sbullard@crain.com @CrainRltywriter

Scratch three more tenants from the directory at The Avenue at Tower City Center as vacancy continues climbing at the downtown shopping mall. Tower Deli was scheduled to close

Friday, Nov. 3, joining sister operation Lincoln Tap House in the dark, as the gastropub shuttered Oct. 19. The tailor shop Maestro recently moved to a storefront next door to the Hanna Theater, vacating a shop proprietor Mark Sror had opened two years ago on the Avenue. They are the latest additions to vacancy at the mall that an affiliate of Cavs owner Dan Gilbert’s Bedrock Real Estate

acquired in 2016 from Forest City Realty Trust, which had installed the 366,000-square-foot downtown mall inside the former Union Rail Terminal in 1990. The trio of shutdowns joins two food court tenants and at least three other tenants that left the building this past year, including Children’s Place, a national retailer shedding stores across the country. SEE AVENUE, PAGE 7


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CRAIN’S CLEVELAND BUSINESS

MetroHealth, Clinic score in ACO payouts Clinic brings in $19.9M and Metro gets $4.3M in Medicare savings; UH, Summa shut out By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

Two Northeast Ohio health systems will receive multimillion-dollar payouts from the federal government for helping save money in their care for seniors, but another two weren’t quite as lucky. MetroHealth’s Medicare accountable care organization, or ACO, received a $4.3 million share of generated savings, while the Cleveland Clinic’s received $19.9 million for performance year 2016. Summa Health in Akron and Cleveland’s University Hospitals failed to receive payouts despite having done so in previous years. The Medicare Shared Savings Program is one of the most well-known of the ACO programs, which are designed to reward organizations that provide high-quality, coordinated care at a controlled cost. That’s far different from the traditional reimbursement models across most health care programs that simply pay out based on how many services are rendered. “We hope that more communities will think about what’s going to work best for them, whether it’s an ACO or other advanced payment models that have them looking at providing payment that is based on value and quality, and not based on volume,” Seema Verma, administrator of the

Centers for Medicare and Medicaid Services, said in an interview with Crain’s in late October. CMS establishes a spending benchmark for each participating ACO. For a health system to get a slice of the savings, they have to spend less than that threshold by at least a certain percentage, which is also established by CMS. Summa, which had been the only system in Ohio to receive a payment for the first three years of the program, spent under its benchmark but not far enough to trigger shared savings for performance year 2016. UH, which has participated in the Medicare shared savings program since it began in mid-2012, spent above its established benchmark. This is the first time UH spent above the benchmark, with an overspend rate of 2.5%. In a prepared statement, UH said its Medicare ACO population “continues to be well-managed” and has a low per-capita expense for each beneficiary compared to other Medicare ACOs in the country. UH did not make anyone available to comment further. Last year was MetroHealth’s third year in the Medicare ACO program, but its first in terms of taking home a cut of the savings. Its savings rate of 1.7% in 2015 wasn’t enough to trigger a payment, but last year that rate ballooned to 8.1%, resulting in a $4.3 million payout for the health system. “A significant amount of those dol-

“We hope that more communities will think about what’s going to work best for them, whether it’s an ACO or other advanced payment models that have them looking at providing payment that is based on value and quality, and not based on volume.” — Seema Verma, administrator of the Centers for Medicare and Medicaid Services

lars will go toward funding that investment to continue forward, and some of the other dollars will go toward physician services,” said Dr. Nabil Chehade, MetroHealth’s senior vice president of population health. The program is a three-year commitment, and MetroHealth has signed up for another three years, but this time on a new “track” that will give MetroHealth a larger portion of the savings if it meets its marks. But if it overspends, MetroHealth will have to pay CMS. “This is a vote of confidence by our leadership,” Chehade said. “We had that confidence that if we’re going to put all this work and effort, we should share more of the reward.” Cleveland Clinic’s savings rate for 2016, its second year in the program, was 5.8%, which resulted in its $19.9 million cut of the savings. Dr. James Gutierrez, president and medical director of Cleveland Clinic ACO, said a percentage of the savings is retained for operations and to defray investments the Clinic has already spent to manage the senior population. The rest, he said, is divided among the departments or independent physicians participating in the ACO. The 2016 performance year, Summa’s fourth in the program, was the first time it didn’t save enough money to trigger a payout. Its savings rate was about 2%, but the system needed to reach closer to 2.5% to take home a share of the savings.

“Unfortunately, it’s a little bit of the design of the program, because there is a regression to the mean over time with these kind of programs,” said Dr. Mark Terpylak, Summa’s senior vice president for population health and president of New Health Collaborative, Summa’s ACO. “The benchmarking is based on what you spent the prior years, so every year as you lower that, you get a tougher and tougher target to work against.” The Medicare Shared Savings Program also awards a quality score to participating ACOs, which is a factor in determining the portion of savings each gets to keep. The scores are based on more than 30 quality metrics from screenings to care coordination to patient access. MetroHealth’s ACO’s quality score was 95.9%, the Clinic’s was 96.3%, Summa’s was 90.4% and UH’s was 86.6%. Meanwhile, CMS’ Verma said she expects the program — which was launched under the Obama administration in the wake of the Affordable Care Act — to continue, but wants to figure out how to make it easier. “We want to get regulation and burden out of the way and create tools for the organizations, whether it’s in some type of different payment model, whether it’s ACO, the idea is to get government out of the way, get Washington out of the way of dictating processes and focusing on outcomes, high quality care, efficient care,” she said.

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Mike Thomas, who began his duties as Cleveland State University’s director of athletics on March 1, is well aware his department’s signature program is men’s basketball. But Thomas, a former director of athletics at the universities of Illinois, Cincinnati and Akron, used a baseball analogy to describe the fundraising prowess of Vikings athletics. “I would say a program that you think should have rounded the bases by now as far as a mature fundraising program, we’re at first base,” Thomas said. “We have a lot of work to go there, but I say that in a very positive way. It’s a great opportunity for us.” Cleveland State, like the vast majority of its NCAA Division I mid-major peers, has an athletics budget that is funded almost entirely by school funds. In fiscal year 2016, $10,139,629, or 86.2%, of the Vikings’ 12,048,354 budget was paid by student fees, and school funds accounted for another $251,721. The Vikings’ three revenue lines — ticket sales, contributions and media rights/licensing — paid for $1,237,966, or 10.3% of the budget. Cleveland State’s sports teams combined for $181,842 in ticket sales, which was the university’s lowest total since 2005 and marked a $273,471 drop from 2012. Athletic department contributions, meanwhile, were at a seven-year low of $457,308 in 2016, and the rights and licensing revenue of $598,816 dropped more than $100,000 in a year and was CSU’s worst figure in the category since 2013. “I think for us in athletics, there are some things we need to do to advance our standard of living, no question,” Thomas said. “In a lot of schools in our situation, including Mid-American Conference schools, situations where you’re highly subsidized, your budget might not look a lot different from year-to-year. So what are the difference-makers for your program?” Thomas has identified three areas in which the Vikings most need to improve: men’s basketball ticket sales, corporate sponsorships and fundraising. And the 30-plus-year college administrator believes the Vikings have taken significant steps to pump up the numbers in each area.

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Thomas said CSU athletics is further behind the money-raising efforts of the University of Akron’s athletic department when he was hired by the Zips in 2000. In August, CSU announced that Saunjula Staton, who had been splitting her time between athletics and the Vikings’ partnership with Northeast Ohio Medical University, would be CSU’s director of athletics advancement. Staton, who helped CSU attract more than 500 new donors for the athletic department’s Giving Day in February, said she’s hoping the Vikings can more than double their annual fund to $1 million. The increased funds could help CSU add to its scholarship count, which coaches have cited as a top need, she said. “Former student-athletes are really good prospects” for such donations, Staton added.

Cleveland State is counting on new coach Dennis Felton to get its men’s basketball program back on track. (Contributed photo)

By the numbers: CSU ticket sales A look at the ticket sales revenue for Cleveland State athletics from fiscal year 2012 to FY 2016: 2016: $181,842 2015: $260,311 2014: $274,739 2013: $270,787 2012: $455,313 Source: USA Today ... Note: The 2016 total is CSU’s lowest since $160,469 in 2005.

Her boss, Thomas, led a University of Illinois athletic department that, from 2011-15, raised a total of $165 million — doubling its per-year average from the previous five years. “I think if you look at the few key pieces of an athletic director’s job description, absolutely one of them should be fundraising,” Thomas said. “They should be out there front and center leading the charge.”

Sponsorships Cleveland State recently signed a two-year extension with Learfield, its multimedia rights-holder, and with the deal came another possible revenue-producer. Ryan Cook in July was named the general manager of Learfield’s Vikings Sports Properties, which oversees CSU’s corporate partnerships, signage, and TV, radio and digital rights. For a large chunk of last year, the Vikings had an interim person in the GM role, Thomas said. “I think there’s an opportunity for real growth there,” Thomas said. The CSU director of athletics said the Vikings are also talking to local stations about televising some men’s basketball games and airing a coach’s show featuring new hire Dennis Felton. “Where we are today and where we want to go eventually will most likely look a lot different as far as the exposure and branding of our program,” Thomas said.

Ticket sales The Vikings are also counting on an outside source to help inject some much-needed life into the box office. In September, a couple months after a two-year deal that called for the Cavs to book events at the now-26year-old Wolstein Center expired, CSU announced that The Aspire

Sport Marketing Group would manage its ticket marketing, sales and service. The two-person staff will primarily be focused on a men’s basketball program that has finished last in the Horizon League in attendance for five consecutive seasons. “You’re not paying the upfront expenses to build an infrastructure to go out and sell tickets or corporate sponsorships,” Thomas said of the deals with Learfield and Aspire. “That’s done by these firms, and they train these people. But they’re part of our family; they’re part of our team. We don’t look at them as any different than CSU employees.” But Thomas will be the first to admit that the best possible sales pitches from the firms, which collect commissions on the athletic revenues, could fall flat until Cleveland State gets its most notable program back on track. Cleveland State was a combined 18-45 in former men’s basketball coach Gary Waters’ final two seasons. Prior to that, Waters had led the Vikings to at least 19 wins in six of the previous eight years. Thomas’ first big move after becoming director of athletics was the hiring of Felton, who led Western Kentucky and Georgia to a combined four NCAA tournament appearances in 11 seasons. The Vikings averaged just 1,399 fans in 13 home games in 2017. The norm was 1,324 below the Horizon League average of 2,723, and marked a year-over-year dip of 27%. Since averaging 3,260 fans per game during a 22-win season in 2011-12, the attendance for CSU’s men’s basketball program during the five-season run at the bottom of the conference has ranged from last year’s 1,399 to a high of 2,236. “There’s no question that having a highly successful men’s basketball program is great not only from a revenue standpoint, but certainly an exposure standpoint of what it does for this university and this community,” Thomas said. The director of athletics added that if he had a dollar for each time someone wanted to talk to him about the Cleveland State teams coached by Kevin Mackey in the mid-1980s, “we would already know how we would pay for a new events center. “So that right there tells you why this should be an every-year thing where we’re in the pennant race,” Thomas said, using another baseball analogy. “You might not win your conference every year. You may not go to the NCAA tournament every year, but here’s what you need: You need to be relevant.”


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Visitors can get an astronaut’s view of the Apollo Command Module control panel on an iPad. (Anita Orenick/GLSC)

Customers can use the app to investigate the airbag landing system of the Sojourner Rover that was deployed on Mars. (Contributed photo)

“So we hope they walk away feeling a little closer to something that would be very difficult to do without augmented reality,� she said In developing the app, the center was careful to make sure that kids weren’t just staring at a screen, but also were interacting with the objects in the museum. The app will prompt them to scan an artifact or look for something on it. “One of the things that we tested a lot was are the kids interacting with the tablet or are they really interacting? So this forces them to do that,� Kaltenbach said. The science center, home of the

NASA Glenn Visitor Center, was awarded a grant to create the app from NASA’s Competitive Program for Science Museums, Planetariums and NASA Visitor Centers; the app is funded by part of the $799,000 grant. The science center developed it in collaboration with Richard Lewis Media Group and consultant Rachel Hellenga. “The public has really expressed a lot of excitement about being able to virtually touch things, being able to climb inside the Apollo capsule virtually, being able to do things that are, in this case, kind of out of this world,� Ellenbogen said.

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AVENUE

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Gregory Dabran, a partner in the investor group that operated Lincoln Tap House and Tower Deli, looked back on the last 10 years at The Avenue and said, “We had a good run.� However, Dabran said his company sought rent reductions from Detroit-based Bedrock because its business declined due to increased vacancy in nearby office buildings, and it never gained additional business from Gilbert’s casino operation at the attached Higbee Building. “They did a great job keeping that (gaming) business within those four walls,� Dabran said. When Lincoln and Tower Deli opened in 2006, its concept was to serve office tenants in the millionsquare-foot property and not rely on outside business. Lincoln gained about 4% in additional sales the first few months after Hard Rock Cafe closed at Tower City Center in 2016 because the chain had opened the Hard Rock Rocksino in Northfield. “But the decline of the mall took that away after a while,� Dabran said. “We tried getting more people to come into the mall with partnerships and radio advertising, but we couldn’t get them in.� If Bedrock had reduced its rent, Dabran said, the two stores would have stayed open even though he characterized its finances as “tight.� About 22 people worked in both locations, although some moved to other operations owned by him or his partners. For his part, Dabran is now focused on the Foundry bar and restaurant in Elyria, which he and a business partner opened last year.

Mark Sror recently moved his tailor shop, Maestro, from The Avenue to a storefront next to the Hanna Theater in Playhouse Square. (Stan Bullard)

In Maestro’s case, Sror said he wanted to move to a larger, more prominent location in the mall but Bedrock would not give him a longterm lease because it wants to keep its options open for its yet-to-benailed-down mall revival plan. “I didn’t think I could move my life and my business for just a year or two,� Sror said. So he leased space for five years from Playhouse Square Foundation, which controls East 14th Street storefronts, although it leased the upper floor offices in the Hanna Annex to K&D Group for apartments. “I already had more than six customers who live in the Residences at the Hanna,� Sror said. “I felt the business deserved a better location than where it was at Tower City.� Sror said his rent is substantially more in the Theater District, but he believes that over time the added visibility will help the company. The storefront also gave him the opportunity to start selling shoes, shirts, and what he called “bespoke� sport coats imported from Italy that he fits to

buyers as well as made-to-order custom suits he tailors himself from bolts of cloth. He estimates he’s gotten 5% more traffic since setting up shop near the Hanna marquee in September, although that has not translated into additional sales. Sror, who started to learn tailoring at age 10 from his late grandfather in Beirut, Lebanon, said he was thankful to Forest City and Bedrock for giving him his start in an empty tailor shop almost two years ago. Prior to that, he worked as a subcontractor to a men’s clothing chain both here and in Detroit since emigrating to the United States in 2006. “I was able to build a good business in Tower City. People had to find me on a hallway off the main concourse of the mall,� Sror said, “but social networking and good Yelp ratings made it work. I have confidence in myself for this next step.� He also created a home-like shop with comfortable chairs, an oriental rug and fireplace for his customers and the site of his 60-hour work weeks. For Bedrock’s part, it declined to

comment on the loss of the trio of tenants and said it does not disclose vacancy rates at its properties. Although vacancy has climbed as Cleveland has waited for Bedrock to craft a plan to resurrect The Avenue, statistics are not available from online realty data provider CoStar. However, CoStar indicates the scale of the behemoth in downtown. Though it’s lost some retailers, it houses about 60, including Brooks Brothers, Payless Shoes, GNC and Victoria’s Secret, among others. However, when asked about the added closings, Bedrock issued a statement from Jim Ketai, Bedrock CEO, in an email. “As a Greater Cleveland Regional Transit Authority hub and downtown shopping destination, The Avenue Shops at Tower City serves as the central connector of Bedrock’s Cleveland investments,� Ketai wrote. “We’re evaluating several options for its future development and we are committed to finding the solution that most benefits the city and all Clevelanders. “In the interim, current tenants remain a priority and, as with all of our tenants, we work hard to arrive at lease terms that accommodate their needs to the best of our ability while allowing for flexibility in our future plans.� Several realty insiders speculate that Bedrock’s purchase of The Avenue was largely defensive in nature, a drive to control parking at Tower City Center and real estate attached to the Jack Cleveland Casino. Moreover, Gilbert-linked concerns have continued to invest in downtown Cleveland since taking on The Avenue. Gilbert’s Jack Cleveland Casino last month bought the May Co. parking garage at Prospect Avenue and Ontario Street following Bedrock’s September purchase of the May Co. department

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store fronting on Public Square and an office building at 2025 Ontario St. Gilbert’s Ritz-Carlton at Tower City also completed an 18-month updating of the hotel costing millions, although actual costs were not disclosed. Avenue tenants, downtown office workers and residents are not the only ones wondering what Bedrock’s Avenue plans will be. Among them is Doug Price, CEO of Willoughby-based K&D Group, who along with business partner Karen Paganini bought the iconic 52-floor Terminal Tower, the namesake and centerpiece of Tower City Center, above the Avenue, last year. K&D plans to convert part of it to apartments if it secures highly competitive Ohio Historic Preservation Tax Credits next month from Ohio Development Services Agency and Ohio History Connection. “The Gilbert group has said it would invest billions in Cleveland. We’re all on the same page that it needs to be better,� Price said in a phone interview. As K&D’s eight downtown and Flats properties incorporate retail space, Price also knows the challenges of winning business-savvy retail tenants for downtown. “Food is pretty much covered downtown, and when residents need household goods they go to Steelyard Commons. It’s minutes away,� Price said. “For other kinds of retail, they’re really pioneers, and you know what problems traditional retail is having.� That’s why, he added, K&D has focused on bringing to its downtown properties local businesses who want to expand because they know Northeast Ohio, such as Corbo’s, Hodges, Metro Home and Yours Truly. “You can’t just put in national retailers,� Price said. “It’s not an easy proposition no matter how you look at it.�

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“It was worse than I feared,� said Michael Novogradac, managing partner in Novogradac & Co., a national accounting firm that specializes in tax credit financing and has offices in Cleveland, Columbus and Dover. “If this is passed (as introduced), I don’t know the exact dollars in Cleveland, but historic preservation wouldn’t be financially feasible,� he said. “Cleveland has done a lot with historic credits and New Markets.� The programs create credits against federal income tax for qualified investments. A $5 million investment in a certified rehabilitation of an historic structure, for example, creates a 20%, or $1 million, HTC against federal income taxes. The NMTC offers a similar incentive for new construction in neighborhoods the federal government has identified as low-income or depressed, and the LIHTC program encourages the construction of affordable housing. Tax credits are awarded by a competitive process. The federal government limits the amount of tax credits available in a given year and allocates them to public agencies or nonprofit organizations across the country that make specific awards. In Ohio City, the Snavely Group this summer won low-income housing and historic tax credits for the $10.8 million redevelopment of the Forest City Bank Building and the Seymour Block into 38 units of housing with a maximum monthly rent of $785. The buildings are part of a larger, $60 million Snavely development at the corner of West 25th Street and Detroit Avenue that includes the Quarter, a 194-unit market-rate apartment building. New Market Tax Credits made that part of the deal work financially. The incentives are important in Northeast Ohio because commercial and residential rents are relatively low compared to other metropolitan areas, even though construction and renovations costs don’t vary greatly from market to market. HTCs and NMTCs that reduce construction financing costs have been one way to make building here more attractive to developers. “What we know is that (these programs) are remarkable economic and community development tools that have bipartisan support,� said Joel Ratner, president and CEO of

Cleveland Neighborhood Progress, just before the new tax plan was announced. CNP is a community development nonprofit. Its Village Capital provides financing for low-income tax credit partnerships. Radhika Reddy, founding partner of Ariel Ventures LLC, a business advisory firm that has begun investing in real estate, said the loss of HTCs would be “a big blow.� Reddy, who has redeveloped several buildings, including the Ariel Center, her company headquarters on East 40th Street, said that rent payments can’t always cover the development costs of renovation in Northeast Ohio. “These buildings don’t (cover) cash flow,� she said. “You need the subsidy (that comes with tax credits) to make deals work. Rents are low in Cleveland.� Michael Deemer, executive vice president for business development for the Downtown Cleveland Alliance, said the HTC has been critical to the central city. “What would downtown Cleveland be today without the federal historic tax credit?� he asked. “Imagine downtown Cleveland without East 4th Street, without the 1,400 hotel rooms that were added in historic buildings; imagine downtown without Heinen’s (supermarket); without the Warehouse District. That’s what we’re talking about.� Deemer said that 40% of the current downtown population of about 15,000 lives in buildings renovated with historic tax credits and that the tax credits are critical to future growth. “We’ve identified 17 buildings in the pipeline that need to be completed to reach the goal of 20,000 by 2020 and 12 of them are historic-tax-credit eligible,� he said. The loss of NMTCs could have an impact on the Opportunity Corridor, the new road being carved out on Cleveland’s Southeast side. While state transportation money is paying for the pavement, NMTCs were expected to be a vital element in the city of Cleveland’s plan to attract strong, established businesses to build on what had been hard-to-reach and battered properties on newly cleared land adjacent to the roadway. “The corridor will be built,� said Cleveland City Councilman Anthony Brancatelli, whose Slavic Village ward includes part of the Opportunity Corridor. “I’m concerned that we will compromise (the city’s vision) if we don’t have that tool (NMTCs) available to us.�

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If you’re hosting ... Everything you do to stage a holiday bash for your co-workers depends on your personal and corporate style. Some managers throw themselves into the spirit of the season; others are far more buttoned-down. Figure out the tone you want to achieve, and plan from there. Carefully consider what you call the event: Especially if your workplace includes a diverse swath of employees. Much as it may rankle you personally, a “holiday” or “year-end” party is less likely to alienate than declaring it a Christmas party. Be clear about who’s invited: Will it be employees-only? Plus one? Or will this be a family and friends gathering? Some companies want to toast its team as a show of appreciation, then host a separate event to celebrate the whole gang. While more guests can mean rising costs, including spouses or partners is a show of thanks for the support and sacrifices they offer, too. (And some sources consider it a way to keep a lid on excessive behavior.) Think about when to schedule your event: The season between Halloween and New Year’s Day is crazy for most people (especially those with kids). Consider avoiding the weekends. A weeknight, like Thursday, may be a good choice (all the more if you’re able to offer Friday off ). Or even stage a “welcome to 2018” get-together in January. Figure out a realistic budget: Start with a dollar amount your company can handle, but before you commit, shop around. Once you’ve gauged prices for food, beverages, paper and plastic goods, decorations, etc., that’s when you can determine whether to either trim your expectations or dig deeper for additional funds. So much of the event’s success hinges on the spirit of the party. Do you need to give party gifts?: If yours is a group that requires a bit of, shall we say, “enticement” to attend, that’s where the promise of a grab bag of gifts may come in handy. They don’t need to be expensive (though throwing in one or two bigger-ticket surprises won’t hurt). In advance, announce that they’ll be given out on the day or evening of the party. Accommodate ALL of your guests: That means nonalcoholic beverages along with the beer, wine and spirits. Vegetarians, gluten-free, no red meat — dietary preferences are endless. You probably can’t know who has a peanut allergy or won’t eat pork (though many will gladly share that info), but it’s a show of thoughtfulness to offer a diverse buffet. And make sure you have plenty. You know, go big or go home. Consider offering drink tickets: Discourage colleagues from raffling them off. And ask others to help keep an eye open for anyone who’s overindulging. If you act pre-emptively, it’s easier to avoid uncomfortable, obnoxious or potentially dangerous behavior. Arrange for alternative transportation: And make plans before you need them. Designated drivers, taxis, Uber, some kind of buddy system to get a colleague safely home — those efforts can prevent a tragedy (and potential legal action). Think pre-emptively: One legal consultant recommends that a week or two before the party, management distributes a memo clearly stating company policy regarding harassment, proper behavior and similar guidelines. Just a discreet reminder. — Joe Crea

PARTY

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How did the once-simple act of throwing a bash for the crew become so wrought with disappointment and controversy? More importantly, what steps can you take to make sure your cup of good cheer doesn’t sour? “It comes down to a matter of respect — very simple, basic stuff,” said Rob Falls, president and CEO of Falls Communications in Cleveland. “If it’s not ingrained in how you do business every day, you’re going to have a problem,” he added. Falls Communications hosts two parties each year. One is a family event held during the summer or early fall. “That’s where you bring spouses and kids,” Falls said. “This year, it was a clambake. We had a balloon guy who made these wonderful things for the kids, great live music, played games. “The other one, the end-of-theyear holiday event, is for the staff only. We pull out all the stops: It’s always at a great venue, different every couple of years, with great food and lots of it, great wines, a full bar and we have a gift exchange, which is a lot of fun. It truly is a real feel-good event. And it’s one of the few things we do where we spare no expense.” Such a shindig, Falls insisted, “is not a departure from who you are (as an organization). It’s really an embracing of those core values and culture. And it’s really a celebration of your team.” According to a recent survey by CareerBuilder, roughly two-thirds of all businesses host some kind of holiday gathering. It may be as simple as taking the staff out to lunch during the holiday season or hosting a full-blown bash. Degrees of sophistication are all over the board, but event planners have observed significant changes in the styles in which hosts entertain. Joan Rosenthal, founder and owner of Marigold Catering, said today’s hosts want a hint of elegance balanced by a simple homeyness. “Twenty years ago, nobody knew Marigold,” she said. “But as we started to evolve, we were getting requests for more elaborate activities: carving stations, chef-integrated things, more formal service.” Budgets have changed, too, she said. “Now you still get business, but they’re trimming,” she said. “They still want to show the love and respect for their staffs, but they now do it on a different level. They’re no longer over-thetop elaborate: You see some of that, but nowhere as much as you used to.” With the rise of celebrity chefs, hosts recognize the impact of splashy food. But they want more homestyle-driven comfort food done elegantly, Rosenthal said. “They want something fun — gorgeous and good. I have some really wealthy clients that can’t wait to have my fried baloney sandwiches — seriously. You’d never see that 10 or 20 years ago,” she said. One-line buffets are out, and food stations and family-style are in, Rosenthal added. That reflects a growing trend toward “experiential” events. Guests enjoy being engaged in the process. That can be as simple as setting up different food stations or watching the chef make their omelet. Amanda Dempsey, events director for Mitchell’s Homemade Ice Cream, sees a growing demand for good food with a side order of entertainment. “I think people are looking for experiences more,” Dempsey said. Founders Mike and Pete Mitchell had that in mind when they created the space for their store in Ohio City. “When people are booking a party,

they know we have space that’s accessible to watch the kitchen, and have an opportunity for guests to both celebrate and yet have more — learn about how ice cream is made, learn more about a local business.”

Maneuvering the pitfalls Barbara Fairchild is one of America’s foremost hosts, with more than 32 years at Bon Appetit magazine, 11 of them as editor. Now retired, Fairchild looks over the landscape of corporate entertaining with some caution. “I’m not sure those (business) parties are as successful as they used to be,” she said. “There’s timing, childcare issues, people don’t want to be out late. … And these days there’s the whole millennial factor — some people just don’t show up. “I think it’s better off doing company parties off site, and definitely something more casual — like at a big brew pub, with small plates and a couple of unusual cocktails — rather than doing a big sit-down lunch or dinner.” Alcohol, of course, is the big gamble. Some guests go overboard, and too often it’s a short leap from “loosening up” to creating a scene. Some may simply not drink, which is easy enough; recovering alcoholics and those whose religious views oppose booze can pose bigger concerns. Fairchild said there are ways of controlling alcohol a bit better. “Say, a theme around interesting beers, or serve only one kind of thing — maybe only sparkling wines — or controlling what is served,” she said. “And you can always have the nonalcoholic drinks. Make sure it’s visible, so that they can immediately find them.” Rob Falls takes a different tack. “I really want people to enjoy themselves,” he said. “We encourage them to have a good time. We’ve never had fall-down drinking. People have been responsible, and they also look after each other. Safety is at the forefront of everything — and there’s no argument: If we feel you can’t drive, you’re not driving. Period.”

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If you’re attending … At the risk of being cynical, however you may feel about your employer or co-workers, it’s smart to remember that the company could just as easily not host a holiday event. So, show up. Unless you’re ill or already have well-established plans for the evening, your absence is apt to be noted. Attending is a show of collegiality, as well as loyalty. (And, frankly, your desire to continue good relationships.) It’s a business event: “Whatever happens in Vegas ...” may be true, but some co-workers have long memories. Before you totally cut loose, it will help to understand the company culture. Know who you’re partying with. Some businesses encourage the crew to have a great time (and accommodate those who’ve overindulged); others are more staid or rigid, in which case you’ll want to save your rave for when you’re with your family and friends. Don’t arrive starved: No matter how much you’re ready to feast, don’t go hungry. Make sure to eat before you head for the bar. And pace yourself. Alternate drinks and sipping water or soft drinks. (Besides, no one will know whether that’s vodka or H2O in your glass.) Think ahead: Make plans for alternate transportation home — in advance — should you have one too many. Dress appropriately: And give your companion a heads-up, too. Dressing up for a party is one thing, but unless it’s held at a particularly splashy venue or other exotic locale, you know, keep it professional. A word about gifts: If you plan to bring someone a gift, avoid hurt feelings (or looking like you’re schmoozing the boss) by waiting for a more discreet opportunity — unless it’s an actual gift exchange event, of course. Engage: Skip the wallflower routine — get in there and mix. And talk about something other than work. And, OK, so maybe you just don’t want to be there. Get with the spirit, and keep your feelings, gossip or grudges to yourself. C’mon: ’Tis the season, and all that. Stick around a while: It’s bad form being the first to duck out. Say thanks: And not only to the boss, but to those who did the heavy lifting. Granted, it may be an “obligatory” event and a deductible expense for the company, but acknowledging your appreciation to your host is a simple — and courteous — gesture. — Joe Crea

Reluctant guests? Of course, there remains the question of whether to hold a party. For every Mr. Fezziwig, that beloved character from “A Christmas Carol” who dwells among us — harbinger of yuletide joy, the one who leads the first dance and hales a toast — there are those who don’t see all the good cheer. Dick Blake has been leading sessions in etiquette, corporate training and dance for about 50 years in Northeast Ohio. Among employees, holiday parties may be viewed more as an imposition than a treat. “They feel compelled to show,” Blake said. “Think about it. Eight hours is a long time to work. How often do you see them run out at the end of the day?” he said. “They want to be in their car, on their way, off to their families and friends. People have changed. Habits have changed. They’d rather cocoon instead of getting back in their cars and spending another few hours with their fellow employees.” Receiving a nice check is a far more welcome gesture, Blake insisted. And definitely not a piece of china or a frozen turkey, he added. The bosses’ idea of a “generous” gift — say, or a vase, ornament — may be the recipient’s white elephant: unwanted and even insulting. “Give the employees something of substance — a gift of actual money,” Blake said. “Not a gift card, where you’re basically telling them where to shop or eat. Cash is something they can use for whatever it is they actually want.”

PA G E 9

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PA G E 10

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

The Browns are 1-23 under the leadership of chief strategy officer Paul DePodesta, left, and executive vice president of football ops Sashi Brown. (Getty Images)

Fans are no longer buying what the Browns are selling Editorial

Choices There’s a reason it has been more than 30 years since a significant tax reform package emerged from Washington, D.C.: Tax reform is really difficult. Budget math is hard. Political compromise is even harder. And the choices required to make reform work can have longterm consequences that undercut some of the benefits of nearterm tax relief. Case in point: the potential elimination of the Federal Historic Tax Credit program, which has been a key element of the revitalization of downtown Cleveland and other big American cities. Downtown Cleveland Alliance last week sent up a signal flare telling stakeholders that Congress “is looking to end this effective, job-creating and revenue-generating program in the name of tax reform” and urging them to “join us in the fight” to preserve it. The advocacy group makes a compelling pitch. The historic tax credits provide funding “to fill the gap between private investment, bank financing and public investment,” DCA notes, and they help “rehabilitate historic buildings into housing, office space and renovated retail space” — critical functions in older downtowns seeking a second act by attracting younger workers who want to live, work and play in cities. Over the last 15 years, DCA estimates, “$254 million in federal HTC credit financing has created 25,000 jobs throughout the city of Cleveland, while generating $339 million in tax revenue.” Nearly 40% of downtown residents — a number that now stands at more than 15,000 and is headed to 20,000 in the next few years — live in a building with a renovation made possible by HTC financing. We’re convinced of the merits of the HTC program and urge Ohio’s lawmakers to help keep up the momentum in Cleveland (and Akron, and Toledo, and Cincinnati, etc.) by working to preserve it. At the same time, if you’re going to try to enact the biggest

transformation of the U.S. tax code since 1986, some programs that you hold dear will have to go, if you’re going to preserve any budget sanity. There are hundreds of programs like the HTC that have value to some constituents, but they can’t all stay if you want to cut the corporate tax rate to 20% from the current 35%. Last Thursday, Nov. 2, House Republicans finally offered the outline of their plan, the Tax Cuts and Jobs Act. In addition to slashing the corporate rate, GOP leaders seek to compress the number of individual income tax brackets and repeal the estate tax starting in 2024. A budget blueprint agreed upon by the Senate and the House constrains the tax overhaul to a cost of $1.5 trillion over a decade. To partly offset the lost revenue, The Wall Street Journal noted, “Republicans plan to curtail the deductions individuals take for state and local tax payments and the ones businesses get for the interest they pay on debt.” However — and this is key when it comes to programs like the HTC — the plan “stops short of touching other popular tax breaks that were being considered for change, such as the ability of individuals to park up to $18,000 a year in pretax funds into 401(k) savings accounts.” It calls for leaving the top individual tax rate at 39.6%, but pushing the income threshold for that rate to $1 million for married couples. Already, one big element of the tax reform plan — capping deductions for mortgage interest for existing loans and newly purchased homes at $500,000, rather than the current $1 million — is causing some pushback, and the National Federation of Independent Businesses said it was unable to support the bill in its current form because it “leaves too many small businesses behind.” The GOP wants to pass tax reform by December, which is ambitious but doable. Advocates for the HTC and other programs will need to work in overdrive, because we’re about to enter an intense period of budget give and take. Get ready to grumble.

Publisher and Editor: Elizabeth McIntyre (emcintyre@crain.com)

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Well, Cleveland Browns fans, for the first time this fall, we can honestly say: At least the Browns didn’t lose this weekend. Bye weeks are a mercy for an 0-8 team so inept it couldn’t find a way to win even if spotted a 14-point lead. These are indeed dark days for Browns backers. The team sits at 1-23 under coach Hue Jackson. They’ve now found a way to lose on two continents. And the front office — otherwise known as the Gang That Couldn’t Shoot Straight — fumbled a trade because they failed to submit the necessary paperwork to the NFL before deadline. This seemingly never-ending nightmare, fittingly attired in Halloween orange and brown, is the cost that every business faces Elizabeth if they put an inferior product on the marMcIntyre ket. Consumers won’t buy it. And Browns fans, it appears, are reaching that point. Crain’s Kevin Kleps reported recently that, through four home games this season, the Browns are on pace for their worst year at the gate since 1984. Who can blame them from staying away from FirstEnergy Stadium? Since 1999, when the Browns returned after Art Modell took the team to Baltimore, Cleveland has had only two winning seasons in 19 years. They’ve gone through 27 quarterbacks since then. And if they lose the rest of the games this season, they’ll become only the fifth team since 1944 to go winless in the NFL for an entire season (a distinction they came perilously close to in 2016, when they pulled off a Christmas miracle by winning the penultimate game of the season.) Cleveland football fans are an incredible lot. Intensely loyal. Willing to withstand years of mediocrity for the promise that this year might be the one. Think about the hard-earned dollars that have been spent on PSLs, tickets, parking, merchandise and concessions. And for what? For the chance of seeing your team lose week after week? When a team has to give away Cedar Point tickets to entice fans to attend a game, you know you’ve got a problem. Lifelong fans apparently have had enough, relishing in the enjoyment found spending time with family and friends instead of watching Browns games on Sunday. Leaf-raking season is upon us. It sounds like a better Sunday than watching this futility. It doesn’t take a Weatherhead degree to tell you that when you’re putting an inferior product in front of consumers, and it starts to drive these consumers away, it’s time to change. Browns fans are making it clear they are not buying what the team is selling. Without a better product, they may never come back.

Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited. Send letters to Crain’s Cleveland Business, 700 West St. Clair Ave., Suite 310, Cleveland, OH 44113, or by emailing ClevEdit@crain.com. Please include your complete name and city from which you are writing, and a telephone number for fact-checking purposes. Sound off: Send a Personal View for the opinion page to emcintyre@crain.com. Please include a telephone number for verification purposes.


CRAIN’S CLEVELAND BUSINESS

Web Talk Re: Another lost season for the Browns As Jim Donovan told Crain's, the Browns are indeed a punch in the nose to fans. We've had 36 years of season tickets and are at the end of our collective rope. I don't care what anyone says, you need football people running a football team. — John Vranic I can't see any reason to pay attention to the Browns. Just think of how much more time and money you will have for your family or other useful pursuits if you stop buying tickets or watching them on TV. — Bob Fritz

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PA G E 11

Letter to the Editor Campaign highlights prevalence of sexual harassment and rape Crain’s Elizabeth McIntyre shared “A cautionary tale for boards� reminding us of boards’ responsibility to act should an executive sexually harass or abuse another. I wholeheartedly agree and add that doing “the right thing� goes much further than simply responding. Yes, if your executives behave badly, you have a legal, financial and ethical responsibility to do something. Your responsibility, as a human being, also includes work to prevent sexual harassment and abuse from occurring in the first place. Go on the record to let your employees and customers know where you stand. Don’t leave them guessing about the culture you aim to create or whether they will be believed if they share their experiences. Inherent among your audience members are survivors of all forms of sexual violence, with 1 in 3 women reporting sexual harassment in the workplace and 1 in 4 experiencing rape in their lifetime. They need to hear from you that harmful behavior will not be tolerated, that they will be believed if they choose to come forward and that you are committed to preventing abuse before it starts. It will be easier for you — and for survivors — to respond to incidents when it is crystal clear where you stand. Sondra Miller President & CEO, Cleveland Rape Crisis Center

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Focus

The Legal Aid Society of Cleveland’s executive director Colleen Cotter, left, meets with volunteer lawyers Tom Barnhard and Deborah Coleman to discuss the ACT 2 program, which connects retired or near-retirement attorneys with pro bono work, at the legal aid offices in Cleveland. (Peggy Turbett for Crain’s)

LEGAL AFFAIRS

It’s never too late to help

Legal Aid Society of Cleveland’s ACT 2 program coordinates pro bono cases between low-income individuals in need of legal help and late-career or retired attorneys By JEREMY NOBILE

system work for you.” While that’s one overall goal of legal aid groups in general — giving some balance to the poor and downtrodden on the scales of justice — ACT 2 is helping Legal Aid Society of Cleveland meet more of the lower income community’s unmet need for legal help, all while tapping into the expertise and networks of the region’s most veteran lawyers. “I believe broadly in the community that we have a duty to give back, especially with those of us who have managed to get through the system and succeed in our careers,” said Tom Barnhard, a 78-year-old ACT 2 volunteer. “This is a way for us to give back.”

jbobile@crain.com @JeremyNobile

In 2016, Deborah Coleman, a Cleveland attorney who largely focused on complex commercial litigation over a 38-year career at Hahn Loeser & Parks, used her experience in corporate law to help a local couple save their home. The couple bought the house in 2008 through an onerous land contract, sinking savings into improvements over the years only to face nearly losing it when they missed a few payments — which were on top of taxes for which they were responsible despite not actually owning the land on which the house sat. Coleman, who’s used to solving intricate business disputes for a highprice tag in the corporate world, not only renegotiated the land contract with more favorable terms, she had the home’s value adjusted downward, lowering the taxes in the process. Not only did she save the home, she made it newly affordable for the struggling family that would’ve never been able to cover the costs of legal help on their own.

Put to work Volunteer Tom Barnhard talks with a client at a legal aid free advice program. (Contributed photo)

“Now they’re hopefully on the road to getting a real mortgage,” Coleman said. “It’s very exciting to be able to make that difference for somebody.” While many lawyers will take on pro bono work, that case came to Coleman — who is 66, left HLP in 2013 and now runs her own practice in Coleman Law LLC — through the

nonprofit Legal Aid Society of Cleveland’s ACT 2 Project. The program coordinates pro bono cases between low-income individuals in need of legal help and late-career or retired attorneys interested in volunteering their time. They participate in free-advice clinics, take on pro bono cases and work in-house

with the Legal Aid Society. “This isn’t poverty law, by and large,” said Coleman. “It’s about the law as it impacts poor people. These are people who feel like the system was against them their whole lives — and it was. One of the things we as lawyers do here is say, there are people to help you in the system. We, perhaps, can make the

The ACT 2 project was launched in late 2015, financed by a two-year grant from the federal Legal Services Corp. of $214,566 and a $25,000 Encore Cleveland Prize from the Cleveland Foundation. The program was created to help meet the legal needs of poor Northeast Ohioans, but serves the dual purpose of putting these high-powered corporate attorneys who are at or near retirement to work for the needy. SEE LEGAL AID, PAGE 16


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CRAIN’S CLEVELAND BUSINESS

LEGAL AFFAIRS

Lawyers look to educate, inspire Cleveland’s youth By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com @ramccafferty

As a student at John Hay Early College High School in Cleveland, Brandon Brown said he had been interested in law, but only saw his community interact with the police and lawyers in an “adversarial” way. He knew the law was supposed to help individuals, but that hadn’t been the experience he saw in person. But learning about his rights from the volunteers in the Cleveland Metropolitan Bar Association’s 3Rs program helped change that perspective. “I felt like that knowledge was power,” Brown said. Cleveland’s bar association offers a variety of ways for members to give back, but the 3Rs program is its “hallmark,” said bar association executive director Rebecca Ruppert McMahon. The 3Rs program — which stands for rights, responsibilities and realities — is now run in 11th grade classrooms in the Cleveland Metropolitan School District and the East Cleveland City Schools. Volunteers teach six lessons in total on topics such as freedom of speech and legal search and seizure. 3Rs is a “pipeline program,” said Jessica L. Paine, director of community programs for the association, as the association wants to see more students in the districts in which it works continuing on to college and law school. About 300 to 400 volunteers — from public defenders to prosecutors to

paralegals — take part every year, Paine said. Last year, she said the program reached 74 classes out of the 79 total in its coverage area, noting that the other classrooms had access to the program’s materials. The goal is full coverage, and Paine is hopeful the program will reach it this year. To that end, the association also has mock trial programs at the middle school and high school levels, the Louis Stokes Scholars program for undergraduate students and the Minority Clerkship Program for law students, many of which are also focused on increasing diversity in the legal field. That approach worked for Brown, who would go on to be the first student in the program to graduate from law school. After taking part in 3Rs as a freshman and a sophomore, Brown got involved in the mock trial team and took part in the high school internship program, working at what’s now known as Tucker Ellis LLP during the summer. As a theater major at Oberlin College, he took part in the Stokes Scholars Program, and he participated in the Minority Clerkship Program while at Cleveland-Marshall College of Law. Brown graduated in May and recently learned that he passed the Ohio Bar exam. Brown said the relationships he formed with his mentors through the bar association’s programs were critical. As a 13-year-old, a lot goes in one ear and out the other, he said. But he would notice the type of people he wanted to be like. Volunteers in the 3Rs program are

able to help students focus on “what comes next,” said Michael N. Ungar, a partner at Ulmer & Berne LLP. “So it matters. It just matters to these students,” Ungar said. “You know when you’re making a difference. They’re not bashful.” The Cleveland Metropolitan Bar Foundation provides funding for the association’s programs, like 3Rs. In the last five years, the endowment has grown by about 65% to about $2.5 million, said Mitch Blair, president of the foundation. The 3Rs program, which has been in existence since 2005, focuses on teaching students their rights. But it also aims to share practical lessons like how to build a resume, and the debates that come up as part of the lessons help teach skills like logical reasoning. “The dividends pay a thousand times over, whether you become a lawyer or not, whether you go anywhere into the legal industry or not,” McMahon said. “They’re critical life skills that serve you well no matter where you go.” The 3Rs program demonstrates that law is a “living thing,” Paine said, not something set in stone. Students have rights and responsibilities, she said, but the government also has responsibilities to them. Paine said the program has almost added a fourth, unofficial “R” of remedies, teaching students what they can do if their rights are violated. For example, after the shooting of Tamir Rice, 3Rs added a lesson plan on how to act if confronted by the police. And in Ungar’s experience, it’s a

Volunteer Cassandra Manna of Roetzel & Andress with 3Rs students at the Thomas Jefferson International Newcomers Academy.

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PA G E 15

LEGAL AFFAIRS

Study: Legal intervention could bust down employment barriers By DOUGLAS J. GUTH clbfreelancer@crain.com

Volunteer Brandon Cox of Tucker Ellis with 3Rs students at Cleveland Early College High School. (Contributed photos)

lesson that engages the students. â&#x20AC;&#x153;Because those dos and donâ&#x20AC;&#x2122;ts may wind up saving your life. That was a very sobering moment for me, as I studied that lesson plan, because that isnâ&#x20AC;&#x2122;t something that Iâ&#x20AC;&#x2122;ve had to confront in my life, knock on wood. Thatâ&#x20AC;&#x2122;s not something my children have had to confront. Itâ&#x20AC;&#x2122;s something thatâ&#x20AC;&#x2122;s foreign to many, many of the volunteers who â&#x20AC;&#x201D; not all, but many of the volunteers â&#x20AC;&#x201D; who go in,â&#x20AC;? Ungar said. Gayle Gadison, social studies curriculum manager for the Cleveland Metropolitan School District, said the program has value for the districtâ&#x20AC;&#x2122;s students â&#x20AC;&#x201D; but also for the volunteers. The program lets the lessons students are learning be reinforced by real-life practitioners, Gadison said, but it also helps break down any negative, preconceived notions volunteers could have about Cleveland students.

A home, family and the opportunity for a lucrative career represent the American Dream desired by many. However, those basic rights are often elusive for individuals unable to find steady work due to mental illness, homelessness and other reasons often out of their control. A recent study from the Legal Aid Society of Cleveland, funded by the Deaconess Foundation, cites the use of legal means as a powerful strategy in securing economic stability for Northeast Ohioâ&#x20AC;&#x2122;s most disadvantaged citizens. The 68-page report, published last year, outlines common barriers to employment and the legal tools needed to repair a system that, for many underrepresented job seekers, is fundamentally damaged. As criminal history and lack of transportation have poverty at their root, a clear pathway to a living wage can assist individuals in bypassing these and other roadblocks, the study said. Ideally, using legal aid resources will not only put Clevelanders to work, but more importantly allow them a chance for advancement. â&#x20AC;&#x153;Teaching people about resume development and how to dress for work is valid, but if you get someone a job and theyâ&#x20AC;&#x2122;re having trouble keeping it, there are other issues at play,â&#x20AC;? said Legal Aid Society attorney and study author Julie Cortes. Helping would-be hires requires attention from an ecosystem of people and organizations, study proponents said. Civil legal aid lawyers and

â&#x20AC;&#x153;Teaching people about resume development and how to dress for work is valid, but if you get someone a job and theyâ&#x20AC;&#x2122;re having trouble keeping it, there are other issues at play.â&#x20AC;? â&#x20AC;&#x201D; Legal Aid Society attorney and study author Julie Cortes

other members of the Cleveland legal community can fight employment barriers via direct client representation, systemic advocacy and client/stakeholder education. Direct representation, for example, may boost the prospects of a barber with a criminal record who wants to get a beauticianâ&#x20AC;&#x2122;s license. A lawyer could have the barberâ&#x20AC;&#x2122;s criminal record sealed in court proceedings so their history â&#x20AC;&#x201D; depending on the severity of the crime â&#x20AC;&#x201D; no longer shows up on a background check. Another option is a Certificate of Qualification for Employment, or CQE, a state-legislated document allowing employers and licensing boards to hire or award professional licenses to people previously excluded from consideration. Representing a client before a judge or administrative proceeding is just one form of representation, noted Allison Rand, vice president of grantmaking and strategy at Deaconess Foundation, a private foundation in Cleveland committed to helping Cuyahoga Countyâ&#x20AC;&#x2122;s disadvantaged residents find and keep jobs. Legal intervention also takes the form of advocacy directed at infrastructural change or providing legal education to clients or regional stakeholders.

To address problems caused by a lack of transportation, an attorney could support systemic alternatives to using driverâ&#x20AC;&#x2122;s license suspensions for missed court dates. Meanwhile, hosting community presentations about the pitfalls of title loans would allow consumers to make informed decisions about the use of those loans. Clearing pathways represents a fundamental shift for the foundation, Rand said. In recent years, the organization sharpened its focus to explore the hurdles many jump to find better work opportunities. â&#x20AC;&#x153;We thought there would be specific, straight-ahead legal problems, but thatâ&#x20AC;&#x2122;s not the case,â&#x20AC;? Rand said. â&#x20AC;&#x153;Housing, transportation and child care are all challenges that interfere with workforce success. This report laid out how difficult it is to get past those barriers in a way that opens up real opportunities to succeed.â&#x20AC;? Nor is entry-level work the end-all answer, particularly in a state where 34.3% of the population lives at or below 200% of the poverty level, according to 2014 statistics compiled by to the Legal Aid Society. â&#x20AC;&#x153;We went from an â&#x20AC;&#x2DC;employment entryâ&#x20AC;&#x2122; foundation to becoming interested in career pathways and an es-

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tablished route to a family-sustaining wage,â&#x20AC;? Rand said. â&#x20AC;&#x153;Legal and non-legal interventions are an important aspect of barrier removal along all levels of the continuum.â&#x20AC;? There is no coordinated system overseeing the intervention process locally, but partnerships do exist between agencies trying to reach the unemployed or underemployed. Towards Employment, an organization bridging job gaps and removing work impediments for people involved in the criminal justice system, has referred clients to the Legal Aid Society, a relationship reciprocated through client-centric â&#x20AC;&#x153;know your rightsâ&#x20AC;? training sessions quarterbacked by the legal agency. Towards Employment staff members, among them a pair of attorneys, also assist workers with driverâ&#x20AC;&#x2122;s license recovery, credit debt and any number of legal issues. Considering there are about 1.9 million Ohioans with a criminal record â&#x20AC;&#x201D; per Ohio Justice & Policy Center statistics â&#x20AC;&#x201D; simply calling this demographic unhireable is detrimental to the stateâ&#x20AC;&#x2122;s economy, said Bishara Addison, senior manager of policy and strategic initiatives at Towards Employment. â&#x20AC;&#x153;If we donâ&#x20AC;&#x2122;t give this population access to employment, weâ&#x20AC;&#x2122;re missing out on a significant talent pool,â&#x20AC;? Addison said. Stereotypes of the unemployed population as lazy or shiftless are not only ignorant, theyâ&#x20AC;&#x2122;re dangerous, said Cortes of the Legal Aid Society. Ultimately, moving the underserved up the economic ladder through intervention can raise up an entire community.

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“There is clearly a demand that volunteers want to help us more. We thought, here’s this cadre of potential volunteers that if we don’t design something especially for them, we will not be able to engage them,” said Colleen Cotter, executive director of the Legal Aid Society of Cleveland. “And that’s a huge resource in our community lost.” The funding helps create a support system that these attorneys otherwise wouldn’t have, be that office space, help running docket or simply guidance on how to navigate niches of the law attorneys may not be as familiar with. “You can’t just give them a case and expect them to run with it. You need that level of support attorneys have had all through their careers in their office that they may not have now,” said Ann Porath, who manages volunteer attorneys for the Legal Aid Society of Cleveland. “Do they need someone to run docket for them? Tech support? A space to work in? This gives them someone they can call for help.” Among other things, that support system provided an interpreter for Coleman to help aid a Hispanic couple that barely spoke English. There’s benefits for the attorneys as well. Beyond merely keeping busy late in their careers, many volunteers say they’re learning new areas of the law and other skills. Barnhard, for example, used to turn over anything dealing with technology to someone else at his firm prior firm, but now he does more of that work himself. “I’m learning things I should’ve learned 20 years ago,” he said, “and practicing in areas I’ve never worked in before.” Like Coleman, Barnhard — who

(Peggy Turbett for Crain’s)

“You can’t just give them a case and expect them to run with it. You need that level of support attorneys have had all through their careers in their office that they may not have now.” — Ann Porath, who manages volunteer attorneys for the Legal Aid Society of Cleveland

serves Ogletree Deakins in an of counsel role — has long volunteered with legal aid. But the program is giving these volunteers a better support system and more resources for resolving cases. “I’ve gone from having one (legal aid) case sometime to having at least one all the time,” Coleman said. “And I’ve had either three or four going at the same time at some peaks.” Legal aid cases widely vary in scope, but many tend to involve labor and employment disputes — Barnhard’s area of expertise — or

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landlord/tenant disagreements. Some attorneys appreciate practicing law they’re not familiar with. Yet, for others, the idea of getting a case outside their comfort zone can be a hurdle to overcome in recruiting other volunteers. But as Coleman and Barnhard emphasize, the legal aid support system and ACT 2 program provides the help any volunteering attorneys might need. Coleman notes that while she’s not an expert in veteran law, legal aid has someone who is. “That type of case is no something I’d maybe choose to take on. But if there’s an acute need, I’d feel more comfortable taking that on when I know I have this gentleman for assistance,” she said. “If I hadn’t met him through this network, I wouldn’t know where to turn.” But handling cases outside one’s historical area of practice really shouldn’t be a concern. “At the bottom, you’re helping people solve problems,” Coleman said. “And that’s really what lawyers are trained to do.” There have been some unintended benefits as well. By plugging in veteran attorneys to pro bono cases, many end up being resolved faster than anyone expected because oftentimes the lawyers end up knowing each other or the judges involved. “This has all worked as good or better as any similar project around the country,” Cotter said. “And it’s worked better than anyone thought it would.”

Future of ACT 2 Through June 2017, legal aid reported that the ACT 2 Project specifically has engaged 67 attorneys, with volunteers giving some 3,900 hours of service impacting 812 clients. All that work involves cases that may not have otherwise been addressed. That kind of impact helped the Legal Aid Society of Cleveland land a second LSC grant in September of $165,525. The grant is one of 15 issued from the LSC's competitive $4 million Pro Bono Innovation Fund, which is intended to encourage and expand pro bono efforts and partnerships to support more low-income clients. It’s estimated the sustainability grant will support the program

through 2019, helping to serve some 1,500 additional clients and engage another 50 volunteers. When the grant expires, legal aid will have to fund the program itself. “We have two years to develop more partnerships and show off what we’ve been able to achieve,” Cotter said. “That is why I’m very optimistic our philanthropic community will step forward and support it.” The ACT 2 Project is all the more important when considering how much the need already outpaces what legal aid can provide. Cotter said more than half of everyone who comes to the Cleveland legal aid group alone is turned away because of finite resources. Earlier this years, President Donald Trump lumped in the LSC, which funnels dollars to legal aid groups across the country, with other government organization slated for defunding. If that happened, legal aid groups in Cleveland and Akron would see 30% of their funding disappear. Moves like that make legal aid groups worry how they might plug any gaps that might appear. But the value in legal aid and programs like ACT 2 should be apparent. “One attorney in the ACT 2 program leverages scores of volunteer attorneys,” said Coleman, who also chairs an advisory committee for the project. “The return on investment is huge. And that’s really the power of this. All these formerly high-priced attorneys are volunteering their time and decades of expertise and solving problems. The leverage is amazing.” Volunteers are eager to keep working and hopeful the program continues for many years to come not just because it keeps them busy, but because of the good it can do for the community. “We’re a nation of laws. Nazi Germany was a nation of laws. But we’re also a nation of justice,” Barnhard said. “It’s important that the people in this country feel they can get justice in the community. When you’ve got people, especially poor people, who don’t feel they are being treated fairly, that’s a danger to the community. In a bigger global sense, it’s important for our system that people feel they can get the law on their side. That’s what we’re trying to do here. And the impact is huge.”

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35th Anniversary

35th Anniversary

CLEVELAND BUSINESS VOL. 36, NO. 47

NOVEMBER 23 - NOVEMBER 29, 2015

ALLYSON O’KEEFE, 37 Partner; Porter Wright

35th Anniversary

CLEVELAND BUSINESS

VOL. 36, NO. 47

NOVEMBER 23 - NOVEMBER 29, 2015 Allyson O’Keefe started her legal career at Porter Wright in 2004 after completing a summer internship there as a Case Western Reserve University law student. Since then, she has worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been promoted to real estateALLYSON partner. O’KEEFE, 37 “Young professionals who live downtown are so excited about the city,” said O’Keefe, a Partner; Porter Columbus native who lived downtown forWright 10 years before moving to Rocky River. “The ones who aren’t from here are often more excited about it. When you move here from somewhere else, you don’t for granted.” VOL. 36, NO. take 47 it Allyson NOVEMBER 23 - NOVE NOVEMBER EMBER 29, 29, 2015 201 O’Keefe started her legal career at Porter Wright in 2004 after completing a sumWhen O’Keefe is not working or spending time with her husband and two children, she can mer internship there as a Case Western Reserve University law student. Since then, she has be found volunteering on the boards of nonprofit organizations and watching college football. worked on many significant deals across Cleveland, including Flats East Bank, The Metropolitan at the 9, Uptown in University Circle and Steelyard Commons, and has been proWHAT INSPIRES YOU ABOUT YOUR WORK? moted to real estateALLYSON partner. O’KEEFE, Just seeing what Cleveland has gone through in the time that I’ve 37 been here, there’s obvious“Young professionals who live downtown are so excited about the city,” said O’Keefe, a ly a lot of excitement around real estatePartner; development. I started in 2004 when we were crazy Porter Columbus native who lived downtown for Wright 10 years before moving to Rocky River. “The ones busy with development. That was sort of the boom from ’04 through ’08. I saw it go through who aren’t from here are often more excited about it. When you move here from somewhere the downturn, then I saw it rise again, even stronger than before locally. else, you don’t take it for granted.” Allyson O’Keefe started her legal career eer at Porter Wright in 2004 after comple completing etin ng a sumsumWhen O’Keefe is not working or spending time with her husband and two children, she can mer internship as a Case Western Reserve University law student. Since tthen, hen, she sh he has has WORKED ON there ARE MIXED-USE URBANnPROJECTS. IS MANY OF THE PROJECTS YOU be found volunteering on the boards of nonprofit organizations and watching college football. worked on many significant deals across ss Cleveland, including Flats East Bank, The The THAT AN AREA OF EXPERTISE? Metropolitan at the 9, Uptown in every University and Steelyard Commons, and rsity d has has ha s been be een proproro Yes, definitely. Real estate is extremely interesting because deal Circle is differWHAT INSPIRES YOU ABOUT YOUR WORK? moted to real estate ent. You can never get bored because there’s so partner. much variety there, from tax Just seeing what Cleveland has gone through in the time that I’ve been here, there’s obviousown are O’Keefe e, a “Young who live downtown so excited about the city,” said O’Keefe, credits to historic renovations, from professionals ground-up development to rehab, from ly a lot of excitement around real estate development. I started in 2004 when we were crazy Rive er. “The “T “The ones ones mixed-use to residential. Columbus native who lived downtown for 10 years before moving to Rocky River. busy with development. That was sort of the boom from ’04 through ’08. I saw it go through who aren’t from here are often more excited xcited about it. When you move here from m somewhere som somew ewhere ere the downturn, then I saw it rise again, even stronger than before locally. else, you LEADERSHIP don’t take it for granted.” YOUR STYLE? HOW WOULD YOU DESCRIBE

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O’KeefeI expect is not working or spending timeI work, children, she can with her husband and two child dre en, sh he c he an I definitely believe in leadingWhen by example. the people withding whom MANY OF THE PROJECTS YOU WORKED ON ARE MIXED-USE URBAN PROJECTS. IS be found volunteering on the very boards off nonprofit and watching college collle eg ge football. foo fo ottball. my associates, to work hard, and they see me working hard. For me, it’sorganizations all THAT AN AREA OF EXPERTISE? about working hard and doing good work. Yes, definitely. Real estate is extremely interesting because every deal is differWHAT INSPIRES YOU ABOUT YOUR WORK? RK? ent. You can never get bored because there’s so much variety there, from tax hrough here e’s o bviousus Just WHAT seeingWAS whatITCleveland has gone the time that I’ve been here, th there’s obviousLIKE TO WORK WITHthrough O’KEEFEinON WHAT OTHERS ARE SAYING: credits to historic renovations, from ground-up development to rehab, from ly a lot of excitement around real estate te development. I started in 2004 when we we were were e crazy crazy THE FLATS EAST BANK PROJECT? mixed-use to residential. busy with development. of the boom from ’04 through ’08. I saw itt go go through th hrough “Allyson is extremely bright and quick witted, butThat whatwas trulysort distinguishes her the downturn, then I saw itpeople rise again, even from most successful attorneys is her exceptional skills. Shestronger has an than before locally. HOW WOULD YOU DESCRIBE YOUR LEADERSHIP STYLE? uncanny ability to encourage the ‘adversaries’ in her negotiations to work in I definitely believe in leading by example. I expect the people with whom I work, OF THE PROJECTS YOU YOU WORKED Wsaid ORKED ON ON ARE ARE MIXED-USE MIXED-USE URBAN URBAN PROJECTS. PROJECTS. IS IS concert with her to achieve win/win MANY solutions to difficult problems,” my associates, to work hard, and they see me working very hard. For me, it’s all THAT AN AREA EXPERTISE? TISE?of the Scott Wolstein, CEO of Starwood Retail Partners andOF co-developer about working hard and doing good work. e is extremely interesting because every deal deal is differdifferrYes, definitely. Real estate Flats East Bank project. ent. You can never get bored there, red because there’s so much variety the ere, ffrom rom m ttax ax — Lee Chilcote WHAT OTHERS ARE SAYING: WHAT WAS IT LIKE TO WORK WITH O’KEEFE ON credits to historic renovations, tions, from ground-up development to rehab, re ehab, from fro om THE FLATS EAST BANK PROJECT? mixed-use to residential. “Allyson is extremely bright and quick witted, but what truly distinguishes her

successfulInc. attorneys is reserved. her exceptional people skills. She has an Reprinted with permission from the Crain's Cleveland Business. © 2015from Crainmost Communications All Rights YOU DESCRIBE RIBE YOUR YOUR LEADERSHIP LEADERSHIP STYLE? STYLE? HOW WOULD ability to encourage the ‘adversaries’ in her negotiations to work in Further duplication without permission is prohibited. Visituncanny www.crainscleveland.com. #CC15040

I definitely believe in leading ding by example. I expect the people with h whom whom m I work, rk concert with her to achieve win/win solutions to difficult problems,” said my associates, to work hard, and they see me working very hard hard. all d. For For me, me e, it’s a Scott Wolstein, CEO of Starwood Retail Partners and co-developer of the about working hard and doing good work. Flats East Bank project.

— Lee Chilcote YING: WHAT WHAT WAS WAS IT IT LIKE LIKE TO TO WORK WORK WITH WITH O’KEEFE O’KEEFE ON ON WHAT OTHERS ARE SAYING: THE FLATS EAST BANK PROJECT? PROJECT? “Allyson is extremely bright right and quick witted, but what truly distinguishes dis stin nguish hes her hes

successfulInc. attorneys her exceptional people skills. skills s. She She has has an ha Reprinted with permission from the Crain's Cleveland Business. © 2015from Crainmost Communications All Rightsisreserved. ourage negotiatio ons to to work w wo orrk k in n ability to encourage the ‘adversaries’ in her negotiations Further duplication without permission is prohibited. Visituncanny www.crainscleveland.com. #CC15040

hieve win/win solutions to difficult probl bllem ms,” s,” said concert with her to achieve problems,” co-deve evel velo ve elo el ope pe er off the the e Scott Wolstein, CEO off Starwood Retail Partners and co-developer ct. Flats East Bank project. — Lee Le Chilcote Ch C

Reprinted with permission from the Crain's Cleveland Business. © 2015 Crain rain Communications nss IInc. Inc nc. nccc. All n Al Rights Rig rese reserved. rved d. Further duplication without permission is prohibited. Visit www.crainscleveland.com. ww.crainscleveland. and.c nd d.ccom. o om. m #CC15040

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CRAIN’S CLEVELAND BUSINESS

LEGAL AFFAIRS

Q&A: Kelly Tompkins

Executive vice president, COO, CFO and chief legal officer; Cleveland-Cliffs Inc. Access to justice has long been a mission for Kelly Tompkins. Now serving as, among various other roles, the chief legal officer at Cleveland-Cliffs Inc., a company he joined following 14 years as general counsel for RPM International Inc., Tompkins regularly advocates for support of Northeast Ohio’s legal aid network, promoting pro bono work to lawyers and encouraging the wider business community to support it philanthropically. While serving as president of the Cleveland Metropolitan Bar Association in its 2005-2006 year, becoming just the second corporate counsel to serve that role in the group’s 132-year history at the time, Tompkins led his agenda with a heightened focus on enhancing the pro bono ecosystem. Crain’s sat down with Tompkins to talk about the purpose a strong legal aid network serves in society and why it’s so critical for not just lawyers but the wider community to channel their support behind improving access to legal justice for those who often need it most. — Jeremy Nobile Being a corporate lawyer, you're not be as beholden to pro bono expectations as other attorneys. Why is access to justice so important to you? I still have a passion for the law and a desire to advocate for the justice system, including organizations like legal aid because they are foundational to society at-large. While I can’t work on a legal aid case because I’m not active, I try to be an effective spokesperson. Why the focus on pro bono work when you led the CMBA? Were people not as engaged? People were engaged, but I was

coming at it as an in-house lawyer. I wanted to try to remind my colleagues that while we’re in-house, we’re still members of the broader profession. I found that a lot of my peers who practice inside corporations wanted to have the stature of their colleagues in big law firms, but for some reason they almost felt like they didn’t have to do the pro bono stuff. While that’s not the case across the board, there was a sense that in-house practices were becoming too insular and not as connected as much as they should be to their broader professional obligations. I wanted to get people to think about it less as an obligation

but simply as part of their responsibility to the rest of the community. Why should businesspeople in general care if local legal aid groups are strong and effective? This really goes back to access to justice being the foundation of society. Take Cleveland right now. We’re on an upswing. But we all know if you try to put a third-story addition on a house and the foundation is not solid, it may look good for a while, but eventually it’s going to fall apart. To me, I view legal aid and the fact there is an unmet need for legal help among the working poor in our community as being no different than the quality of the Cleveland public school system, or the quality of some inner-city neighborhoods: without those things at the foundation, everything else will fall apart. And legal aid groups themselves often do more than just the more obvious service of providing legal help to the needy, don’t they? What’s often the case is, for a legal aid client who presents themselves with an issue, that’s often the tip of the iceberg. Maybe that person comes with a legal need, but actually has a transportation need or some other human service. Like the way the United Way can be a portal for other social service needs, legal aid can be a kind of social service triage of its own.

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As a lawyer, while you may check the box for your pro bono obligations through legal aid, you might also be helping that person connect with other points of social support. Is it hard for some folks, perhaps the affluent, to wrap their heads around the importance of this? So I sit here as a general counsel, and I use my financial resources as a weapon. I know that if I’m litigating against another party, I can use my balance sheet and my financial resources to grind down the other side. I use these financial resources to leverage the justice system. In the business community, people are not wired to think of financial resources and capacity as being an impediment to accessing justice. So people might not think about that. But the fact is, there are people here who can’t access justice because of a lack of these resources. What can we do to get more lawyers involved in community service? For one, fear by in-house lawyers to participate in legal aid is something I’ve tried to debunk. Some lawyers may fear signing up for a legal aid case because they think it’s going to be tied up in the courts for years. That’s not necessarily the case at all. Buy beyond that, they come up with these brief advice and referral clinics where in-house lawyers can team up with law

firms to spend a few hours at a legal clinic. Then, let’s say you’re an M&A partner who knows nothing about landlord-tenant law, but that’s a dispute you take on. Some people will worry about that. But even if you don’t know those laws, the staff attorneys at legal aid will bring that expertise. I try to break down that fear factor. And it’s funny because you could have this in-house lawyer who’s perfectly comfortable walking into a board meeting and giving an update on litigation, but they’re scared to death to go to legal aid to sit down with a client. They shouldn’t be. A lot of what you’re sharing feels like a call to action for the legal community. Equal justice under the law is something we always talk about. And if we as the legal community don’t carry that mantle, we can’t expect non-lawyers and our community to do that. Our profession has to own it. We are uniquely not only situated to do it, but professionally obligated to do it. If we don’t, who will? And I bring it all back to Cleveland. We’re on the rise. There’s a lot of momentum here. But are we putting on that third story on the foundation of a justice system that might already be teetering a bit? We need to support this. And I don’t get the sense that funding for legal services is going to be a high priority in the (Donald) Trump administration.

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Putting together the pieces to grow your wealth portfolio 4

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Secure your legacy

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ESTATE PLANNING

S2 November 6, 2017

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President,s Letter

Estate Planning Council offers multi-disciplinary expertise to guide you down a path toward financial security, family stewardship BY EMILY SHACKLETT

T

he Estate Planning Council of Cleveland is pleased to once again partner with Crain’s Cleveland Business in presenting our annual estate planning special section. The purpose of this section is to provide the community with timely information and valuable resources reflecting our multi-disciplinary approach to planning including financial, insurance, business succession, and estate and charitable planning matters. The articles and commentary on the pages that follow have been provided by some of the region’s most experienced professionals in these fields. They may help you to address your financial and estate planning concerns, or spur further discussion with your team of advisers. Estate planning is an often overlooked aspect of personal financial management. Millions of Americans do not have a current estate

plan and medical directives in place, leaving them vulnerable in the event of unexpected illness, accident or untimely death. Committing a modest amount of time to executing these important documents can save time, expense and hardship for families, loved ones and businesses. The recent hurricanes and wildfires that have deeply affected so many families around the world Shacklett are a poignant reminder that life can change at any time and we must prepare ourselves and our families for that possibility. Since the changing of the administration in Washington D.C., there has been much discussion about estate and income tax reform and the possibility of tax cuts for both individuals and businesses. For most of the year, experts have speculated

about the prospects, but recently, U.S. stocks hit record highs again as news came that the U.S. Senate adopted a fiscal 2018 budget resolution clearing the path for potential tax reform. With the ever-changing political and economic landscape, it is imperative that people protect and preserve the assets they have spent a lifetime building. It is wise to seek and rely upon the advice of experienced professionals who are familiar with income, gift and transfer tax laws and have expertise in making prudent financial and investment recommendations. Plenty of such experienced professionals make up the membership of the Estate Planning Council of Cleveland. They are prepared to help you evaluate how your personal financial goals could be affected by the changing tax, economic and legislative environment, as well as geopolitical risks. These professionals will provide

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Whether it’s retiring in comfort, educating your children or grandchildren or helping your loved ones, being able to live those values and fulfill your dreams lies in setting goals and carefully planning a course of action.

ance agents, appraisers and representatives from charitable organizations. Our members are committed to their clients and their community and are able to provide you with the assistance you will need to safeguard your financial future. Our website, www.epccleveland. org, is a valuable resource that can help you to identify the professionals you will need to assist you with your unique situation. We are pleased to present you with this special section in Crain’s Cleveland Business, which contains important insights and commentary on a variety of estate planning issues. We hope that you will find it to be an indispensable resource as you work with your advisers to plan a sound financial future. Emily Shacklett is a partner and senior advisor at Fairport Asset Management. Contact her at 216-431-2738 or emily.shacklett@fairportasset.com.

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Tax Planning Business Succession Planning

a wide array of planning services to address the complexities of your financial life and guide you toward a path of financial independence. They will assist you in making sound financial decisions to propel you toward your estate and financial planning goals. Perhaps you have family members with special needs. You may have a family business that you wish to transfer to a future generation or prepare for sale. Maybe you have charitable legacies that you wish to fulfill. The members of the Cleveland Estate Planning Council can help you with the advice, tools and techniques that will enable you to attain these and other goals. Founded in the 1930s, the Estate Planning Council of Cleveland is composed of more than 400 members working in the Greater Cleveland area, including attorneys, accountants, bankers and trust officers, financial planners, insur-

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ESTATE PLANNING

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Bloodline trusts need to flex for future generations BY LACIE O’DAIRE

C

lients with children are faced with difficult estate planning decisions that sometimes necessitate a crystal ball to see into the future. A bloodline trust is often used to help minimize the uncertainty about the future and put clients at ease about the inheritance they are leaving their children. A bloodline trust (sometimes called a dynasty trust) can be drafted to keep assets in the bloodline of a family and away from creditors, as well as the exspouse of a beneficiary or spendthrift beneficiaries. The trust, rather than distributing

Estate Planning outright to children or grandchildren, continues to be held for future generations until it is too small or impractical to administer. It can essentially go on forever, so it is important that the trust be thoughtfully drafted to prevent unintended consequences. There are many provisions that require careful consideration, including the one regarding what happens to the trust upon each beneficiary’s death. Clients need to consider permitting a

beneficiary to have a limited power of appointment to combat unexpected circumstances, even though it may seem counterintuitive. For example, it is possible that a beneficiary may decide not to marry or to have children. Generally, a bloodline trust would reallocate a childless O’Daire beneficiary’s share to his or her surviving siblings or their children upon the beneficiary’s death. Perhaps this may be the desired result for some clients, but the trust could include a power of appointment that would allow bene-

ficiaries to appoint in their last will a portion of or their entire trust share to a spouse or partner to prevent an undesired financial hardship. The power of appointment could also be drafted to provide that a charity or a specific lineal descendant of the client be appointed the remaining trust property. As another example, consider a beneficiary who may have a lineal descendant with substance abuse issues, financial irresponsibility or income-based government assistance. Or, perhaps, the lineal descendant is estranged from the family. A limited power of appointment would allow the beneficiary to appoint trust property

away from the lineal descendent to another lineal descendant or a charity. This allows a beneficiary to essentially make changes to the trust to alter the trust for changed or unforeseen circumstances. If done properly, a bloodline trust can protect a family’s inheritance but also provide flexibility to adapt to the specific circumstances of future generations. Lacie O’Daire is a partner in the Tax & Wealth Management Group of Cleveland-based Walter | Haverfield. Contact her at 216-928-2901 or lodaire@walterhav.com.

End-of-life planning is key to ensure wishes are met BY MARY EILEEN VITALE

E

nd-of-life planning is essential to making sure your wishes are carried out not only at your date of death but beyond. Taking care of financial matters and personal affairs will also give your family peace of mind. The following include steps to take to assure you attain your desires:

COMPLETE AND UPDATE NECESSARY LEGAL Vitale DOCUMENTS:

Complete or update a will (and trust, if necessary) to direct the disposition of your assets. Keep the originals in a safe place that is known to and accessible by family members. Choose executors and trustees who are capable of acting to carry out your wishes. If you have

Estate Planning minor children, name custodians for them and trustee of assets for their care. Individuals named in these roles need not be the same person. Execute and update living wills and health care durable powers of attorney to provide instructions for your care in the event of your incapacity. Different states may have differing forms. If you have relocated, make sure this is up to date for the state of your residence. Re-title assets to the name of your revocable trust if one is in place in order to avoid probate on these assets and allow for an orderly transfer.

MAKE SURE THE RIGHT PEOPLE ARE IN PLACE:

Execute a durable general power of attorney (POA) to authorize an

agent to act on your behalf concerning financial matters. Review beneficiaries on assets that transfer directly to named beneficiaries such as life insurance, annuities, retirement plans and IRAs.

CONSIDER GIFTS, HEIRLOOMS: Consider specific bequests of personal property such as artwork and family heirlooms. Also consider charitable gifts.

MAKE LISTS: Prepare a list of advisers with their

contact information. Provide this information to your named executor, successor trustee or other trusted individual, as well as a copy of POAs, wills and trusts. Also prepare a list of financial assets with documentation of their location, as well as social security or pension plans that may provide death benefits. Be sure to provide a list of instructions for your executor including locations of safe deposit boxes, post office boxes, safes and combi-

nations for all. When it comes to funeral arrangements, consider preplanning and paying for burial arrangements. Be sure to notify family of the arrangements made. Taking care of the details early allows you to relax knowing your desires will be met. An estate is affected positively by doing your homework now. Mary Eileen Vitale is principal at HW&Co. Contact her at 216-378-7210 or vitale@hwco.com.

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S4 November 6, 2017

SPONSORED CONTENT

Keeping the champagne on ice Ohio law ups age limit on custodial accounts for minors Estate Planning

BY JOSEPH M. FERRARO and SUSAN L. RACEY

O

hio law now allows a donor to direct a custodial account for a minor to be held until the beneficiary turns age 25. An account established prior to this change, and irrespective of its value, is required to be distributed to the beneficiary at age 21 — giving the beneficiary much reason to celebrate and parents cause for headaches. The recent change will help to alleviate these concerns in the future by allowing the custodian to manage the account until the beneficiary is through

college and early adulthood. In order to delay the payout of the account to the beneficiary after age 21 (but not beyond age 25), the donor will have to specify the later age at the time the account is established. If a later age is not specified, the account must be paid out at age 21. The new law applies to accounts created after April 6, 2017, so existing accounts will not be able to be held beyond age 21.

Ferraro Racey The new law provides a limited right for the beneficiary to withdraw the account at age 21, which allows a donor’s transfer to the account to qualify for the gift tax annual exclusion (currently $14,000 per year, per donee). However, the donor can elect to not give the beneficiary this right and the custodian has no obligation to notify

the beneficiary of such right. As previously allowed, the donor or custodian may designate successor custodians, avoiding probate court involvement upon the custodian’s death or inability to serve. These recent changes have made custodial accounts more practical and flexible gifting tools. For some beneficiaries, the champagne flutes will just have to stay on the shelf for a few more years. Joseph Ferraro is an associate in the Tucker Ellis Estates, Trusts & Probate Group. Contact him at 216-696-5872 or joseph.ferraro@tuckerellis.com. Susan Racey is a partner in the Tucker Ellis Estates, Trusts & Probate Group. Contact her at 216-696-3651 or susan.racey@tuckerellis.com.

W

hen the time comes to settle an estate, those involved hope there has been some thoughtful planning and that everyone can work together cordially. When it comes to the distribution of personal property, things can become difficult. Even the best plans, however,

Estate Planning may not take into account some of the less-obvious assets. While the cars, artwork and jewelry are easy assets to identify, other categories require a seasoned eye. Folk art is one of

We make families our business.

those fields that even renowned experts have a hard time accurately evaluating. Within the last year, a grotesque face jug that had been evaluPinney ated on the Antiques Roadshow for $30,000 to $50,000 was later identified as a 1970s school art project valued at $3,000 to $5,000. What makes folk art so valuable is also what makes it difficult to evaluate: its naiveté. Created by self-taught, untrained artists, folk art often results in childlike representations of the world that many see as ugly. While there are museums dedicated to its preservation and high prices can be realized for exceptional pieces, it’s not something that’s on everyone’s radar. The realm of folk art covers many items you may find

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GRATitude Low interest rate environment ideal for establishing a grantor retained annuity trust BY HOWARD ESSNER

A

in an estate: antique advertising, early textiles (samplers, quilts, coverlets), weathervanes and painted country furniture, to name a few. Historical ephemera are another tricky subject you may encounter when searching through those boxes of paper in the attic. While it can seem daunting to leaf through each page, attempting to decipher century-old script, the results can be worthwhile. There are hundreds of thousands of letters from Civil War soldiers, but a firsthand account of the Battle of Gettysburg outweighs a letter describing the weather and the condition of one’s boots. Some things that may need an expert to separate the wheat from the chaff include letters and signatures, antique photographs, advertisements and posters for famous events and entertainers, and old newspapers. An item’s value is a moving target and often the source of much discord. It’s important to get outside opinions to make sure nothing is overlooked and to realize the best result for your client.

grantor retained annuity trust is an estate tax planning technique designed to allow the intergenerational transfer of assets with little or no estate or gift tax liability. It is particularly powerful in today’s low interest rate environment. To establish a GRAT, the grantor transfers assets to an irrevocable trust, but retains an annual annuity payment, typically over a term of years. Assets remaining in the GRAT after the last annuity payment has been made are transferred to the beneficiary (heirs Essner or another trust). For tax purposes, the amount of the gift into the GRAT is the value of the assets transferred, plus a theoretical interest rate, minus the annuity payments paid back to the grantor. If the grantor sets up the trust so that the annuity payments equal the value of the assets transferred to the GRAT plus the theoretical interest, the transfer to the trust would have a zero value for estate and gift taxes. As long as the assets in the trust provide an investment return greater than the theoretical interest rate (2.4% for September 2017), there will be assets in the trust at the end of the term, and these assets will transfer to the beneficiary free of further estate or gift taxes. During the life of the GRAT, the grantor also pays the income tax on the taxable income of the GRAT, also a good estate planning strategy. There are two major risks. First, if the donor does not survive the term of the GRAT, the assets in the GRAT are brought back into his estate. Second, the trust assets might not produce returns in excess of the imputed interest rate, in which case the annuity payments will exhaust the GRAT. In both cases, the grantor is no worse off, other than the legal cost of establishing the GRAT.

Carrie Corrigan Pinney is business manager at Cowan’s Auctions Inc. Contact her at 216-292-8300 or carrie@cowans.com.

Howard Essner is managing director and family wealth advisor at Ancora. Contact him at 216-825-4000 or howard@ancora.net.

Consult expert opinions to legitimize folk art’s value BY CARRIE CORRIGAN PINNEY

Estate Planning


ESTATE PLANNING

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The decanting option Trustees can improve a trust’s vintage Estate Planning

BY LINDA M. OLEJKO

M

ost of us think of irrevocable trusts as being set in stone. The trust document, together with state and federal law, defines the beneficiaries, trustees, terms of distribution, tax consequences and many other things. Sometimes those terms no

longer correlate well with modern family or investment needs and tax law. Decanting is an act undertaken by a trustee to solve these perceived prob-

lems. The trustee of the existing trust creates a new trust. The assets from the existing trust are “poured” into the new trust, just as wine is poured from a wine bottle into a new vessel. The new trust is similar to the old trust but may, for example, correct drafting errors, update administrative Olejko terms, modernize investment options or, in some cases, add a general power of appointment to create a stepped-up income tax basis at a beneficiary’s death.

November 6, 2017 S5

Ohio is one of 26 states that have enacted a statute allowing decanting. Additional states permit decanting under their common law. In Ohio, a trust may be decanted without court or beneficiary approval (although seeking consents can be a good idea) so long as notice is given to the parties. The Ohio statute provides trustees with broad discretion to decant in many circumstances. If the trustees have unfettered discretion to make principal distributions, maximum flexibility is available. If the discretionary standard is narrow (health, education, maintenance

and support), then the materiality of the change will be carefully scrutinized. Extra care should always be used changing provisions of a trust exempt from federal generation-skipping transfer tax so as not to disrupt the tax exemption. Decanting is an invaluable tool if undertaken by a professional trustee with the experience necessary to ensure success. Linda M. Olejko, CFP®, CEPA, is a managing director of Glenmede. Contact her at 216-514-7876 or linda.olejko@glenmede.com.

Various circumstances can prompt an estate plan tune-up Estate Planning

BY STEVEN P. LARSON

T

he process of estate planning, from start to finish, can take months or even years. But at long last, you and your attorney have created the perfect estate plan for you and your family. After the documents are signed and handshakes exchanged, the next question that is almost always asked is, “so when do we need to look at this again?” Unfortunately, estate plans are not “set

it and forget it” documents. Estate planning attorneys draft documents based on multiple factors: client assets; client wishes; beneficiaries; marital and familial status; federal, state, and estate tax law; and asset protection needs, to name a few. Changes in any one or more of these factors could significantly alter the

outcome of the estate plan and potentially create negative consequences. ASSETS: Any significant increase or decrease in wealth can create unexpected tax consequences, such as an estate tax. Experienced estate planning counsel may be able to Larson offer suggestions on how to reduce or potentially eliminate any estate tax. FAMILY STATUS: Any change

in family status (marriage, divorce, birth of a child, death, etc.) should be followed up with a phone call to your attorney. Any of these events may significantly change the desired outcome of your estate plan. TAX LAW: Although your legal adviser should be in front of changes in tax law, it would be prudent to follow up with your attorney if there are any major changes in the tax law. In the past 15 years, federal estate tax

has been applicable on estates as small as $1 million up to its current level of $5.49 million. As a rule of thumb, whenever you experience a significant life event, after the dust settles it is important reach out to your attorney to determine whether any updates are needed to your estate plan. Steven P. Larson is an attorney in the Trusts & Estates group at McCarthy Lebit. Contact him at 216-696-1422 or spl@mccarthylebit.com.

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ESTATE PLANNING

S6 November 6, 2017

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Five qualities to look for when choosing the right estate planning attorney Estate Planning

BY NICOLE K. COUMOU and RONALD F. WAYNE

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ow that you have made the important decision to protect yourself, your family and your business from the financial and emotional hazards that may arise without quality estate and business succession planning, how do you

identify a high-quality estate planning attorney who is right for you? Estate planning attorneys typically prepare documents to transfer property at death, assist with proper titling of

Finish what you start Be sure assets are retitled to avoid costly consequences BY HOWARD J. KASS

G

rowing up, how many times did a parent tell you to finish what you start? How about your teacher? School counselor? Clergy? We have all heard it, many times from many role models. Finishing what you start is good advice that usually serves us well, regardless of

Estate Planning the context. How does this apply to estate planning? Consider the typical estate planning process. Someone meets with an attorney to carefully design his or her estate plan. As a result of multiple

assets to avoid probate, plan for incapacity and assist with post-mortem administration of estates and trusts. Basic documents, such as wills, revocable or irrevocable trusts, durable powers of attorney and health care directives to accomplish the desired results are a good start, but you need and deserve more. Here are five important qualities and capabilities to look for when se-

meetings, conversations with family members, consultations with their tax adviser, along with their other trusted advisers, a well thought-out, intricate, plan is created to provide for an orderly disposition of their assets upon death. The resulting documents will likely Kass include, among other things, one or more trust agreements. At the conclusion of this long, sometimes exhausting, process, the family and their advisers may get together to celebrate the successful creation of the estate plan, together breathing what they feel is a well-

Lawyers who are creative cre•a•tive / kre'adiv/ adj. 1. Our ability to provide original solutions to help clients minimize tax consequences and strategically plan for the future. 2. walterhav.com

lecting your estate planning attorney and law firm:

1

TAX PLANNING

Qualified lawyers who specialize in estate planning strive to minimize income, estate and gift taxes as part of their services. How an estate planning attorney drafts your will and trust instruments will be greatly influ-

deserved sigh of relief. But, wait! Something may be left undone. Have the trustors retitled assets to their trusts? This is the most prevalent failure I have encountered in all the estate planning cases with which I have been involved. Why go to the time, expense, effort and heartache, to create an intricate estate plan if the plan isn’t perfected by retitling assets into the name of the newly created trusts? Missing this one, final, piece can be financially devastating. Here’s an example: “Francis” was the matriarch of her family and had amassed significant wealth. Following her passing, I was provided with her voluminous estate planning documents that contained, among many other items, a generationskipping trust agreement. Since it was her intent to leave a significant portion of her estate to her grandchildren, having a GST trust was a shrewd decision on her part. Unfortunately, Francis died before

enced by current federal and state income and transfers tax laws that apply to your particular situation. Your estate planning attorney must be able to effectively explain how various taxes play into different aspects of your estate plan and give you choices as to the best outcome for achieving your personal goals. A sophisticated trusts and estates attorney will be well-versed in the area of individual retirement accounts (IRAs), Roth IRAs, 401(k)s, profit sharing and stock incentive programs. Intricate regulations and tax laws need to be considered when deciding CONTINUED ON NEXT PAGE

transferring any of her assets to the GST trust. Francis’ estate unnecessarily paid over $700,000 in GST tax because neither she nor her attorneys finished what they started. They failed to ensure that her assets were retitled to her trusts. That was a $700,000 mistake. Don’t make the same one. Howard J. Kass, CPA, CGMA, AEP®, is a tax partner at Zinner & Co. LLP. Contact him at 216-831-0733, ext. 159 or hkass@zinnerco.com.

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when to name trusts and when to name individuals as beneficiaries of differing kinds of retirement plans.

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BACKGROUND IN BUSINESS

Clients with substantial wealth and business holdings need both tax planning and business planning advice. While tax and business planning tends to go hand in hand, your trusts and estates practitioner should be prepared to discuss the structure of your entities, your position in the company, governance issues, business succession alternatives and the consequences of integrating your business endeavors into your estate plan. The ability to understand the dynamics and inner workings of a family owned business is imperative to creating an estate plan that carries out the business ownerâ&#x20AC;&#x2122;s true intentions. For instance, the estate and business succession plans of two different clients owning substantially similar businesses may differ dramatically depending on the structure of the business or that ownerâ&#x20AC;&#x2122;s future goals.

minimum years of experience and exhibit extraordinary professional accomplishment are a prime resource in identifying quality estate planning attorneys. Word-of-mouth endorsements can also prove valuable. Finally, do not rely exclusively on online reviews that may have been generated either by one unjustifiably disgruntled former client or submitted by a well-intentioned family member.

5

PRICING

Most quality estate planning attorneys are willing to either meet in person or at least by phone the first time without cost to make sure the engagement will be a good fit for both the lawyer and the client. Both the scope of the engagement and the cost of the services should be set forth in a signed engagement letter before you incur any financial obligation. Will you

November 6, 2017 S7

be charged on a flat fee basis, an hourly rate, or a combination of the two? Focus on receiving good value, not the lowest price. An inexpensive but poorly constructed estate plan will eventually cost more to repair than would a well-conceived plan that minimizes taxes and avoids real or threatened litigation. You tend to get what you pay for in the estate planning world. Using these key criteria when

selecting an estate planning attorney will help you identify and engage the attorney most able to meet your future needs and goals. Nicole K. Coumou is an associate at Buckingham, Doolittle & Burroughs LLC. Contact her at 330-258-6422 or ncoumou@bdlaw.com. Ronald F. Wayne is a partner at Buckingham, Doolittle & Burroughs LLC. Contact him at 216-615-7349 or rwayne@bdlaw.com.

3

FIRM RESOURCES

Preferably, your chosen estate planning attorney is a member of a firm with a robust trusts and estates practice group consisting of diverse members with differing skill sets. If your lawyer retires, which younger members of Coumou the firm are already familiar with your business, family and objectives? If your estate plan is challenged in court, does the firm have seasoned litigation attorneys who Wayne

can defend your intended beneficiaries against assault? Complex situations often arise during the administration of an estate or trust. Is your trusts and estates attorney equipped with the right resources to handle real estate, tax, corporate and litigation matters that might arise? An estate planning attorney with ready access to other qualified attorneys in her firm allows for quick collaboration and the efficient production of client work.

4

OBJECTIVE CRITERIA

Chose an attorney whose specialty is estate planning. Highly qualified estate planning attorneys are either board certified specialists or broadly recognized as experts in their field. They teach, speak and write about current hot topics. Key membership organizations for trusts and estates attorneys include Estate Planning Councils and Bar Association Section memberships that bring together skilled estate planning practitioners. Professional recognition organizations that require members to be elected by their peers, have certain

Whether we are feeding the hungry, comforting the sick, or caring for the elderly, our Jewish values inspire us to act. With the stock market at an all-time high, now is the time to donate appreciated securities to the Jewish Federation of Cleveland. To realize potential tax benefits in 2017, make this transfer before December 31, 2017*.

Take an active role in helping meet needs in the Jewish and general communities, today and in the future. To transfer securities, contact Kari Blumenthal at 216-593-2893 or kblumenthal@jcfcleve.org. *Ask your financial advisor for details.

www.jewishcleveland.org


ESTATE PLANNING

S8 November 6, 2017

UNWINDING THE PLAN: modifying and terminating irrevocable trusts BY DANA MARIE DECAPITE

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rusts generally allow for the planned, controlled, and tax-efficient distribution of wealth to individual and charitable beneficiaries. As estate planners, we spend much of our time discussing the benefits of creating and administering various types of trusts with our clients. Many of these trusts are created as irrevocable trusts (and therefore unmodifiable), while others become irrevocable upon the trust creator’s death. The irrevocability of a trust, while beneficial for a variety of tax and non-tax reasons, can create problems for trust beneficiaries when circumstances have changed to the point that modifying or terminating the trust becomes necessary. Luckily, the Ohio Trust Code allows for the modification and termination of trusts in certain specific situations. This article serves as an overview of circumstances allowing for a trust modification or termination, and some of the methods used to effectuate the desired change. Choosing the method for modifying or

Estate Planning

terminating a trust generally involves two considerations: (1) the reason for the desired modification/termination, and (2) the parties seeking to modify/ terminate the trust.

CONSENT TO TERMINATION OR MODIFICATION. If the creator (the

“settlor”) and the beneficiaries of an irrevocable, non-charitable trust consent to and petition the court for the modification or termination, the court can order modifica- DeCapite tion or termination, even if doing so is inconsistent with the material purpose of the trust. In this situation, the reason for the termination is immaterial, but the necessary parties — the settlor and the beneficiaries — must consent to the desired change. The trustee is not a necessary party, nor is trustee consent

required; however, the trustee must follow the court order of modification if so granted. This type of modification or termination only applies to trusts that became irrevocable on or after January 1, 2007, the effective date of the Ohio Trust Code, and does not apply to special needs trusts. If the settlor is deceased or does not consent to the desired change, the beneficiaries may petition the court to terminate the trust. In this case, termination will only be granted if the court concludes that continuing the trust is not necessary to achieve any material purpose of the trust. Similarly, the trust may be modified (but not to remove or replace the trustee), if the modification is not inconsistent with the material purpose of the trust. In each of the situations requiring beneficiary consent, if one or more of the beneficiaries does not consent to a proposed modification or termination, the court may still approve such action; but only if the trust could have been modified or terminated if all beneficiaries had consented, and

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the interests of a non-consenting beneficiary are adequately protected.

CHANGE OF CIRCUMSTANCES.

Upon petition by a trustee or the beneficiaries, the court may modify the administrative or dispositive terms of a trust — or terminate the trust — because of circumstances not anticipated by the settlor, as long as modifying or terminating the trust furthers its overall purpose. In this case, the court should make the modification only if it advances the settlor’s probable intention. If termination is granted, the trustee is required to distribute the trust property consistently with the purposes of the trust, whether or not the trustee is party to the court petition.

ADMINISTRATION COSTS EXCEED VALUE. If the trustee concludes

that the value of the trust property is insufficient to justify the cost of administration, the trustee may unilaterally (without court involvement) terminate a non-charitable inter vivos trust with trust property less than $100,000, after giving notice to the qualified beneficiaries. Alternatively, if the trustee does not or cannot terminate a trust with property less than $100,000, because of the terms of the trust or otherwise, the court can modify the trust (and remove and replace the trustee). The court can also terminate the trust if the court determines that the value of the trust property is insufficient to justify the cost of administration.

PRIVATE SETTLEMENT AGREEMENTS FOR MODIFICATION. The

Ohio Trust Code allows for a non-judicial agreement to be entered into for the purpose of modifying a non-charitable irrevocable trust. This type of agreement generally can be used to modify the terms of a trust if the modifications are not inconsistent with any material purpose of the trust. However, there are very specific parameters and restrictions placed on the necessary parties to the agreement and the permitted modifications. Two or more of the following must be parties to the agreement: the settlor (if there are no adverse tax consequences); the beneficiaries; the current trustee; and creditors (if interest is affected by the agreement). There are prohibitions on using such agreements to terminate a trust, to change a beneficial interest, or to include terms/conditions that could not be otherwise properly approved by the court. It is important to note that irrevocable trusts are not necessarily “iron-clad” under the right set of circumstances and with the collaborative consent of necessary parties. A desire to modify or terminate an existing irrevocable trust should be evaluated on a case-by-case basis to assess the implications of such desired change and determine the appropriate judicial or non-judicial remedy under the current Ohio Trust Code. Dana Marie DeCapite is an attorney at Benesch. Contact her at 216-363-4443 or ddecapite@beneschlaw.com.


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November 6, 2017 S9

Secure your legacy through proper asset protection Estate Planning

BY JOSEPH M. MENTREK

C

reating, maintaining and ultimately transferring wealth have long been the goals of wealth managers, estate planners and their clients alike. Historically, such planning focused primarily on managing taxes. Recent changes in federal and state estate tax laws have reduced the attention on taxes for some. At the same time, an increasingly litigious society and aggressive creditors, including disenfranchised spouses facing divorce, have shifted the attention of many individuals and their planners to asset protection. For purposes of this discussion, we will consider asset protection to be a set of techniques and a body of law concentrated on insulating assets from the claims of creditors without concealment or tax evasion. Prior to 1997, asset protection planning was considered novel, Mentrek or even suspect, and was largely limited to planning with offshore trusts. Domestic trusts provided strong asset protection to beneficiaries, but only if the trust was created and funded by a third party. Strong asset protection was equated with loss of control. Self-settled trusts — those created by individuals for their own benefit — afforded no protection from creditors. The notion of asset protection was turned on its head and introduced to the mainstream in 1997 with the adoption of legislation in Alaska allowing for the creation of self-settled domestic asset protection trusts. As of today, 17 states, including Ohio, have some form of asset protection statute on their books. Consider some blocking and tackling in the context of asset protection. Asset protection is not about hiding assets; rather, it is about using existing laws to create barriers to discourage creditors. This is completely legal, but it must be accomplished before you face a creditor’s claim or it will not be effective. Asset protection will not work if there has been an actual intent

to hinder, delay or defraud present creditors (those with an existing enforceable liability) or future creditors (those with existing claims where a determination of liability is pending). It will, however, be generally effective against potential future creditors. Keep in mind that there is no “onesize-fits-all” solution, and asset protection is best accomplished using a combination of strategies to shelter assets in a variety of protected baskets. For instance, insurance should always act as a first line of defense against creditors’ claims. But for potential liability above policy limits, asset protection can be accomplished by something as simple as transferring assets from one spouse who may be more susceptible to claims (physicians, attorneys, CPAs, architects, or other professionals subject to personal liability for malpractice) to the other spouse who does not face such exposure. Similarly, most state statutes provide for certain types of assets that are legally exempt from the claims of creditors. Exempt assets in Ohio include annuity contracts and the cash value of life insurance held for the benefit of your spouse, children or dependents; balances in ERISA qualified plans (pensions), individual retirement accounts (IRAs) including Roth IRAs, regular IRAs and inherited IRAs; balances in Section 529 education savings plans; and equity of up to $136,925 in residential real estate (homestead exemption). The exemptions vary from state to state, so check with your adviser. The homestead exemption in Florida, for instance, is currently unlimited. Asset protection planning utilizing business entities and trusts can also be effective. Assets held in a corporation or limited liability company (LLC) are protected from the creditors of the owners of those entities. Likewise, the owner of an entity cannot be held responsible for the liabilities of the entity. Trusts also provide varying important

Your success is our foremost concern. You want positive outcomes — and no single path can lead you to them. That’s why Key Private Bank’s approach to wealth management is to provide focused, personalized solutions from experienced financial professionals who are ready to help you navigate whatever paths lie ahead. To learn more, contact Gary Poth at 216-689-5607 or go to key.com/kpb today.

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Asset protection is not about hiding assets; rather, it is about using existing laws to create barriers to discourage creditors.

levels of asset protection. As mentioned earlier, a third-party-settled trust with spendthrift provisions (provisions where the beneficiary cannot assign, or pledge his interest, and which prohibit the ability of a creditor to reach the property) are universally accepted and recognized in all 50 states. Support trusts, discretionary trusts, split interest trusts (QPRTs, GRATs, CRATs and CRUTs), spousal lifetime access trusts and lifetime QTIPs also provide a certain level of asset protection because a creditor cannot levy on

assets beyond the extent of the beneficiary’s limited interest in the trust. Furthermore, the Ohio Legacy Trust is a self-settled domestic asset protection trust that has been available since 2013. The trust creator may be the beneficiary of a spendthrift trust that will protect assets from his or her own future creditors. Under Ohio statute, the trust document must be in writing, irrevocable and governed by Ohio law. It must provide for a qualified trustee, and must contain spendthrift provisions. The transferor

must make certain attestations, including a declaration of solvency at the time he or she set up the trust. Interestingly, there are a host of rights that may be retained by the transferor making the requirement of an independent trustee far less onerous. There are a variety of strategies you can employ, with or without professional assistance, that can provide you asset protection and peace of mind against creditors. If all else fails, you can still resort to something more exotic like an offshore trust in the Cook Islands, Isle of Man, or Nevis. Joseph M. Mentrek, Esq. is chair of the Estate and Succession Planning Group and serves on the firm’s executive committee at Calfee, Halter & Griswold, LLP. Contact him at 216-622-8866 or jmentrek@calfee.com.

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S10 November 6, 2017

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IT’S RAMPANT, INVISIBLE AND LETHAL: the financial exploitation of the elderly BY DAVID P. MEYER

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hile investment fraud is a concern for every individual investor, the risk is particularly troubling for the elderly because they are increasingly targeted as victims of financial exploitation. Exploiting the elderly has become so common that it is estimated that at least one in five elderly investors has been the subject of elder financial exploitation. In light of this growing problem, it is critical that elderly investors are aware of the many different forms of senior investment fraud and know of steps to take, Meyer including estate planning, that minimize the risk of losing hard-earned money through financial exploitation. Broadly defined, fraudulent exploitation is the unlawful act of using a senior’s resources for monetary or personal gain through intimidation, threat or deception. Senior investment fraud can be difficult to detect given that it takes many different forms and often involves a relative, close friend or a trusted adviser. For example, there are numerous cases involving Alzheimer’s patients having

Estate Planning their finances exploited by their trusted financial advisers or close family members who take advantage of the senior’s mental health condition. Investors between the ages of about 50 to 64, who are facing imminent retirement, are also frequently targeted as victims of Ponzi schemes, investment scams and stockbroker misconduct. Pre-retirees may be more susceptible to this type of fraud as they may be concerned about the financial strain of upcoming retirement and might be more trusting if they are acquainted with the con-artist. The growing concern of elder financial fraud is reprehensible, life threatening, and most importantly, invisible. There are many steps that can help prevent seniors from falling victim to financial exploitation. The first is knowing what to look for. With regards to family members taking advantage of their elders, red flags may include pressure from relatives to give loans, or finding that money has mysteriously disappeared. Investment advisers may also target senior clients to earn high commission by soliciting high-risk invest-

ments that are unsuitable for retirees. Red flags of churning and stockbroker misconduct include unauthorized transactions and significant decline in investments. Rogue advisers and fraudsters may also target seniors for Ponzi schemes and investment fraud. If the adviser is not returning phone calls, provides little information about the investments, promotes “private” or “special deals,” or offers side investments, these may all be signs to take caution. One of the most effective measures in preventing senior investment fraud can

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also be the most difficult — recognizing vulnerability. Unfortunately, difficulty in making financial decisions coupled with an impaired ability to recognize deception can make seniors a natural target for investment fraud. Signs that you or a loved one may be vulnerable to senior investment fraud include lack of confidence in making financial decisions, having trouble keeping up with bills due to confusion, giving gifts or loans that cannot be afforded and the inability to understand investment advice. Fraudsters target these traits in seniors who are less likely to pick up on red flags. Acknowledging vulnerability may help increase awareness in identifying these signs. Seeking the help of an estate planning professional can help ensure that senior’s mental health will not jeopardize their finances or their estate. It is important to educate individual investors about the benefits of having a power of attorney, and encourage investors to share details

of their financial affairs with estate lawyers and other professionals to help ensure that if the investor’s health deteriorates, their financial affairs will be properly handled. On top of individual measures to prevent senior exploitation, there are a number of new legal initiatives aimed at attacking the problem. For instance, Ohio has broadened the definitions of neglect, exploitation and financial harm, and expands the list of persons required to report suspected abuse or exploitation. Additionally, some states now require that certain individuals in the financial industry take specific training on how to recognize financial abuse of elder adults. These are simply a few examples among an extensive list of legislation aimed at protecting elders from financial exploitation. Unfortunately, preventative measures and legal initiatives are not always enough to prevent senior exploitation. The last method of fighting this problem is to file a claim to recover losses through the civil legal system. Through injunctive relief, restraining orders and revocation of powers of attorney, filing a claim can stop the problem and prevent additional losses. Additionally, seniors who have suffered financial exploitation may be able to recoup their losses. If the individual behind the exploitation is a registered financial adviser, the brokerage firm where he or she is employed may be liable for losses caused by the misconduct of the broker. Financial exploitation can be devastating, particularly for senior citizens with limited income. It is important that victims of financial exploitation seek the representation of legal counsel experienced in securities fraud. David P. Meyer, Esq., is founding principal with Meyer Wilson Co. LPA. Contact him at 614-358-3283 or dmeyer@meyerwilson.com.


Tanzie D. Adams Charles F. Adler, III Richard A. Ahrens Ronald S. Ambrogio Bill Ambrogio Thomas D. Anderson Graham T. Andrews Heather A. Archdeacon Kemper D. Arnold James S. Aussem P. Thomas Austin Charles J. Avarello Andrew G. Bacharach, Jr. Amanda K. Baker Molly Balunek Peter Balunek Mary Lynne Baranek Kimberly J. Baranovich Albert J. Barnabei Lawrence C. Barrett Stephen Baumgarten Alexandra G. Beach Edward J. Bell Steven Berman H. William Beseth, III Gina Marie Bevack-Ciani Mohammed J. Bidar Michelle M. Bizily Alane Boffa Daniel L. Bonder Nicole K. Bornhorst David J. Bosak Aileen P. Bost Jill A. Branthoover Sandra J. Brantley Herbert L. Braverman Christopher Paul Bray Matthew Brigeman Don P. Brown Kenneth B. Brown C. Richard Brubaker Robert M. Brucken Bethany J. Bryant Martin J. Burke, Jr. Eileen M. Burkhart Christina M. Bushnell Samuel V. Butcher J. Donald Cairns Carl Camillo Leigh H. Carter William G. Caster Jennifer Chess James R. Chriszt Trevor R. Chuna Mark A. Ciulla R. Michael Cole Katherine E. Collin Jeffrey P. Consolo Calla Hoyt Cornett Barbara J. Cottrell Greg S. Cowan Steven Cox Thomas H. Craft Joseph Crea Deborah P. Cugel M. Patricia Culler Tia Marie D’Aveta Dana Marie DeCapite Thomas A. DeWerth Carina S. Diamond David S. Dickenson, II James G. Dickinson Sarah M. Dimling Nicholas P. DiSanto Mary Ann Doherty Lynda Doland Terry Ann Donner Timothy Doyle Emily A. Drake Therese Sweeney Drake Jill Dugovics William A. Duncan Carl J. Dyczek Howard B. Edelstein Elaine B. Eisner Michael E. Ernewein Heather R. Ettinger Erin C. Eurenius

Christina D. Evans Susan M. Evans Todd M. Everson Charles E. Federanich Joseph M. Ferraro J. Paul Fidler Julie E. Firestone Mary Kay Flaherty Linda Fousek Amy K. Friedmann Patricia L. Fries Robert R. Galloway Stephen H. Gariepy James E. Gaydosh Kyle B. Gee Christopher Geiss Thomas M. Genco Thomas C. Gilchrist Stephanie M. Glavinos

Howard Kass Toby Kaye Marta L. Kelleher Lesley Keller Alexis Kim Woods King, III Paul S. Klug Victor G. Kmetich James R. Komos Beth M. Korth Harvey Kotler Roy A. Krall Frank C. Krasovec, Jr. Thomas W. Krause James B. Krost Deviani Kuhar Craig A. Kukla Anthony C. Kure Kristen Kuzma

Jamie E. McHenry Sarah E. McIntosh Ryan P. McKean Kevin R. McKinnis Catherine A. Mekker Joseph M. Mentrek Claus D. Meyer Lisa H. Michel Charles M. Miller William M. Mills Wayne D. Minich Ginger F. Mlakar Marie L. Monago M. Elizabeth Monihan Robert C. Moore Kenneth R. Morgan Philip G. Moshier Michael J. Moss Joseph L. Motta

The Estate Planning Council of Cleveland

Caroline Gluek Ronald J. Gogul Scott A. Gohn James A. Goldsmith Susan S. Goldstein Tom S. Goodman Laura Joyce Gorretta Lawrence I. Gould David A. Grano Alicia N. Graves Karen L. Greco Sally Gries Anne Marie Griffith Nancy Hancock Griffith Elizabeth C. Griffiths Alan D. Gross James P. Gruber Ellen E. Halfon Patrick A. Hammer Sarah Hannibal Brian R. Hassett Lawrence H. Hatch Janet W. Havener Albert G. Hehr, III Theodore N. Hellmuth Kimberly Heman James M. Henretta Jean M. Hillman Joanne Hindel Mark L. Hoffman Harold L. Hom Robert S. Horbaly James M. Horkey Brent R. Horvath Michael J. Horvitz Douglas Ingold Lynnette Jackson Paula Jagelewski Christopher P. Jakyma Barbara Bellin Janovitz Joel J. Jensen Theodore T. Jones James O. Judd Stephen L. Kadish Matthew F. Kadish Matthew A. Kaliff Joseph W. Kampman Karen J. Kannenberg Lori L. Kaplan William E. Karnatz, Jr. Bernard L. Karr

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Emily Shacklett

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SECRETARY

Peter Balunek

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Dana Marie DeCapite

PROGRAM CHAIR Elaine B. Eisner

IMMEDIATE PAST PRESIDENT Michael W. Matile

Louis D. LaJoe Gary E. Lanzen Steven P. Larson Donald Laubacher Paul J. Lehman Maureen Leneghan Kevin J. Lenhard David M. Lenz Wendy S. Lewis Keith M. Lichtcsien Dennis A. Linden James Lineweaver David F. Long Ted S. Lorenzen Amy R. Lorius Janet Lowder Edward C. Lowe Lisa K. Lowy Robert M. Lustig James M. Mackey David S. Maher Stanley J. Majkrzak Chad Makuch Timothy Patrick Malloy Laura J. Malone Michelle Mancini Karen T. Manning Wentworth J. Marshall, Jr. Michael W. Matile Donald C. May Nancy McCann Karen M. McCarthy Dawn E. McFadden Daniel A. McGowan Erica E. McGregor Katharine N. McHale

Susan C. Murphy Hoyt C. Murray Norman T. Musial Christine A. Myers Raymond C. Nash Jodi Marie Nead Lisa Wheeler Neely Robert Nemeth Michael H. Novak Michael T. Novak Anthony J. Nuccio Eric A. Nye Michael J. O’Brien Lacie L. O’Daire Linda M. Olejko Matthew S. Olver Leslie A. O’Malley Richard M. Packer James B. Perrine Michael J. Perry Dominic V. Perry Marla K. Petti Thomas Pillari Jennifer N. Pinkerton Douglas A. Piper Rebecca Yingst Price Douglas Price Maria E. Quinn Susan Racey Joseph Radigan Uma M. Rajeshwar Timothy L. Ramsier Melissa Anne Register Linda M. Rich R. Andrew Richner Radd L. Riebe Elton H. Riemer Theodore J. Robbins Lisa Roberts-Mamone Kenneth L. Rogat Carrie A. Rosko Philip B. Rosplock Lisa J. Roth Larry Rothstein David Rubis Alexander I. Rupert Kenneth J. Sable Patrick J. Saccogna Jennifer A. Savage Ronald S. Schickler Bradley Schlang

Dennis F. Schwartz Jennifer B. Schwarz June A. Seech John S. Seich Doris A. Seifert-Day Emily Shacklett Stanley E. Shearer John F. Shelley Douglas E. Shostek Roger L. Shumaker Lisa Paul Sierk Gary M. Sigman Mary Jean Skutt Mark A. Skvoretz John M. Slivka N. Lindsey Smith Clinton Robert Oney Snyder Sondra L. Sofranko James Spallino, Jr. Richard T. Spotz, Jr. William L. Spring Laura B. Springer Stacey Staub Kimberly Stein Laurie G. Steiner Saul Stephens E. Roger Stewart Beverly A. Stiegele David J. Stokley Diane M. Strachan Thomas B. Strauchon Thomas E. Stuckart John E. Sullivan, III Linda DelaCourt Summers Joseph T. Svete Scott E. Swartz David A. Szabo Julie A. Taft Richard Tanner Barbara Theofilos Maryann Fremion Thomas Kurt M. Thomas Jerry C. Thomas James K. Thompson Donna Thrane Eric Tolbert Floyd A. Trouten, III Mark A. Trubiano Stephenie Truong Thomas M. Turner Diann Vajskop Robert A. Valente Jaclyn L.M. Vary Missia H. Vaselaney Amy Vegh Catherine Veres Mary Eileen Vitale Michael A. Walczak Kimberly A. K. Walrod Neil R. Waxman Julie A. Weagraff Michael L. Wear Stephen D. Webster David G. Weibel Jeffry L. Weiler Richard Weinberg Miles P. Welo Heather Welsh Katherine E. Wensink Elizabeth Wettach-Ganocy Terrence B. Whalen Andrew Whitehair Frederick N. Widen Erica K. Williams Geoffrey B.C. Williams Scott A. Williams Teresa M. Wisniewski Nelson J. Wittenmyer Matthew D. Wojtowicz Carol F. Wolf Brenda L. Wolff Alan E. Yanowitz James D. Yurman Jeffrey M. Zabor Michael J. Zeleznik David M. Zolt Gary A. Zwick Donald F. Zwilling


ESTATE PLANNING

S12 November 6, 2017

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The ‘ A RT’ of inheritance Be sure will and trust address inheritance rights associated with assisted reproductive technology Reconnect and take the Lead like a Girl Scout!

For more information or to donate, please visit gsneo.org/donate or gsneo.org/alumnae

BY M. ELIZABETH MONIHAN and COLLEEN MEREDITH

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as your family been touched by Assisted Reproductive Technology? In 2015, 72,913 babies, or 1.6% of all infants, were born in the U.S. through ART, according to recent fertility clinic statistics from the Centers for Disease Control and Prevention. You, your children or grandchildren could bring an ART child into the family. Genetic material Monihan can be stored for a long time in a fertility clinic. An ART child could be born many years after the death of one or both of the parents. When planning your estate, you must address this possibility in your will or trust agreement.

Estate Planning New Ohio law provisions became effective in 2017, clarifying inheritance rights of posthumously born children, or more remote descendants, and extending the time period during which an ART child could be born and counted as an heir. If you die without a will in Ohio, an ART Meredith child must be born within 300 days after your death to be counted as an heir. You may not want to include a later-born ART child or grandchild as an heir. But if you do, you can extend the time to determine your heirs to one year and 300 days,

with a special provision in your last will and testament. You can extend that time period even longer, up to five years, with a special provision in a trust agreement. If you stored genetic material at a fertility clinic, plan what should happen in the event of a divorce or breakup, disability or death. You also should review your estate plan with your estate planning attorney to determine how to carry out your wishes on leaving an inheritance to your family members, including possible ART children. Your attorney can help you understand how the new laws affect your estate planning intentions for your family. Lisa Monihan and Colleen Meredith are attorneys at Schneider Smeltz Spieth Bell LLP. Contact them at 216-696-4200 or by email at memonihan@sssb-law. com or cmeredith@sssb-law.com.

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November 6, 2017 S13

Empower fiduciaries to manage digital assets BY STEVE HINKLE

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ith society’s increasing reliance on Internetbased technology, nearly everyone owns virtual or digital assets. Many assets that were once tangible and controlled by physical possession are now managed electronically. In this environment, planning for digital assets becomes even more important. Digital assets can include the following: n personal email accounts and messages; n data stored on hardware, such as computers, thumb drives, smartphones and tablets; n photographs, videos and music playlists stored on these devices; n software and licenses (Windows and similar “Office” software, Quicken, TurboTax, and apps for mobile devices); n online financial accounts, such as bank and investment accounts; n social media and social networking accounts (Facebook, LinkedIn and Twitter); and n online sales accounts (PayPal, eBay) These assets often have little or

Estate Planning no monetary value in themselves. For example, software is often nontransferrable at death. However, personal websites, emails and social media accounts may have tremendous sentimental value to a decedent’s family. Also, access to online sales and investment accounts can significantly increase the ease of estate and/or trust administration. For example, banking, Hinkle investment and retirement account statements may reside only online. Federal data privacy laws and online account agreements may prohibit the service provider from turning over online communications to anyone other than the account owner without his or her consent. This makes it important for the account owner to update estate planning documents to empower fiduciaries to access and manage his or her digital assets.

An ESOP may be logical vehicle for retirement, tax purposes BY JENNIFER A. BARNES

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s a successful business owner, you have worked your entire life to build up your greatest asset, your business. You are now ready to retire and enjoy life more. What are your plans for your greatest asset? Do you have the next generation to take over or do you have to sell your company? There is a third option: Sell to an employee stock ownership plan. An ESOP is an employee-owner plan that provides employees of the company ownership through a retirement plan. The company sets up a trust to which it makes annual contributions. The con- Barnes tributions and assets are allocated to employee accounts. Once vested, the employee can retire and receive taxable payments over time. The trust is governed under the Employee Retirement Income Security Act and will be subject to minimum standards. Once the ESOP is set up, you sell the company stock to the plan. The ESOP will provide you a down payment and a

ESTATE PLANNING STEPS

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Your will should have specific language authorizing your executor to manage digital assets. Your power of attorney should expressly allow your attorney-in-fact to access and manage your digital assets, including an affirmative statement

in the POA allowing access to the content of your electronic communications.

direction of your fiduciaries.

Your will, power of attorney and revocable trust should include provisions granting consent to your service provider to disclose the contents of electronic communications to appropriate individuals at the

Steve Hinkle is senior vice president at Key Private Bank, Family Wealth/ Wealth Services. Contact him at 216-689-0333 for questions about this article. To inquire about Key Family Wealth’s services, contact Gary Poth at 216-689-5607.

3

LOVE. It’s a Family Tradition.

Pass it on.

retirement Planning note for the remainder of the value of the company. The company continues, but with the ESOP/S-Corp. structure, there is no federal tax liability on the business income of the S-Corp. The business income tax savings is used annually to pay off the note. You have received money for retirement while securing the future of your company and employees. This is a simplified example but proves the point that this is an option. The keys to success are that the company has a leadership team strong enough to carry on without the owner. Additionally, the company needs to have sufficient cash flow and low debt ratios to sustain the transaction. The first step to determining whether this is a viable option is to have a feasibility study completed and discuss the various options with your tax adviser. Jennifer A. Barnes, CPA, MT, is director of tax at Pease & Associates LLC. Please contact her at 216-348-9600 or jbarnes@peasecpa.com.

Create a legacy of love. Consider future patients and families of Hospice of the Western Reserve when you are creating your estate plan. Ensure that compassionate, comfort care is accessible to each generation by making a legacy gift. Contact Laura Frye, Planned Giving Officer at 216.255.9066 or visit hospicewr.org/planning. ASK FOR US BY NAME

855.475.0245 |

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ESTATE PLANNING

S14 November 6, 2017

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High-income earners often overlook key tax-reducing strategy retirement Planning

BY JIM LINEWEAVER

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nytime you can minimize taxes on an investment of $100 million, you’re doing something right. Max Levchin, founder of enormously popular travel and entertainment review site Yelp, did just that. Before Yelp’s IPO, he placed his huge ownership stake (some 15,317,779 shares) in a Roth IRA. After the IPO, reports from sources like USA To- Lineweaver day and The Motley Fool suggested it grew by as much as $100 million to $200 million. Thanks to his Roth strategy, Max did so tax-free. Despite Max’s enormous tax savings, Roth IRAs are often overlooked by high-income earners. The reason is that investors are often concerned about

the initial costs of a Roth conversion. While you will be required to pay taxes to make that conversion, there are many advantages that can make it ultimately worthwhile. For example, you can convert a traditional IRA, 401(k), or other employer pension plan, bypassing the income requirements that might otherwise keep you from contributing to a Roth. You can then use the funds within the Roth IRA to purchase stocks, bonds or even real estate. If you had purchased $100,000 of Amazon stock— to take a strategy from Max’s book —

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at its IPO, that would be worth nearly $5.5 million today. These holdings can then grow tax-free and can be accessed for taxfree distributions as early as age 59½. You can let your Roth keep growing for as long as you’d like. You can even choose to leave your Roth IRA to a child or grandchild, allowing them to make withdrawals over their lifetime to help with college or a first house. Because of its flexibility, the Roth IRA is a powerful estate planning tool that allows you to take control of your finances and your legacy. Securities offered through Triad Advisors, member FINRA/SIPC. Advisory services offered through Lineweaver Wealth Advisors, LLC. Lineweaver Wealth Advisors, LLC is not affiliated with Triad Advisors. This explanation is provided for information purposes only and is not to be construed as or considered to be tax advice. Jim Lineweaver, CFP®, AIF®, is president at Lineweaver Wealth Advisors and Lineweaver Financial Group. Contact him at 216-5201711 or www.lineweaver.net.


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IRA charitable rollover: Enjoy a tax benefit, make a difference BY ALEXANDRA BEACH

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egislation signed at the end of 2015 permanently extended the IRA charitable rollover, making this popular gift option an established way to give. If you are 70½ or older, the IRA Charitable Rollover is an exceptional opportunity for you to make a charitable gift and satisfy your annual required minimum distribution without paying taxes. To understand the advantages of an Beach IRA charitable rollover, it helps to understand IRA basics: n Since an Individual Retirement Account is a tax-deferred retirement account, contributions within stated limits are tax deductible for the designated tax year. Contributions, appreciation and earnings are not taxed until they are withdrawn. n When IRA owners reach age 70½, they are required to take yearly minimum distributions—even if they don’t want or need the income. n IRA distributions are taxed as ordinary income at a marginal tax rate as high as 39.6% in 2017. Before the IRA charitable rollover arrived, the only way to make a lifetime charitable gift using IRA assets was to make a withdrawal, pay the tax, send the proceeds to a nonprofit organization and hope that the charitable deduction would offset the income tax due on the withdrawal. With the IRA charitable rollover, it’s a one-step solution: instruct your IRA

retirement Planning custodian to transfer a specific dollar amount directly to the nonprofit.

IRA CHARITABLE ROLLOVER POINTERS

n You must be 70½ or older on the date of the distribution to participate. n You must direct the distribution to a qualified 501(c)(3) nonprofit organization. Donor-advised funds, 509(a)(3) supporting organizations, charitable remainder trusts, and gift annuities are not eligible. n You may contribute one or more rollovers for an annual total of $100,000, which will count toward your minimum required distribution. n You may not take an income tax charitable deduction for the rollover. n You may not roll over funds from a 401(k), 403(b), or 457 plan. Only distributions from a traditional or Roth IRA qualify.

November 6, 2017 S15

Life insurance: A valuable gift planning option BY BRIAN M. TULLIO

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n the world of charitable gift planning, gifts of life insurance offer a welcome degree of certainty and flexibility. Life insurance provides a host of benefits for both the donor and charity, including: n Substantial leverage; n An almost-certain policy benefit provided for the charity; n No erosion of the gift due to estate and/or income tax; n Ease of implementation and maintenance; and n Great flexibility in meeting donors’ philanthropic goals, regardless of their economic status.

insurance Planning All of these advantages make life insurance a desirable charitable gift-planning vehicle. As a result, advisers have used life insurance to structure gifts in a variety of ways. In different situations, some options are better than others for the donor Tullio and the charity. The easiest and simplest way to make a gift of life insurance is to

name the charity as a beneficiary of an existing policy. While no immediate income tax charitable deduction is provided, this gives donors flexibility, allowing them to retain control of the policy and its cash value. The donor can simply complete a change of beneficiary form provided by the policy carrier, which generally is found online. However, a major drawback for the charity if this option is chosen is that because the donors could change their minds and perhaps name someone else as the beneficiary at a later date, the charity has difficulty CONTINUED ON NEXT PAGE

If you’re 70½ or older, this is an excellent gift option to consider before giving cash or writing a check. Ask your tax adviser whether an IRA charitable rollover is right for you. If it is, contact your IRA custodian to request a qualified charitable distribution and be sure to let the nonprofit organization know that they should expect a distribution from your IRA. Alexandra Beach, Esq., is a senior gift planning officer at University Hospitals. Contact her at 216-844-0432  or alexandra.beach@UHhospitals.org.

Preserve Your Legacy a single-minded focus. We employ sophisticated estate planning techniques to meet individual and family goals in the disposition of an estate, while minimizing transfer and estate taxes. Contact: Kimon P. Karas, John S. Seich, or Steven P. Larson, 216.696.1422

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relying on the policy benefit. A better option for both donor and charity might be to contribute a paidup policy directly to the charity. In this case, the donor would relinquish control by transferring ownership of the policy to the charity. The donor would receive an immediate income tax charitable deduction for the lesser of either the donor’s adjusted cost basis or the policy’s replacement cost.

‘‘

Finally, while more complex than these other gift options, premium-financed life insurance policies allow a donor to take full advantage of the leverage provided by life insurance for the purpose of establishing a large deferred gift.

(Because this is a non-cash charitable contribution, likely in excess of $5,000, Section B of IRS Form 8283 should be filed to validate the

charitable deduction.) Another good option would be to establish a new insurance policy and, shortly afterward, transfer ownership

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to the charity. Then, the donor would pledge cash payments to assist the charity in covering the cost of the premiums. The donor would receive

a charitable deduction for making the cash contributions to the charity. In turn, the charity would benefit from immediate control of the policy and its cash value, allowing it to rely on the policy benefit. Finally, while more complex than these other gift options, premium-financed life insurance policies allow a donor to take full advantage of the leverage provided by life insurance for the purpose of establishing a large deferred gift. For a premium-financed life insurance gift, a donor would set up an irrevocable life insurance trust (“ILIT”) to serve as the owner of a single or joint life survivorship insurance policy. The ILIT then would secure financing for a loan, normally renewed annually, covering the policy’s premium costs. To accomplish this, the trust will pledge the policy as collateral, and the donor may decide to post additional out-of-pocket collateral, as well. Premiums typically will continue for several years. When the policy benefit is distributed to the trust, the trust will use a portion of the benefit to pay the loan principal and interest, while the remaining benefit will be distributed to the charity. Although no charitable income tax deduction will be generated for the donor, the particular type of policy used for this (a modified endowment contract) will appreciate during the life of the donor. This will generate a larger benefit than is produced by a conventional policy. There are other variations of this strategy that can be used to maximize the policy benefit, reduce collateral requirements or provide for cash distributions. Therefore, although premium-financed policies can be very complex, the benefits for charities are substantial, making this an attractive option for them and for more affluent donors. All of this information is only the tip of the iceberg when devising a charitable plan with life insurance. These contributions also can be facilitated with gift annuities and charitable remainder trusts, whereby the income generated can be used to pay premiums on an insurance policy. Also, incorporating life insurance into a blended gift provides for the charity both now and in the future. With this brief glimpse into charitable planning with life insurance, you can see the many ways in which such a flexible gift vehicle can help your clients meet and achieve their philanthropic goals. Brian M. Tullio, Esq., LL.M., is assistant director of gift planning at Cleveland Clinic. Contact him at 216-442-5358 or tulliob@ccf.org.


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November 6, 2017 S17

Explore life settlement before jettisoning policy BY CHRISTINE MILLEN and RAYMOND NASH

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on’t surrender or let a life insurance policy lapse without checking into a life settlement first. You could be leaving money on the table. Life insurance is a valuable planning tool that can help families and business owners mitigate a variety of risks. However, the planning needs of today may differ in the future. In the past, if policyholders had a change in Millen circumstance making a life insurance policy no longer needed or wanted, they had limited options. These options included either surrendering a policy

insurance Planning for its available cash value or letting a policy lapse. Today, there is an additional option policyholders should consider before letting a life insurance policy go: a life settlement. A life settlement is the sale of a life insurance policy to a qualified institutional buyer. The policy owner receives cash Nash today, or a smaller retained death benefit amount, and the investor takes over the premium obligation in exchange for future death benefit proceeds.

Questions to ponder when considering a private company valuation BY LARRY VAN KIRK

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aluations are critical for public and private companies alike. Accurate, non-biased valuations can inform private company board decisions, internal transactions, executive compensation and sale and investment decisions.

Why should a private company board consider a valuation?

Boards obtain a valuation for sale or purchase of company equity, internal stock transactions and incentive compensation plans. Some boards Van Kirk include valuations during the strategic planning process when management considers a significant strategic move that may impact company value.

When should a board seek a fairness opinion or an independent valuation for a sale?

Each situation depends on the relationships of the parties and potential for controversy or contentiousness. An outside fairness opinion may not be needed with multiple bidders and high confidence in the sale process and pricing, but a fairness opinion or independent valuation is prudent if controversy is possible. For example, if there is one interested buyer and no other bidders, a fairness opinion might instill confidence in the price and offer an outside view without risk escalation.

Do internal transactions

tax Planning or executive incentive compensation require a valuation?

Valuations of internal stock transactions or stock incentive compensation programs are required to meet both tax requirements, per Section 409A of the Internal Revenue Code, and financial reporting requirements, per the Financial Accounting Standards Board’s Accounting Standards Codification, ASC 718. Board members should understand these value derivations and indications, especially for compensation or audit subcommittees.

Can the board evaluate the impact of management policies with the valuation?

Discussing the value drivers guides healthy review of many policies. For example, the board can review how buying a new piece of equipment impacts cash flow, and, ultimately, value. Is it a revenue enhancer or a value enhancer? For companies with a strong generational divide, knowing the implications of a growth-oriented philosophy versus a risk-tolerant philosophy is critical for investment or spending decisions. Larry Van Kirk is managing director of Valuation Research Corp. Contact him at 513-579-9100 or lvankirk@valuationresearch.com.

The marketability of a policy is dependent on several factors, which are greatly influenced by the age and health of the insured. Generally, a life settlement works best for older insureds (ages 70 and older) who have experienced a decline in health since their policy was acquired. The type of policy — such as universal life or whole life — can also affect the purchase price. Typically, whole life policies are less attractive to buyers because of their limited flexibility. Universal life policies, even with no-lapse guarantee features, are generally attractive to purchasers. Universal life survivorship policies can also have value, if both insureds have experienced a change in health. The price paid for a policy represents the net present value of the policy, which is discounted from

FOR SALE the face amount. It is calculated by considering future premium expenses, health prognosis of the insured and other risk factors.

With looming tax reform, which could eliminate or substantially alter estate taxes, many more life insurance policies may become unnecessary. This could make life settlements an even more valuable option for policyholders to consider in the future. However, it’s important to keep in mind that a life settlement isn’t the right fit for everyone. That’s why it’s important to get the help of a trusted insurance adviser to navigate the secondary market. Christine Millen is vice president of operations and marketing at Heirmark. Contact her at 440-630-9400 or cmillen@heirmark.com. Raymond Nash is CEO and principal at Heirmark. Contact him at 440-630-9400 or rnash@heirmark.com.

Your legacy helps create a healthier community. Leave your legacy. Remember University Hospitals in your estate plans.

Gifts to University Hospitals continue the legacy of giving from generation to generation – by enabling us to live our mission every day:

To Heal. Enhancing patient care, experience and access To Teach. Training future generations of physicians and scientists To Discover. Accelerating medical innovations and clinical research And with your support, we’ll continue to provide the same high-quality care that we have for more than 150 years. Join the many who are transforming lives forever.

To learn more, contact our gift planning team at 216-983-2200 or visit UHGiving.org.

©2017 University Hospitals


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S18 November 6, 2017

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Ohio’s income tax residency rules H.B. 292 attempts to clarify ambiguous situation tax Planning

BY JOSEPH F. VERCIGLIO

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hio has an income tax, and the current rates range from 0.495% for annual income less than $5,250 to 4.997% for annual income greater than $210,600. Ohio’s income tax applies differently to residents and non-residents, so it is important to understand Ohio’s residency rules. Subject to credits for taxes paid in other jurisdictions, Ohio residents pay Ohio income tax on their worldwide income, such as dividends and capital gains. Ohio non-residents pay Ohio income tax only on Ohio-sourced income, such as wages earned in Ohio, Ohio gam- Verciglio bling winnings, income or gain from property in Ohio, or income or gain from a pass-through entity doing business in Ohio. An Ohio resident can, therefore, save income tax by becoming a resident of a state that has lower rates than Ohio or no income tax like Florida. The question often is: how much time can I spend in Ohio and not be considered an

Ohio resident for income tax purposes? Under Ohio law, an individual is a resident for income tax purposes if “domiciled” in Ohio. “Domicile” is not defined in Ohio’s statutes. Under Ohio common law, “domicile” generally means an individual’s residence at which the individual intends to reside indefinitely (which can be difficult to discern). Ohio Revised Code Section 5747.24 attempted to provide clarity on this issue. This Code Section provides that an individual will be irrebuttably presumed to not be domiciled in Ohio for the year if the individual: n has fewer than 213 “contact periods” with Ohio (a contact period is essentially an overnight stay in Ohio); n the individual has a residence outside Ohio; n and the individual files by April 15 of the succeeding year or such later date prescribed by the tax commissioner a form with the commissioner containing a

statement verifying that the individual was not domiciled in Ohio during the year, and such form does not contain a false statement. The requisite form is the affidavit of Non-Ohio Residency/Domicile (Ohio Form IT DA). Many believed that this Code Section provided a “bright line” rule, such that as long as the requirements were met, the individual would be irrebuttably presumed to not be domiciled in Ohio for the year regardless of common law domicile facts to the contrary. In 2015, the Ohio Supreme Court’s holding in Cunningham v. Testa, 144

values vision impact

Ohio St.3d 40, 2015-Ohio-2744, set forth that Code Section 5747.24 does not, however, provide a bright line rule. The determination of an individual’s residency typically arises as follows: An individual files the affidavit, and the tax commissioner contends that the taxpayer was an Ohio domiciliary based, for instance, on a claim of 213 or more contact periods, or a showing by the commissioner of common law domicile facts (even when an individual has fewer than 213 contact periods) which represent a substantial basis for the commissioner rejecting the individual’s claim of non-Ohio domicile.

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Such a contention, if successful by the commissioner, would make the taxpayer’s affidavit false, which means under Code Section 5747.24 the irrebuttable presumption does not apply. When the presumption does not apply and the individual has fewer than 213 contact periods, the individual is presumed to be domiciled in Ohio. He or she but can rebut the presumption with a preponderance of evidence to the contrary. This is a standard that requires a presentation of facts that show that, more likely than not, the individual was not domiciled in Ohio. The standard increases to clear and convincing evidence to the contrary when the individual has at least 213 contact periods. Clear and convincing evidence is that which will provide in the trier of fact a firm belief or conviction to the facts sought to be established. An individual, therefore, must take certain actions and keep good records to be able to substantiate non-Ohio domicile. Some common law facts tending to show that an individual is not domiciled in Ohio are: out-of-state voting records; out-of-state driver’s license; receipt of mail at non-Ohio residence; plane tickets showing dates spent outside Ohio; credit card receipts showing date and location of use outside Ohio; titling of vehicles outside Ohio; and homestead treatment of non-Ohio residence. Ohio Administrative Code Section 5703-7-16 provides a list of factors that should not be considered in making a determination of an individual’s domicile, including the recitation of residency in an individual’s estate planning documents; and the location of the individual’s financial advisers, law and accounting firms, and health care providers. In response to Cunningham v. Testa, Ohio House Bill 292 was introduced earlier this year, which attempts to solidify Code Section 5747.24 as a true “bright line” rule and do away with any concern of a common law domicile analysis. H.B. 292 generally tracks the requirements of current Code Section 5747.24, but allows for filing the affidavit later in the year. It also adds the following requirements: the individual did not (i) with respect to the residence outside Ohio required under current law, claim a federal depreciation deduction; (ii) hold a valid Ohio driver’s license or Ohio I.D. card; (iii) claim Ohio’s homestead exemption; or (iv) receive in-state tuition based on a claim of Ohio residency. It remains to be seen whether this clarifying bill will become law. Joseph F. Verciglio is a partner at Baker & Hostetler. Contact him at 216-8617713 and jverciglio@bakerlaw.com.


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Your time is a gift Gift-planning advisers, nonprofits can make a difference together BY DIANE M. STRACHAN

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ne of the greatest gifts you can give your favorite charity is time. As a gift planning professional, you can have a tremendous impact by volunteering to serve on the gift planning advisory committee of your favorite charity or nonprofit organization — somewhere your knowledge and skills are sure to make a difference. Volunteering your time to a gift planning advisory committee is a winwin for you and the organization you choose to support. Nonprofits have limited resources, regardless of size. By volunteering your expertise, your time is meaningfully spent providing insight and feedback Strachan on ways to help the organization. As a committee member, you will receive an insider’s knowledge to share with others. You may get a behind-thescenes look at the people and programs that make things happen and develop an even greater appreciation for the group’s vision and mission. As a gift planning adviser, you will be uniquely positioned to share what you learn from your clients and network of contacts. You will have first-hand knowledge of the questions clients have for the nonprofits they choose to support. Having this “insider” information will help the charity tailor its messaging, appeals and marketing, and can be shared through letters, newsletters, and emails to donors and potential donors. Your expertise will help position staff at the charity as trusted experts in gift planning. One advantage for the charity you choose to support is that you are more likely to become a donor, or increase your level of giving, once you become a member of the gift planning advisory committee. As a volunteer adviser, you can help staff learn about trends, policies and vehicles in the gift planning industry. Consider sponsoring a staff member to attend a conference on charitable planning, and follow up afterward to discuss ways in which you can work together to strengthen its program. You can encourage the nonprofit staff to seek new ways to market and educate donors about its gift planning program and the many ways the group can help donors achieve their philanthropic goals. As a member of the gift planning advisory committee, you will learn personally just how fulfilling it can be when the donor’s and charity’s philanthropic needs are met.

Fundraising is always important to the nonprofit organization, and gift planning events are an excellent

way to attract potential donors. Gift planning advisory committee members often help underwrite the cost of the

November 6, 2017 S19

charitable Planning gift planning event while enjoying a unique opportunity to market their companies to a broad audience. If you find that your favorite charity does not have a gift planning advisory committee, you should not hesitate to provide input about what it takes to start one.

If you already serve on a committee, then provide the organization with specific ideas about how you, as the professional adviser, can make the gift planning advisory committee even more effective for the charity and more meaningful to you. After all, your time is the greatest gift of all. Diane M. Strachan, CFRE, is director of philanthropy at The Cleveland Museum of Art. Contact her at 216-707-2585 or dstrachan@clevelandart.org.

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ESTATE PLANNING

S20 November 6, 2017

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Donor-advised funds satisfy a variety of planning objectives BY SAUL A. STEPHENS

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ver the past decade, the growth of donor-advised funds has been increasing at a rapid rate. Their simplicity to set up, their flexibility and their tax-saving capabilities have proven to be an excellent tool in estate planning and business exit strategies. However, who should consider a DAF to accomplish their planning objectives? Those donors who: n Experience a high-income year and want to set aside assets now to fund future giving; n Want to minimize taxes when selling highly appreciated asset(s); n Question how best to support

charitable Planning several charities over a number of years through one gift; n Prefer flexibility to change their charitable beneficiaries; n Want to engage family members in charitable giving as a way to pass on family values; n Are concerned about the time and complexity in gifting appreciated assets to more than one charity or want to manage and track giving in a simple and organized way with one annual tax receipt;

n Have favorite charity(ies) that cannot accept non-cash donations; n Need time to decide which charities to support or want to be able to give anonymously to certain charities; n Plan to sell a business or other assets or anticipate inheritance; Stephens n Have fluctuating income that makes it hard to maintain a steady level of giving; and n Are concerned about the cost and complexity of a private foundation.

These funds can provide a myriad of estate and charitable solutions, but

also asking some pertinent questions will allow a potential donor to determine what DAF may be the best choice for them. Some questions to consider are: n Are you affiliated with any other organization? n What kind of contributions or investments can be made? n What kinds of grant distributions or succession are allowed? n What are the costs? Reviewing your financial planning goals with your adviser is critical for reaching your charitable inclinations, but also asking the right questions will give the insight needed to make charitable giving tax-efficient, flexible

and enjoyable as possible. Securities offered through 1st Global Capital Corp., Member FINRA, SIPC. Investment Management Solutions (“IMS”) Platform fee-based asset management accounts offered through 1st Global Advisors Inc. All other financial planning services offered through The Wealth Center at Meaden & Moore. The Wealth Center at Meaden & Moore and 1st Global Capital Corp. are unaffiliated entities. Saul A. Stephens is a financial advisor with The Wealth Center at Meaden & Moore. Contact him at 216-928-5418 or sstephens@meadenmoore.com.

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Essential questions to consider when deciding to give BY BETH DARMSTADTER

C

haritable giving by individuals in the U.S. increased nearly 4% in 2016 and accounted for more than three-fourths of all donations made, according to Giving USA’s annual report on philanthropy. Individuals — not corporations or foundations — gave an estimated $282 billion in 2016. Americans have no problem giving. The challenge for many, however, is deciding when, where and how to give. Answering those Darmstadter questions begins with listening to and finding out not only what is important to donors but also what is going on in their lives. Based on these factors — a medical issue or a pending move, for example — a donor may not be able to make a significant gift today. Waiting, or deciding instead to make a planned gift, such

charitable Planning as naming an organization as a beneficiary of a life insurance or retirement plan, for instance, might be more appropriate. It’s not always easy finding the right fit when it comes to choosing how to share a portion of one’s hard-earned money. A good starting point in helping people direct their donation is to find answers to some key questions. Does the organization: n Have a mission that reflects the individual or family’s personal passion and/or charitable interests? n Have a track record of operating in the black? n Provide updates to the community on the impact of its philanthropic dollars? n Spend no more than 30% of the money it raises on administrative costs?

n Use donations to support needs that are essential to the well-being of the community?

Donors may be too overwhelmed to think about where to focus their philanthropic dollars, especially if the organization is large and complex. They may wrongly assume that their modest donation isn’t worthy. Breaking down needs into “sizable” projects that match the donors’ interests will help them understand that their gift can still make a difference in even the largest organizations or fundraising campaigns. This is the time when an individual can benefit from a conversation that focuses on specific areas that might interest them, areas where their gift — regardless of size — will have an impact. Beth Darmstadter is director of individual giving for MetroHealth’s department of Foundation and System Philanthropy. Contact her at 216-778-1630 or bdarmstadter@metrohealth.org.


ESTATE PLANNING

SPONSORED CONTENT

Planned gifts to ensure the future BY MARY GRACE HERRINGTON

C

haritable giving is an important aspect of estate planning. As you consider the myriad of methods for preparing your assets, planned giving is a fantastic way to leave a gift that will allow an organization to continue its good work after your lifetime or set up Herrington a way to benefit an organization during your lifetime. Planned gifts also offer

charitable Planning financial benefits that may not be available with other types of gifts. For those who wish they could support causes and organizations they believe in but aren’t financially able to make major contributions right now, planned gifts are a great way to extend your assets into the future. Here are just three ways you can make a significant difference for a charitable organization

November 6, 2017 S21

2

THE GIFT OF REAL ESTATE

without opening your wallet.

1

A LEGACY CONTRIBUTION

In order to ensure organizations you believe in continue their missions way into the future after your lifetime, you can leave a portion of your estate to them in your will. With the advice of a financial or legal adviser, this can be as simple as including a sentence such as: “I give [sum, percentage or description of property] to [charitable organization] to be used for its general tax-exempt purposes, but without other restriction as to use.”

There are several ways to give property to an organization, but they all have the same benefits. Not only do you alleviate the stress of you or loved ones having to sell your real estate down the line, but appreciated property you own for more than one year is subject to a charitable income tax deduction.

3

A FUTURE ASSURANCE

One of the easiest and most flexible ways to leave a gift is through a beneficiary designation. You can leave any percentage of your IRA or retire-

Private family foundations help build a legacy BY DIANE TOMER

W

hether planning for your family’s long-term economic security, or to educate future generations about charitable giving, establishing a private family foundation may be an approach to consider. Family foundations are a

charitable Planning practical way to educate and involve family members in life-long giving. They also reduce your income tax, and over time, the revenue investment

may surpass the initial funding. “Family foundation” typically implies the active involvement of donors or members of the Tomer donors’ family in the foundation. While more time consum-

ing, more costly to maintain and more complex to administer compared to other charitable giving techniques, a private foundation can provide families with a lasting legacy in their family name and be the engines toward positive change. A private family foundation is a distinct and separate legal entity that

ment plan, your life insurance policy or your commercial annuities to a charity. It’s as simple as filling out a change-of-beneficiary form with the overseeing entity. No matter what your financial situation is now, there is always a way to give back to your community later through planned giving. A few small actions now can make a lasting difference for your favorite nonprofit organizations and the people they serve. Mary Grace Herrington is chief development officer at WVIZ/PBS, 90.3 WCPN and WCLV 104.9 ideastream. Contact her at 216-916-6270 or marygrace.herrington@ideastream.org.

may be funded with an initial gift of $250,000. A good time to consider this option may be when you have sold a business, received an inheritance, or won the lottery. It is an interesting option for long-term charitable gifting goals and teaching future generations the power of philanthropy. Diane Tomer is director of development and marketing at Recovery Resources. Contact her at dtomer@recres.org.

Experienced Counsel for High-net Worth Individuals and Families The attorneys in Calfee’s Estate and Succession Planning group can help you make some of the most important decisions of your life. With deep experience in finance and the law, our extensive knowledge and experience provides exceptional value to clients seeking:     

Sophisticated estate, gift and generation-skipping planning Comprehensive estate and trust administration Business succession planning Asset protection planning Probate litigation

Calfee’s Estate and Succession Planning Attorneys Joseph M. Mentrek, Practice Group Chair Amy K. Friedmann | Jean M. Hillman | Fran Mitchell Schaul | James A. Singler | Jaclyn M. Vary | Marcia J. Wexberg

Calfee. Clients First.

Cleveland | Columbus | Cincinnati | Washington, D.C. 216.622.8200 | Calfee.com


ESTATE PLANNING

S22 November 6, 2017

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Many ways to share the benefits of charitable giving BY JULIE A. WEAGRAFF

W

e all know that charitable giving can benefit our community and help make the world a better place. But giving back has other benefits as well. The opportunity to give back through philanthropy can enrich your life in many ways. There have even been research studies that indicate giving back can make you happier. Today, there are more ways than ever

charitable Planning to give. Thanks to technology, you can give whenever and wherever you want. It’s easier than ever to share your giving experience with others through social media. You can be a donor and a champion for organizations by sharing your support within your network of contacts. You can reach far more

people than you ever dreamed possible — just think about the rippling effect of the ice bucket challenge. If giving makes you happy, then giving more should make you even happier, right? Monthly giving, Facebook giving, Go- Weagraff

FundMe, walks, runs, galas, benefits, auctions, are just a few of the opportunities that are available to support your

The power and simplicity of endowed giving BY DANIELLE M. LOCKE

I

magine creating a permanent legacy that will keep on giving to your favorite cause or charity — forever. Now, imagine that you can make a gift during your lifetime that would allow you and your family to witness the change in the community you helped make. This is the power of endowment funds. And it’s within reach for everyone.

charitable Planning To get started, donors simply make a permanent, tax-deductible donation to a community foundation or charity. The amount varies, but at the Community Foundation of Lorain County it can be as little as $10,000 deposited over

a five-year period. The principal is invested wisely, and the income is used to provide ongoing, sustainable funding for causes or organizations. Because only a percentage of the investment earnings are distributed as grants or scholarships, an endowment allows you to give more over time, far more than a one-time gift would be worth. An endowment with a community foundation can be personalized to ful-

favorite causes. When it comes to giving back, don’t stop there. In addition to your financial support, consider serving on a committee or a board of a nonprofit organization. The time you invest will reap even greater dividends. You will get to know your fellow volunteers and feel a camaraderie in supporting a cause that is near and dear to your heart. By giving your time and your resources you will develop a greater appreciation and richer understanding for the mission of the organization

you support. You will become aware of the challenges that nonprofits face and will become more invested in your community. As you do, think about your legacy and experience the happiness of knowing that your giving will have a positive impact on future generations.

fill any charitable goal or passion. You can create a fund in your name or your family’s name, in memory or honor of a loved one, and to benefit a specific cause or charity. The endowment fund can be established now or at the time of passing. All funds held at the Com- Locke

your endowment before death, you can encourage friends and family to support the growth of your fund. An endowment is unlike any other gift because it has permanence. Your gift will continue to grow, make grants annually in your name and have lasting impact on your community forever.

munity Foundation of Lorain County are public, which means anyone can donate to the fund at any time. By starting

Julie A. Weagraff, MNO, CFRE, is director of fund development at Girl Scouts of North East Ohio. Contact her at 330-983-0399 or jweagraff@gsneo.org.

Danielle M. Locke, CAP®, MPA, is a gift planning officer at Community Foundation of Lorain County. Contact her at 440-984-7390 or dlocke@peoplewhocare.org.

The art of giving. Give the gift that supports CMA while providing additional income to you and your family. Benefits of your Charitable Gift Annuity include:

• Rates of return up to 9%, plus a guaranteed income stream for life • A significant charitable deduction, and minimized capital gains tax if using appreciated securities • A lasting legacy for you and your family For more information about charitable giving, contact Diane M. Strachan, CFRE at 216-707-2585 or dstrachan@clevelandart.org

ClevelandArt.org


ESTATE PLANNING

SPONSORED CONTENT

November 6, 2017 S23

Do well and do good with charitable gift annuities BY MATTHEW A. KALIFF

I

n a low interest-rate environment, a charitable gift annuity offers an attractive solution for an individual or couple seeking steady income, an attractive return and low risk. A CGA gives the added satisfaction of doing well by doing good. With a CGA, a charitable organization promises to pay a fixed annual income for life in exchange for an irrevocable contribution of cash or marketable securities, such as publicly traded stock. The annual income payments go to the donor or a designated beneficiary. The amount of the income payments depends in part on the age of the beneficiary at the time of the contribution: the older the beneficiary, the greater the annual payment. Deferring the start of receipt of payments also increases their amount. The charity keeps any funds that remain unpaid from the CGA at the death of the last beneficiary. A CGA has several financial benefits. First, it provides immediate and guaranteed income. Because the CGA is sponsored by a charity, the donor may receive a charitable income tax deduction. Also, a portion of the annual income payments are tax-free.

charitable Planning There may also be savings on capital gains if the donor uses appreciated securities for the CGA. Here is an example of how a CGA can simultaneously increase cash flow and support a charity: Janet, age 76, loyally gives to a local food bank. Janet owns 200 shares of a publicly traded stock that she bought years ago for $10,000. The shares are currently worth $20,000 and pay Janet an annual dividend of $500. Janet is retired and she would like to increase her cash flow. Janet Kaliff decides to contribute the stock shares to the food bank to fund a 6% CGA. The food bank will pay Janet $1,200 annually for life, which is $700 more than the annual dividends she earned from the stock shares. Moreover, $465 of each annuity payment will be taxfree for 16 years. The balance of each payment will be allocated among ordinary income and capital gain. Assuming a 15% tax rate, Janet can claim a current tax deduction of $9,384.

She also avoids tax on a portion of the $10,000 capital gain. Per Janet’s request, the food bank will use any remaining CGA funds for an endowment in Janet’s honor after her death. Janet achieved her twin goals of greater cash flow and supporting her favorite charity. She even created a permanent philanthropic legacy. When considering a CGA, be sure that the sponsoring charity has the resources to guarantee uninterrupted annuity payments. Compare CGA rates among different charities. Most follow the standard rates set by the American Council on Gift Annuities. The sponsoring charity should provide a complete, personalized illustration of how the CGA will work based on your circumstances. As with any important financial decision, consult with your legal or financial adviser. The illustration used above is for educational purposes and is not professional tax or legal advice. Consult a tax, financial, or legal adviser about your specific situation. Matthew A. Kaliff is assistant managing director of Endowment Development at the Jewish Federation of Cleveland. Contact him at 216-593-2831 or mkaliff@jcfcleve.org.

IRA bequests are an effective charitable giving tool BY ANN E. SALEK

E

state planning is typically a time for introspection. What have I built during my life, both personally and financially? What type of legacy do I want to leave? As such, planning your estate is the ideal time to consider your philanthropic goals. Once you establish your goals, you can then work with a planner to determine the most appropriate ways to accomplish your goals. By planning carefully, your gift can show gratitude, ensure a loved one’s name lives on or even support future capital needs. Because of the generous planning of legacy giving donors, Hospice of the Western Reserve has become a stronger and more effective Salek agency. Many of these gifts were bequests, but more recently qualified plan assets —such as IRAs — have become popular vehicles for planned giving. Many people accumulate a large percentage of their wealth through IRAs. Since the amount accumulated in an IRA has never been subject to income tax, individuals must carefully consider the income-tax consequences. A charity is an ideal beneficiary because a charity does not pay income tax, so it

charitable Planning will receive the entire bequest amount. In contrast, if an individual is the beneficiary, the individual will include any distribution from the IRA in their adjusted gross income. When leaving IRA money to a charity, it is best to designate the charity directly on the beneficiary designation form. The IRA is useful for lifetime charitable donations as well. In 2016, Congress made permanent the law that allows an individual to donate their required minimum distributions to a charity. The IRA owner can satisfy their RMD requirement, and the distribution will not increase their adjusted gross income. Careful consideration and planning must take place so that the distribution goes directly from the IRA fund to the charity. The individual should contact their IRA administrator, as well as the charity, to coordinate the donation. Ann E. Salek is a member of the Planned Giving Advisory Council for Hospice of the Western Reserve and is an estate planning attorney with the firm of Critchfield, Critchfield & Johnson in Medina. Contact her at 330-723-6404 or salek@ccj.com.

TOGETHER, WE CAN HELP YOU LEAVE YOUR MARK ON CLEVELAND. The MetroHealth Foundation, Inc. is a 501(c)(3) charitable organization. Founded in 1954, it supports The MetroHealth System’s mission of leading the way to a healthier you and a healthier community through service, teaching, discovery and teamwork. To learn more, contact Beth Darmstadter, director of individual giving, at 216-778-1630 or bdarmstadter@metrohealth.org.

CHANGE IS HEALTHY The MetroHealth Foundation • 2500 MetroHealth Drive, Towers 135A, Cleveland, OH 44109


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CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS

THE LIST

Largest Colleges and Universities Ranked by fall 2017 full-time equivalent enrollment LOCAL FTE ENROLLMENT (1) THIS YEAR COLLEGE OR UNIVERSITY

FALL 2017/ 2016

% CHANGE

% ENROLLMENT STUDENT: FACULTY ANNUAL TUITION/ UNDERGRAD/ GRADUATE RATIO ROOM & BOARD

OPERATING BUDGET TYPE OF INSTITUTION; (MILLIONS)/ AFFILIATION YEAR FOUNDED

ENDOWMENT (MILLIONS)

PRESIDENT

1

Kent State University P.O. Box 5190, Kent 44242 (330) 672-3000/www.kent.edu

30,081 31,215

-3.6%

21:1

$10,012.0 $10,916.0

83.9% 16.1%

4 year public

$668.6 1910

$129.1

Beverly Warren

2

University of Akron 302 Buchtel Common, Akron 44325 (330) 972-7111/www.uakron.edu

18,251 19,011

-4.0%

17:1

$8,618.0 $12,296.0

85.0% 15.0%

4 year public

$391.3 1870

$195.0

Matthew J. Wilson

3

Cuyahoga Community College 700 Carnegie Ave., Cleveland 44115 (216) 987-6000/www.tri-c.edu

13,213 13,579

-2.7%

15:1

$3,137.0 NA

100.0% 0.0%

2 year public

$229.3 1963

NA

Alex Johnson

4

Cleveland State University 2121 Euclid Ave., Cleveland 44115 (216) 687-2000/www.csuohio.edu

12,817 12,929

-0.9%

17:1

$9,636.0 $12,500.0

74.0% 26.0%

4 year public

$242.5 1964

$82.3

Ronald M. Berkman

5

Case Western Reserve University 10900 Euclid Ave., Cleveland 44106 (216) 368-2000/www.case.edu

10,917 10,820

0.9%

11:1

$47,074.0 $14,784.0

44.0% 56.0%

4 year private

$1,111.3 1826

$1,798.8

Barbara R. Snyder

6

Youngstown State University One University Plaza, Youngstown 44555 (330) 941-3000/www.ysu.edu

10,432 10,389

0.4%

14:1

$8,087.3 $9,090.0

89.0% 11.0%

4 year public

NA 1908

NA

James Tressel

7

Lorain County Community College 1005 N. Abbe Road, Elyria 44035 (800) 995-5222/www.lorainccc.edu

6,175 6,431

-4.0%

18:1

$3,225.0 NA

100.0% 0.0%

2 year public

$67.8 1963

$48.7

Marcia J. Ballinger

8

Stark State College 6200 Frank Ave. NW, Canton 44720 (330) 494-6170/www.starkstate.edu

6,132 6,420

-4.5%

20:1

$2,796.0 NA

100.0% 0.0%

2 year public

$63.4 1960

$6.2

Para M. Jones

9

Lakeland Community College 7700 Clocktower Drive, Kirtland 44094 (440) 525-7000/www.lakelandcc.edu

4,259 4,595

-7.3%

17:1

$3,287.0 NA

100.0% 0.0%

2 year public

$57.3 1967

$0.4

Morris W. Beverage

Ashland University

3,743 3,685

1.6%

16:1

$19,740.0 $9,746.0

70.0% 30.0%

4 year private

$91.0 1878

$42.0

Carlos Campo

College Ave., Ashland 44805 10 401 289-4142/www.ashland.edu THE(419) LIST

Largest Colleges and Universities Ranked by fall 2017 full-time equivalent enrollment

HIGHER EDUCATION SOLUTIONS

LOCAL FTE ENROLLMENT (1) OPERATING BUDGET TYPE OF INSTITUTION/ (MILLIONS)/ AFFILIATION YEAR FOUNDED

% CHANGE

% ENROLLMENT STUDENT: FACULTY ANNUAL TUITION/ UNDERGRAD/ GRADUATE RATIO ROOM & BOARD

(MILLIONS)

PRESIDENT

11

John Carroll University 1 John Carroll Blvd., University Heights 44118 (216) 397-1886/www.jcu.edu

3,471 3,506

-1.0%

14:1

$39,990.0 $11,580.0

87.0% 13.0%

4 year private

$83.0 1886

$211.0

Jeanne Colleran

11

Baldwin Wallace University 275 Eastland Road, Berea 44017 (440) 826-2900/www.bw.edu

3,471 3,588

-3.3%

11:1

$31,668.0 $9,142.0

84.0% 16.0%

4 year private

$132.1 1845

$164.5

Robert C. Helmer

13

Oberlin College 38 E. College St., Oberlin 44074 (440) 775-8460/www.oberlin.edu

2,838 2,903

-2.2%

9:1

$52,762.0 $15,862.0

99.0% 1.0%

4 year private

$164.5 1833

$819.9

Carmen Ambar

14

Walsh University 2020 E. Maple St. NW, North Canton 44720 (330) 490-7090/www.walsh.edu

2,083 2,034

2.4%

13:1

$27,650.0 $10,530.0

72.8% 27.2%

4 year private

$76.2 1960

$25.8

Richard Jusseaume

15

University of Mount Union 1972 Clark Ave., Alliance 44601 (800) 992-6682/www.mountunion.edu

2,062 2,262

-8.8%

13:1

$29,890.0 $10,100.0

93.0% 7.0%

4 year private

$55.0 1846

$138.8

Richard Merriman

16

The College of Wooster 1189 Beall Ave., Wooster 44691 (330) 263-2000/www.wooster.edu

1,993 1,990

0.2%

11:1

$48,160.0 $11,400.0

100.0% 0.0%

4 year private

NA 1866

$260.4

Sarah Bolton

17

Notre Dame College 4545 College Road, South Euclid 44121 (216) 381-1680/http://notredamecollege.edu

1,574 1,618

-2.7%

16:1

$29,300.0 $9,850.0

91.0% 9.0%

4 year private

$30.3 1922

$8.4

Thomas G. Kruczek

18

Bowling Green State University - Firelands One University Drive, Huron 44839 (419) 433-5560/www.firelands.bgsu.edu

1,269 1,312

-3.3%

20:1

$4,706.4 NA

100.0% 0.0%

2 year public

NA 1966

NA

Andrew Kurtz

19

Hiram College 11715 Garfield Road, Hiram 44234 (330) 569-3211/www.hiram.edu

978 950

2.9%

10:1

$32,700.0 $10,290.0

99.0% 1.0%

4 year private

$29.4 (2) 1850

$72.8

Lori E. Varlotta

20

Malone University 2600 Cleveland Ave. NW, Canton 44709 (330) 471-8100/www.malone.edu

960 973

-1.3%

12.5:1 (3)

$29,000.0 $9,300.0

77.4% 22.6%

4 year private

$29.6 1892

$19.4

David A. King

21

Northeast Ohio Medical University 4209 State Route 44, Rootstown 44272 (330) 325-2511/www.neomed.edu

951 959

-0.8%

NA

$40,000.0 NA

0.0% 100.0%

4 year public

NA 1973

NA

Jay Alan Gershen

22

Lake Erie College 391 W. Washington St., Painesville 44077 (440) 296-1856/www.lec.edu

949 959

-1.0%

21:1

$29,426.0 $9,460.0

87.2% 12.8%

4 year private

$18.5 1856

$33.7

Brian D. Posler

23

Ursuline College 2550 Lander Road, Pepper Pike 44124 (440) 449-4200/www.ursuline.edu

721 726

-0.7%

8:1

$30,840.0 $10,362.0

55.0% 45.0%

4 year private

$22.7 1871

$43.5

Christine De Vinne

24

Cleveland Institute of Art 11610 Euclid Ave., Cleveland 44106 (216) 421-7000/www.cia.edu

624 615

1.5%

10:1

$37,980.0 $13,942.0

100.0% 0.0%

4 year private

$18.9 1882

$27.5

Grafton J. Nunes

THIS YEAR COLLEGE OR UNIVERSITY

FALL 2017/ 2016

maloneynovotny.com + 216.363.0100 ENDOWMENT

RESEARCHED BY CHUCK SODER Information supplied by the schools. Send questions, suggestions or suggestions to Chuck Soder: csoder@crain.com. (1) These numbers represent full-time equivalent enrollment for campuses in Ashland, Ashtabula, Cuyahoga, Erie, Geauga, Huron, Lake, Lorain, Mahoning, Medina, Portage, Stark, Summit, Trumbull and Wayne counties. (2) Reflects fiscal year 2017. (3) Calculated from numbers that include students and faculty outside Northeast Ohio.


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ANALYSIS

List: College enrollment falls again, still above 2007 level Local campus enrollment

By CHUCK SODER csoder@crain.com @ChuckSoder

Enrollment at local colleges dropped yet again this past year, but it’s still higher than it was in 2007. Full-time equivalent enrollment on campuses in Northeast Ohio fell by 2.5% from fall 2016 to fall 2017, according to data submitted by the 27 schools on the full digital version of our Colleges and Universities list. That trend has been going on since 2010. But that wasn’t a normal year. Local colleges attracted a huge influx of students between 2007 and 2010. Consider the 23 schools that submitted data in 2007, 2010 and 2017. Their FTE enrollment jumped by 22,000 — nearly 20% — in just three years. All but two of those schools added students between 2007 and 2010. Community colleges posted huge gains back then. But for the most part, they've lost those gains. Why? Data from Postsecondary Analytics show that community colleges typically gain students when unemployment is high. But enrollment gains during the recession were widespread, as was the decline. For instance, four of the region’s five public, four-year colleges saw

Full-time equivalent enrollment on local campuses for the 23 colleges that submitted data in 2007, 2010 (when enrollment peaked this past decade) and 2017. 150,000 120,000 90,000

As for the list ...

60,000 30,000 0

Though local FTE enrollment at Kent State University, No. 1 on the list, has fallen since 2015, the university has largely held on to the enrollment gains it made during the recession. Meanwhile, the University of Akron, No. 2 on the list, has experienced a steady decline since 2011. A few schools — Case Western Reserve University, Northeast Ohio Medical University and Cleveland Institute of Art — have grown almost continuously.

’07

’10

’17

SOURCE: Crain’s research

FTE enrollment drop slightly this year. All five saw declines in total headcount enrollment, Crain’s reported in October. That story noted that they’re recruiting from a smaller pool of high school graduates these days. It also said international recruitment has become harder due to increased competition and a contentious political environment. But some schools are clearly doing better than others.

Case Western is No. 5 on the list, but it by far has the largest endowment at nearly $1.8 billion, and the largest operating budget at $1.1 billion. But it isn’t the most expensive school on the list. That’s Oberlin College, which charges $52,762 annually to students paying full freight. The College of Wooster is second at $48,160, followed closely by the Cleveland Institute of Music, then Case Western. The least expensive school is Stark State College. And a bit of news regarding Virginia Marti College of Art and Design. VMCAD College, which is on the full digital list, is now in the four-year college category. It started offering bachelor’s degrees in January. More than 60% of its students are now in those programs.

Local Decisions from a Local Bank Geauga Savings Bank is the no-hassle, no headache bank. Just local banking decisions from local bankers. That means timely answers when you need them the most. Get the service you deserve with your business and personal banking needs. Talk to us today or stop by our office at: 24755 Chagrin Blvd., Ste. 100 | Beachwood, OH Contact: Dell Duncan Executive Vice President 216-225-1666 Dduncan@geaugasavings.com

Heathyr Ullmo Senior Commercial Banking Officer 330-603-3634 Hullmo@geaugasavings.com

geaugasavings.com

OUR PURPOSE

IS TO HELP YOU FIND YOURS PURPOSE. IT’S THAT SENSE OF CALLING THAT TAKES YOU FROM A STUDENT OF LIFE TO A PERSON OF IMPACT. It powers Golden Flashes and is fundamental in everything we do at Kent State. It’s what drives us and it’s what unites us – not just on campus but across the nation and across the globe. At Kent State University, it’s our purpose to help you find yours – so you can capture your calling and own the future.

Kent State University, Kent State and KSU are registered trademarks and may not be used without permission. Kent State University is committed to attaining excellence through the recruitment and retention of a diverse student body and workforce. 17-UR-00332-237

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CRAIN’S CLEVELAND BUSINESS

AKRON

Tapping into high-flying drone industry As field grows rapidly in the state, Kent State adds a study focus By DAN SHINGLER dshingler@crain.com @DanShingler

Sometimes, it can seem like college professors just drone on and on. Kent State University has hired some of them to do just that. The school is preparing to graduate the first students of its aeronautics program with a minor in unmanned aircraft systems (UAS), aka drones, in December. The program only has about 15 students, out of more than 500 in the school’s aeronautics program, but professors Blake Stringer and Jason Lorenzon think they’ll have more students going forward. “We’re definitely seeing more interest,” said Stringer, who was seated next to a DJI Phantom, the ubiquitous, white quad-copter that is like an emoji for drones. “I saw one just flying down the beach on vacation — right above people!” Lorenzon said. He teaches the legal and regulatory aspects of UAS. No-nos, such as flying a drone above people, tend to set him off, he said. That might be because Lorenzon, like Stringer, is a pilot, too, and people who fly around in real planes tend to be sticklers for the rules and procedures that keep them alive. But they also want to see rules followed with drones because they and industry advocates don’t want to see the industry get a black eye

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NOVEMBER 6, 2017

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Kent State University professors Blake Stringer, left, and Jason Lorenzon teach classes about unmanned aircraft systems, or drones. Kent State recently added a minor in the field of study. (Dan Shingler for Crain’s)

that could stunt its growth. Kent State, along with other industry participants, is holding an event on Wednesday, Nov. 29, in Independence to provide updates on the drone industry and its opportunities — and where the school hopes to cultivate further interest in the industry and its program. So far, though, industry growth is, well, taking off. And Kent State is on top of it with its new minor. “I think it’s terrific,” said Jeff Rolf, president of the Ohio Aerospace Institute, when told of the school’s new program. Rolf is already involved with the development of UAS technology in the state. He thinks the state — with its drone technology and related business and technical assets — is well-positioned to be what he calls the “re-birthplace of aviation.”

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Entrepreneur Jeff Taylor’s company, Event 38 in Akron, sells customized working drones for a variety of applications. (Contributed photo)

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Rolf said there are already several Ohio companies working on advanced systems for things like collision avoidance and that UAS technology is progressing faster than most people outside of the industry realize. While people are familiar with the hobbyist drones and the very big UAS vehicles used by the military, there’s an entire range of applications in between that are growing rapidly, he said. They include things like systems that do land surveys, inspect pipelines, bridges or other infrastructure; or systems that deliver not only packages, but things such as first-aid supplies and anti-venom in hard-toreach locales. And soon drones may be able to pick you up in one place and drop off you in another. That’s right, Rolf said. In the foreseeable future, you might call for a personal transportation drone instead of a ride-share service. “The Ohio Federal Research Network has put out a request for information on a five-year program on three different kinds of drones,” Rolf said. One is for UAS systems that do things like surveys and inspections, one is for logistic delivery systems that might deliver packages, and the third is for “personal aerial vehicles,” he said. “They’re looking at, within five years, having unpiloted personal aerial vehicles … You could walk out of your favorite restaurant, key into your phone that you want one of these PAVs to pick you up and take you over to the ball game.” His excitement over all of this reminds Rolf of a childhood visit to the 1963 World’s Fair.

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PA G E 4 5

AKRON

STEM shadows could be boon for employers By BETH THOMAS HERTZ clbfreelancer@crain.com

A new study at the University of Akron that’s looking at how to retain STEM students just might be good for area businesses as well. The university has received a $450,000 grant from the National Science Foundation to study if providing first-year students in science, technology, engineering and math with paid, in-the-field shadowing experiences will help keep more of them in school and in a STEM major. Many area employers are excited to be part of this program as they see it as a good way to start recruiting in-demand graduates early in their college careers, said Donald P. Visco Jr., dean of the UA College of Engineering and principal investigator on this project. “We hear all the time that employers want to make that relationship with potential employees as early as possible, so this is a great opportunity for them to start that relationship,” Visco said. Fifty freshmen who will be identi-

DRONES

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There, he was thrilled to see a man fly with a jet pack on his back, he said. Whether or not he’s right about the world getting the flying cars it’s always wanted, no one doubts that drones are becoming big business and have huge potential as an industry. In southwest Ohio, the state just carved out 200,000 square miles and covered them with three radar systems that will allow drones to be tested in an intensely monitored and controlled environment, said David Gallagher, chief of staff for the Ohio/ Indiana UAS Center & Test Complex, run by the Ohio Department of Transportation in Springfield. “As a state, we’re actually doing some pretty amazing stuff,” he said, noting he’s aware of more than a dozen community colleges and state schools that have some sort of drone program, training students to do things like inspect Lake Erie break walls or monitor pest management programs in agriculture. “There’s always new uses for this … Every other week or so we get a new idea,” he said. The state hopes to get federal permission to fly drones beyond line of sight — meaning the pilot only sees the drone, or what the drone sees, electronically while the drone is far away. If it’s allowed to do that in its new carefully designed space, it could boost efforts underway to develop new UAS technology, including all-important collision-avoidance systems, Gallagher said. Entrepreneur Jeff Taylor graduated with a degree in aerospace engineering from Case Western Reserve University in 2009 and founded Event 38 in Akron more than five years ago. He takes off-the-shelf platforms and components for fixed-wing drones and combines them with custom hardware, software and system designs. He then sells customized working drones at a fraction of the cost of most do-it-all competitors.

fied as being at higher risk for dropping out than their peers will be enrolled in the program in each of the next two academic years, starting next fall. The students will go out for five Friday afternoons per semester to shadow a UA junior or senior who is working in a STEM internship or coop. They will earn $10 an hour and receive some travel-expense reimbursement. This program will give employers the chance to almost double up on their STEM recruiting efforts, said Laura Carey, UA’s director of career services. “Not only will they have a candidate in the pipeline who’s on a co-op or an internship with them, but now they will also get to bring on board, for a short period of time, a job-shadowing student. So it’s really a great opportunity for them to get a lot for their time that they invested in the co-op,” she said. Early connection with STEM students is so important to local employers, in fact, that more than 50 of them wrote letters of support as part of the National Science Foundation grant application. CompaHe had orders on Day One and has never had to go looking for investors, he said. The company is already profitable and makes UAS that do survey work for mining and forestry operations, agricultural service providers and other end users. The technology wasn’t as big when Taylor was in school, he said. But a minor or even a full-blown degree is a great idea in today’s world, he said, because a lot of traditional aerospace training does not automatically apply to drones. “From the design standpoint in terms of the aerospace stuff that we’re doing with drones at this size and scale, it’s a little different than what you do with bigger planes,” Taylor said. At Kent State, students are not only learning about drones, but getting commercial licenses and flying them for profit. They work for people like local real estate agents who want aerial photos or videos of the properties they market. The job opportunities are a big reason that Stringer and Lorenzon think their program will continue to grow. There’s increasing demand for not only people to design and build drones, but to maintain and repair fleets of them, and to fly them professionally. “We’re seeing jobs at $80,000 and $100,000 a year to be a drone operator,” Lorenzon said, with experienced pilots able to get jobs working for broadcasters or oil and gas companies. Kent State 2015 graduate Alex Flock finished his degree in aeronautical systems engineering before there was an official minor in UAS, but he was involved with the field before he got to Kent and at internships at NASA, where he now works in UAS systems at its Armstrong Research Center in California. He thinks the minor will only help future students. “I believe there is a lot of value in getting an education that includes unmanned aerial systems. The industry only continues to grow,” he said. “The technology is getting much more advanced, especially within automated and autonomous systems.”

“We hear all the time that employers want to make that relationship with potential employees as early as possible, so this is a great opportunity for them to start that relationship.” — Donald P. Visco Jr., principal investigator on UA’s STEM shadow project

nies that submitted letters include AECOM, Goodyear Tire & Rubber Co., the Cleveland Clinic and Great Lakes Brewing Co., Visco said. Their interests are clear: In UA’s engineering program, for example, nearly three-quarters of the students who complete co-ops will ultimately get an offer of a full-time job with that company. The logistics of the program are being developed during this academic year, including getting additional employers on board and fleshing out the criteria for which students will be admitted to the program. One key metric the team will be looking at is students who have a relatively low connection to STEM fields, such as

ones who have no family members in the field or those who didn’t take classes in high school that would specifically prepare them, such as pre-engineering. The team is developing a questionnaire that helps identify additional factors, such as students’ commitment for their selected major, their motivation for seeking that path, their confidence in their ability to succeed in their intended career and their expectations for their career. “These kind of commitment levels will be utilized in conjunction with their ACT scores. All of this will go toward making the selection,” Visco said.

The program’s results will be analyzed to see how successful they are and how they might be transferable to other STEM programs nationally. Visco said there is current literature that demonstrates that co-ops and internships keep upperclassmen in the field, but few or no studies have examined having such heightened engagement beginning in the freshman year. “But we know that some students will make decisions about leaving engineering and STEM careers their first week in school, their first month in school,” perhaps after getting a discouragingly bad grade on their first college-level math class, he said. They rarely get an opportunity as freshmen to see past that initial obstacle and experience what an engineer or a chemist, for example, actually does on a daily basis — information that may help motivate them to press on. Deanna Dunn, executive liaison for engineering industrial placements and development at UA, agrees that the first year or two can make or break a STEM student’s ambitions.


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Ancora is pleased to announce that Katie Ricotti has been promoted to Executive Office Assistant. Since Katie joined Ancora in 2014, she has shown an exemplary commitment to her role, supporting many areas of the Firm. In Katie’s new role, she will continue to provide multi-departmental support while also assisting the Firm’s executives. Ancora congratulates Katie on her continued growth and wishes her success in this new role.

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PA G E 47

Tom Yablonsky

Executive VP, Downtown Cleveland Alliance; Exec. dir., Historic Gateway Neighborhood and Historic Warehouse District Dev. Corp. Working tirelessly, primarily behind the scenes, for more than 30 years, Tom Yablonsky is arguably downtown Cleveland’s secret weapon. A lover of the city center since he worked parttime at Cleveland Public Library and lunched at the Arcade while attending St. Ignatius High School, Yablonsky has helped transform downtown to a desirable place as the nation’s urban movement accelerates. He brings to the table advocacy for historic preservation, persuasiveness to bringing in developers – sometimes working for years before they undertake a real estate development – and a cadre of faithful volunteers who support local development corporations. Moreover, he brings a planner’s vision and a focus on development tools to bear in advancing the city’s central business district. Before most people considered the Flats or lower Euclid Avenue as places to live, he was advocating for them to become neighborhoods. A fount of information about Cleveland who sees himself as a storyteller, Yablonsky uses the city’s rich history to enrich its future. — Stan Bullard

Five things What do you listen to when you are alone in the car? I listen to CDs. I hope the Moody Blues make it into the Rock and Roll Hall of Fame this year. I’m a fan of The Avett Brothers.

What are your favorite books? “In Search of History” by Theodore White and “Let the Trumpet Sound,” the biography of Martin Luther King Jr. by Stephen Oates, which is so well done it reads like a great novel.

What superhero would you like to be? I don’t think of myself in superhero terms.

So who is your hero? Robert Kennedy

What advice do you give young people? Volunteer for something you care about.

Lunch spot Camino Taco and Tequila Bar 1300 West 9th Street Cleveland

The meal One had the chicken enchiladas plate with rice and refried beans. The other a taco and Mexican chicken soup. Both shared a platter of tacos and sauce. One had coffee, the other diet soda.

The vibe Good food in a relaxed atmosphere with a very loud jukebox, even at lunch, with all the necessary Mexican decorations.

The bill $42.63 with tip

What are you working on as we speak? Five development organizations I am involved in are working to protect the federal historic preservation tax credit during tax reform. I’ve been on a lot of conference calls, including with the National Trust for Historic Preservation. I’m helping to find people who have relationships with key legislators. The tax credit absolutely underpins what we’ve accomplished in Cleveland. If it goes away, the collaborative effort that has shaped Cleveland and the value of tax credits to add to the capital stack for renovation projects would be threatened. Do you have a favorite downtown building? The Arcade (401 Euclid Ave.). I was glad to be part of the collaboration that produced the $60 million historic adaptive reuse of the building as a Hyatt Regency Hotel. It’s not just a legacy for Cleveland. It’s nationally significant. Why do you live in Cleveland proper? Doing what I do, I could have lived anywhere. First, I love Cleveland. Second, I wanted to live in a historic house (dating from 1923) in a historic neighborhood (on West Boulevard) that was close to Edgewater Park. I like urban areas and wanted to work on preservation of historic buildings. I thought it would give me credibility to live in Cleveland — walking the talk. I am in Cleveland by choice. Lots of cities are enjoying big bursts of downtown development and housing now. Do you worry about Cleveland being left behind? We don’t tell our story well enough. We should be on the top of a lot of lists for business attraction and development. There is great ease of access to downtown. We’ve had a number of residential projects that should be helping us to attract business. This is the environment that corporations now want to be in. Our quality of place and amenities is very high. In historic adaptive reuse, we are a national leader. What epitomizes the progress of downtown to you? Seeing people — and dogs — on the street. It’s alive. You see people

downtown at times and places you never would have in the past. What is your biggest disappointment? There are lost buildings that did not live until preservation was a stronger ethic. Some of those are the original Hotel Hollenden, the Hippodrome and a building called Blackstone that served lawyers that was at West 3rd and Frankfort Avenue. In most cases when a private group tears down a building in downtown Cleveland, it remains a parking lot. That doesn’t happen with public projects, such as construction of the Gateway project, which produced The Q arena and Progressive Field. The Gateway project made East 4th Street possible. Without it, a lot would have been lost. Is it easier to advocate for historic preservation today? There used to be an attitude that historic preservation could stand in the way of progress. Now it’s clear that historic preservation is progress. Remember when the Brotherhood of Locomotive Engineers Building was torn down (in the 1980s) for the Marriott (Downtown Cleveland)? It was said then that Marriott would never go into a historic preservation project. Now seven of the new hotels in downtown Cleveland are in historic adaptive reuse projects. It was a generational difference. Economically and environmentally, restoring old buildings is the right thing to do. Where will the action be in the future in downtown Cleveland? There are opportunities on Superior Avenue, in NineTwelve and in the Flats that will provide for more growth. Our existing projects have set the table for construction on the lakefront and riverfront, Playhouse Square and at the Asher property between West 3rd and West 6th streets. Many of your staffers and interns have gone on to big things. What do you look for in an applicant? I look for passion and the ability to articulate it. It’s not necessarily being the loudest person in the room. Follow your heart. That’s one of the reasons I’m in Cleveland. Living in a city you care about will get you through the ups and downs of life.

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Crain's Cleveland Business  

November 6 - 12, 2017 issue

Crain's Cleveland Business  

November 6 - 12, 2017 issue

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