Issuu

VOL. 37, NO. 45

NOVEMBER 7 - 13, 2016

Source Lunch

Health Case researchers could play crucial part in fight against malaria. Page 4

CLEVELAND BUSINESS

Kareemah Williams on manufacturing’s role in the region. Page 48 EMPLOYMENT

The List Northeast Ohio’s largest hospitals. Page 51

BUSINESS OF LIFE | PAGE 46

County A labor of love working on career pathways By JAY MILLER jmiller@crain.com @millerjh

When Cuyahoga County Executive Armond Budish cut the ribbon on the county’s new Work Opportunity Resource Center last Tuesday, Nov. 1, he also was kicking off a new approach to helping people move from welfare to not just a job, but, he hopes, to a career. The WORC, on the first floor of the county’s human services building on Payne Avenue, is the most visible expression of Budish’s strategy to merge the county’s social welfare services with its newly focused workforce program, until now a part of its economic development department. The plan is to create a silo-breaking operation that guides unemployed or underemployed people on public assistance into an entry-level job and then, even after they have exhausted their welfare eligibility, helps them build a career. The career piece comes by finding training programs that lead to advancement, or by helping to find affordable day care or transportation to work, for as much as five years as workers move up the ladder from a first job to a higher-paying job. It has been called a career pathways approach that, so far, has been tried only in small-scale, narrowly focused pilot programs. “Basically, we’re transforming the workforce system,” Budish said. “We’ve got a lot of programs to train people, but it’s not working together as a system.” Part of the problem is that the welfare system has been satisfied to move people from welfare to a first, entry-level job but then cuts them loose, leaving former welfare clients to figure out for themselves how to find the next-level job or the training SEE COUNTY, PAGE 45

Eugene Holtier, who came to the United States from Romania in 1985, isn’t a musician by trade. In fact, he started his career as an industrial designer before finding work as a car salesman to pay the bills. Now, his handcrafted instruments, which are made in his North Ridgeville workshop, have found homes across the country. One of his cellos is even in the Cleveland Orchestra. (Tim Harrison for Crain’s)

FINANCE

Banks large and small brace for shockwave of Wells Fargo scandal By JEREMY NOBILE jnobile@crain.com @JeremyNobile

Huntington Bancshares Inc. CEO Steve Steinour addressed the elephant in the room when, unprompted, he told investors during a third-quarter earnings call that Huntington Bank was reviewing sales in-

centives and the ways its bankers interact with customers. It’s a topic that doesn’t normally come up in investor calls, where conversation mostly focuses on bank performance and market outlooks. But this past quarter was a atypical from others, as the banking industry was marred by a massive scandal uncovered at Wells Fargo in September involving some 2 million bogus cus-

tomer accounts opened to inflate sales figures. The result was thousands of fired staff, fines and a serious blemish on the San Francisco-based bank’s reputation in the market. Steinour, like many of his fellow executives at other banks, told analysts he doesn’t anticipate Huntington's review turning up anything questionable that would result in

material changes to their procedures. Yet, “I think we’ll be a little more proactive in terms of how we measure performance,” he said. That Huntington, a reputable bank that has drawn its share of awards and recognitions for consumer service, is proactively addressing such issues underscores the aftershock that event is having on the industry. SEE BANKS, PAGE 50

Focus on Small Business When pigs fly: Local restaurants are cooking up some good BBQ, and more is on the way Page 15 Adviser, Tax Tips Page 16 Kathy Vegh’s newest venture Page 19

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www.ClevelandFoundation.org/Purpose

Turning Passion Into Purpose W I T H T H E C L E V E L A N D F O U N D AT I O N

Igniting the Spirit of Philanthropy HOW ONE FAMILY’S CELEBRATION I NS P I R E D O T H E R S I N THE S E LFLE S S T R A D I T I O N OF GIVING Douglas and Karen Katz of Cleveland Heights aren’t intimidated by startups —they thrive on them. Douglas is the founder, owner and executive chef of fire food and drink, an anchor restaurant in Shaker Square with a mission to serve amazing food, foster community and promote sustainable practices. Karen serves as director of exhibits for The Children’s Museum of Cleveland with responsibilities that include designing engaging exhibits for young children and families and fundraising for the new location.

“Our mission at fire is to nurture people and give back. It only makes sense that we would carry on that same approach as our family strives to support the community.” Karen and Douglas believed that establishing a donor advised fund at the Cleveland Foundation would also give their children a voice in where donations were made.

“I think it would be great to find something that felt really good to give to and follow it over the next “fire is our family five years,” Karen business; it brings “It would be people together, and said. really cool for my it strengthens the kids to be a part neighborhood. of the growth.”

Last ye a r, Dougla s a nd Karen channeled their artistic and entrepreneuria l talents by Our mission at fire When Abe and establishing the is to nurture people A melia bega n fire Philanthropic their Mitzva h and give back. It Fu nd of t he project at The only makes sense Clevela nd that we would carry Temple-Tifereth Foundation. Israel, the fund on that same apWhile the played a large proach as our family pa rt in t heir restaurant served as a symbolic strives to support discussions about jumping-off helping others the community.” point, their and giving back to Douglas Katz the community. philanthropic goal is to involve their “I don’t want my children, twins kids to grow up Abe and Amelia, and just write a check and not feel and give together as a family. that it mattered,” Douglas said. “It’s “fire is our family business; it brings not about recognition; it’s about people together, and it strengthens being a part of the change in our the neighborhood,” Douglas said. community.”

To that end, Karen says she is always listening for areas where the children show interest in a cause—they might mention someone who they heard was sick, see something compelling on a car ride or hear about a new nonprofit through school or their temple. For the family, it’s not necessarily the size of the donation that will matter, but that their children picked the cause on their own and recognized that they could make a difference. “I’ve always been attracted to the underdog,” Karen said. “I’m attracted to the smaller organizations that are doing such meaningful, powerful things, and it’s so hard to raise money for them. I’ve seen it firsthand. To grassroots organizations, small gifts can make such a difference.” Douglas and Karen can already see that the fund will give them an opportunity for meaningful experiences as a family. For parents who are both creative and empathetic, this was key. “Even as one family, you can feel connected to a cause and see the impact,” Douglas said. “That means so much.” For even the youngest donors, finding where to start can be the biggest question. So, when their B’nai Mitzvah invitations were mailed last year, both Abe and Amelia decided that instead of gifts, they’d suggest donations to the fire fund. The response from their friends and family was overwhelmingly positive, as more than 60 guests decided that giving to the fund was also a wise investment. “As a family, we believed in giving to people and supporting neighborhoods,” Douglas said. “It was affirming to have our closest friends and relatives join with us— and to see how excited our kids could become about giving. It’s something we can challenge them to think about year after year.”

Karen and Douglas Katz at the 2015 B’nai Mitzvah of their children, twins Amelia and Abe, who decided to make an investment in their community at a young age.

What the Katz Kids Say about Giving... What are you most grateful for? Abe: I’m most grateful for having all of my basic needs for survival provided for me instead of having to miss out on things. What are five words that describe how you feel about saving your money to give back to others? Amelia: Helpful, giving, responsible, caring, special. How might you use your fund? Abe: I want to help homeless people in Cleveland who are struggling with their daily lives. How do you plan to change the world? Amelia: This has been a good starting point, and I hope to continue to help all of the organizations and people in the world. I really enjoy giving and taking my time to help other people.

To learn more about giving through the Cleveland Foundation, please call 877-554-5054.

GROWING WITH PURPOSE FOR 102 YEARS Established in 1914 as the world’s first community foundation, the

For more information on the Cleveland Foundation, please visit

Cleveland Foundation has helped Greater Clevelanders turn their

www.ClevelandFoundation.org and follow us at

passion into purpose for more than a century. The foundation is Ohio’s

Facebook.com/ClevelandFoundation or @CleveFoundation on

largest grantmaker and one of the largest community foundations in the

Twitter and Instagram.

country, with assets of $2.1 billion and 2015 grants of $95 million.

PA G E 4

CRAIN’S CLEVELAND BUSINESS

N O V E M B E R 7 - 13 , 2 016 |

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As malaria parasites consume red blood cells, they leave a byproduct called hemozoin. Because hemozoin contains iron particles, the malaria byproducts align when placed near a magnet, reducing the amount of laser light that can pass through a sample of blood. CWRU’s Magneto-Optical Detector, or MOD, detects any change in light to determine whether a person is infected. Blood sample

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With a couple of magnets, a laser and a lot of ingenuity, researchers at Case Western Reserve University have developed a portable, battery-operated malaria detection device that can test for the disease more accurately and at a fraction of the time and cost — and it’s getting a lot of attention. Without technology like this, experts say, it would be very difficult to truly get rid of malaria — a disease for which almost half of the world’s population is at risk, the World Health Organization estimates — because there’s no other way to screen huge populations. Plus, there’s not enough money or supply of anti-malaria drugs to administer them to everyone in a community. CWRU’s Brian Grimberg and Bob Brown led the group of researchers who developed the technology, dubbed the Magneto-Optical Detector, or MOD. “We can finally go into villages and screen 500 people in a couple of days, whereas before if you had to do that with microscopy, there’s no chance,” said Grimberg, a malariologist and assistant professor of international health at CWRU. “That way, we can get the right people drugs to get rid of malaria in that area.” The MOD technology has recently been picked up for licensing and commercialization by Hemex Health, an Oregon-based startup focused on global health. Also, the work has earned a Patent for Humanity Award from the U.S. Commerce Departments’ United States Patent and Trademark Office. The team, which has been working together since 2009, will also be honored at the White House this month. Right now, two MOD machines are in the field in Peru and Kenya and have screened about 1,000 samples, but that should increase soon, Grimberg said. He plans to start screening whole villages in Kenya beginning in January.

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Brian Grimberg has used the MOD technology in the field in Peru. (Contributed photo)

How it works As malaria parasites consume red blood cells, they leave behind a digestive byproduct called a hemozoin, which contains iron particles (effectively, Grimberg said, it’s “malaria poop”). Magnets moved close to the sample cause the hemozoin to align, which reduces the amount of laser light that can pass through the sample. MOD can detect the change in the laser and quickly determine whether a person is infected. Right now, the prototype is roughly the size of a shoe box. It’s attached to a couple of different batteries outside the box, as well as a laptop. Inside, a motor rotates to move two magnets alongside and then away from the sample, which requires just a single drop of blood, as a laser beam is directed through it. An attached computer reads the change in the laser as the magnets flank the sample and then move away. The final product, which Grimberg said industrial designers are working to perfect, will condense the power source, add solar power and remove the necessity for a separate laptop. With all the components, the machines cost about $500 to make. “It’s already light, it’s already cheap, but we’d like to make it lighter and cheaper,” said Brown, a CWRU distinguished university professor in physics. Volume 37, Number 45 Crain’s Cleveland Business (ISSN 0197-2375) is published weekly at 700 West St. Clair Ave., Suite 310, Cleveland, OH 441131230. Copyright © 2016 by Crain Communications Inc. Periodicals postage paid at Cleveland, Ohio, and at additional mailing offices. Price per copy: $2.00. POSTMASTER: Send address changes to Crain’s Cleveland Business, Circulation Department, 1155 Gratiot Avenue, Detroit, Michigan 48207-2912. 1-877-824-9373. Reprint information: 212-210-0750

Grimberg helped to develop the idea after working on malaria in Papua New Guinea. Scientists traditionally would spend up to an hour preparing and studying a slide to detect malaria. By the end of the day, there would still be people left over whose slides hadn’t been read. His initial idea was to find a way to quickly triage patients. Instead, now there’s a device that can provide results in 30 seconds. It’s also 20 times more sensitive in detection and has a 96.5% accuracy rate, significantly more than the 85% rate seen with in-field tests with a microscopist studying slides. And at less than $1 per test, Grimberg said, it’s cheaper than the $1.57 average for a microscope test in the field or the $6 DNA test, which would be done in a lab.

To the market Wayne Hawthorne, senior licensing manager at the Office of Technology Transfer at CWRU, helped the team file patents and connect them with internal and external funding. The university will get a “small royalty” off of this, he said, but the main focus is to get it out to the global health market. “We’re not looking for big return in terms of dollars, but we are looking for a big return in diagnosing malaria,” Hawthorne said. The return may come for anti-malaria organizations, which Grimberg estimated can save $1.2 billion annually on direct diagnostic costs. Grimberg would like to see this in the hands of governments, villages’ malaria clinics, anti-malaria organizations and even homes, though he said that’s a ways off. But after several years, the technology is close to making it to market, Hawthorne hopes it will be ready for the market in a year. Without Hemex picking up the license for the technology and the support of CWRU, Grimberg said the technology would be “the world’s greatest science fair project.” “It’s really interesting, it’s great and maybe we’d help a few people, but really without the commercialization aspect, we don’t go anywhere, and it doesn’t really help anybody,” he said. Subscriptions: In Ohio: 1 year - $64, 2 year - $110. Outside Ohio: 1 year - $110, 2 year - $195. Single copy, $2.00. Allow 4 weeks for change of address. For subscription information and delivery concerns send correspondence to Audience Development Department, Crain’s Cleveland Business, 1155 Gratiot Avenue, Detroit, Michigan, 48207-9911, or email to customerservice@crainscleveland.com, or call 877-8249373 (in the U.S. and Canada) or (313) 446-0450 (all other locations), or fax 313-446-6777.

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On Sept. 30, Jay Tapper got to be “the cool dad.” On that day, Neutrogena and Teen Vogue threw a glitzy launch party for the latest Neutrogena product: A $35 mask that uses blue and red LED light to treat acne. And because Tapper started the company that developed the mask, he got an invite. That was a big deal. He held the “wealthy dad” title long before Johnson & Johnson acquired the mask from one of his companies, La Lumiere LLC. The deal involved a 9-figure cash payment and a 9-figure earn out, according to Tapper. But getting to take his 16-year-old daughter to a party full of beauty industry insiders was a different experience entirely. “She was so proud of me. I was like the cool dad,” he said. The company that ran La Lumiere, Zuko Inc., employs three people in Oakwood Village: A chief financial officer, a head of operations and Tapper’s assistant. Tapper now lives in Philadelphia, but the Northeast Ohio native racked up many of his early successes while living here. He played a key role in commercializing the Spin Pop (a spinning lollipop), the Dish Doctor (a spinning dish scrubber) and the Original Goody Bag (a bag full of candy and toys). Zuko will continue to develop new products for Johnson & Johnson’s consumer products division, in addition to working on other projects for Tapper, he said.

Neutrogena’s Light Therapy Acne Mask uses blue and red LED light to treat acne. (Contributed photo)

La Lumiere originally released two masks in February 2014: One to fight acne and another to fight wrinkles. By November of that year, they had generated $10 million in sales. So might Neutrogena be working on its own version of the wrinkle-fighting mask? Neither Tapper nor Johnson & Johnson would say. The massive health care products company invested $20 million in La Lumiere roughly two years ago. Within a few months, two other large corporations had expressed interest in buying La Lumiere, Tapper said. Johnson & Johnson soon made its own offer. It made sense to sell the company to Johnson & Johnson, given the

strength of its beauty brands, its retail relationships and its marketing capabilities, Tapper said. Neutrogena is starting a digital marketing and TV ad campaign for its Light Therapy Acne Mask this month, and it plans to run print ads early next year, according to Ginny Friedman, group brand director for Johnson & Johnson Consumer’s Neutrogena brand. Dermatologists already use light to treat acne and wrinkles. Johnson & Johnson took interest in La Lumiere because it was “looking for a science-based solution that would encourage consumer compliance and address acne as a full face condition,” Friedman wrote in an email to Crain’s.

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N O V E M B E R 7 - 13 , 2 016

PA G E 7

DDR is searching for a COO; Mickey Thompson position could lead to more expanding in Stow By STAN BULLARD

By STAN BULLARD

Project details

sbullard@crain.com @CrainRltywriter

Address: 4651 Prosper Drive, Stow

Shopping center owner DDR Inc. of Beachwood is in the market for a chief operating officer in a move to bolster retail experience at its top ranks, perhaps gaining a future candidate for CEO in the process. The move is the latest development in a streak of management turmoil at the company, which owns and manages 327 value-oriented shopping centers in 36 states and Puerto Rico. In July, the public companyâ€™s board terminated David Oakes, its CEO for less than two years, and immediately installed former board member Thomas August in the job. He is the third occupant of the CEO suite at DDR since long-time executive Scott Wolstein left the position in 2010. August mentioned the search on the real estate investment trustâ€™s most recent conference call Oct. 27 with investors and analysts. According to a Seeking Alpha transcript, August said, â€œIâ€™ve been speaking with the board quite a bit, and what we have agreed is that we may also be seeking to hire a president or COO.â€? August has deep experience with office REITs and noted that analysts have pointed to his lack of retail experience.

Mickey Thompson Tires & Wheels is a big industrial building occupant in Stow, and itâ€™s taking steps to allow it to roll on a plan to get a bunch bigger. Streetsboro-based Geis Cos. on Oct. 25 secured approvals from Stow Planning Commission to build for Mickey Thompson a 220,000-squarefoot warehouse and office building on a 15-acre parcel at 4651 Prosper Drive in the Prosper Drive Industrial Park. Mickey Thompson, a designer, developer and distributor of specialty tires for the street, drag strip, truck and off-road markets, currently occupies a 122,000-square-foot building at 4600 Prosper that dates from 1995. According to minutes of the planning commission meeting, Greg Seifert, the in-house architect of Geis, said the building would replace Mickey Thompsonâ€™s current building. The current building also is owned by an affiliate of Geis, according to online realty data provider CoStar. Plans for the new property include a 20,000-square-foot, single-story office space within the structure. The remainder will be devoted primarily to warehousing, as the plan calls for

David Oakes (Contributed photo)

Thomas August (Contributed photo)

â€œAnd then secondly,â€? August continued, â€œand this just really relates to I think good management practices and succession, is I would hope that one or possible more of the people either internally or those we bring on board will be in a position to take my place at some point in the future.â€? August was 68 and agreed to a three-year contract when his appointment was announced in July upon Oakesâ€™ dismissal. The potential president or COO is not the only heavy lifting DDR has executive recruiters doing. The company has Christa Vesy as interim chief financial officer because Oakes was also filling that role. The prior CFO, Luke Petherbridge, left in April to become CEO of Excel Realty Trust. Oakes had served as

CFO before becoming CEO. Having executives in the president and COO capacities is something DDR has done in the past. Oakes served as president while Daniel B. Hurwitz was CEO. Hurwitz had served as COO prior to becoming CEO, and the company had a COO prior to that. Hurwitz left DDR earlier than expected at the end of 2014. After August mentioned the search for a COO and president, one analyst on the call asked about what that would do to overhead costs for the firm. August said the company has had lower expenses in the category the past few years. Brandon Glenn, a DDR spokesman, said the company would not comment on the matter beyond what was stated on the conference call.

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that space to be 39 feet tall â€” a figure thatâ€™s dramatically tall, even for an industrial building. Taller ceilings increase the amount of product that can be stored in a building. Stow City Council approved revising an existing tax abatement for Mickey Thompson at its meeting Oct. 27. The tax abatement was revised so that rather than supporting a project starting in March 2016, as the abatement originally indicated, it will begin by December 2016 and will be finished by Nov. 30, 2017. The tax abatement is for 10 years and is for 100% of the approved property. The city agreement for the abatement was signed for Mickey Thompson by Joseph Kohut, the companyâ€™s treasurer. Kohut declined comment on the project. Greg Geis, the principal at Geis Cos., declined comment in an email. Neither Stow Mayor Sara Kline nor other officials returned calls asking for comment on the project.

PA G E 8

N O V E M B E R 7 - 13 , 2 016 |

CRAIN’S CLEVELAND BUSINESS

Medicaid changes test psychiatric units By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

Along with increased access to care, Ohio’s Medicaid expansion has brought an influx of patients to Cleveland-area hospitals’ already busy inpatient psychiatric units — and the deluge is causing capacity issues. At University Hospitals, for example, patients wait an average of 42 hours before reaching one of the system’s 205 psychiatric beds, said Lori Locke, director of the psychiatric service line and nursing practice for UH. They stay in a holding pattern, waiting in a general hospital bed, an ICU bed or in the emergency room. But none of these settings are ideal for patients. “By the time you get a patient to a bed, they’re sicker than when they first presented in many, many — most cases,” Locke said. Hospitals say the crunch is an unintended consequence of the state’s

expansion of Medicaid eligibility, further exacerbated by the opioid epidemic. As more patients are insured — which health care officials emphasize is a good thing — they’re seeking care at general hospitals instead of the state behavioral health hospital, said Dr. Don Malone, the Cleveland Clinic’s chairman of psychiatry and psychology. “It’s getting people the care that they may or may not have been getting before, but it certainly has taxed the general hospital psychiatric unit system,” Malone said. And though psychiatric beds are separate from detox beds to treat addicts, people struggling with addiction often have mental health issues as well — leading them to stop seeking treatment or to neglect taking their medications. As a result, they could end up in psychiatric crisis. “I think that’s contributed significantly to people getting to the point of having a very serious mental illness, having their lives impacted, losing their jobs, losing their families

“Inpatient is not where you want to treat people. It’s not.” — Dr. Don Malone, the Cleveland Clinic’s chairman of psychiatry and psychology

and getting to the point of being severely depressed and in many cases, suicidal,” said Dr. Ewald Horwath, chair of MetroHealth’s department of psychiatry. “I think that contributed a lot to the pressure for needing admission to psych units.”

Coordinating chaos Cleveland is not alone in the challenge. A poll presented at the American College of Emergency Physicians’ annual meeting in October found that 48% of respondents reported psychiatric patients are held in emergency

departments at least once a day while waiting for an inpatient bed. “When we can’t place a patient immediately, we start calling our colleagues. We call MetroHealth, the Clinic, St. Vincent’s,” Locke said. “We’re usually challenged in the exact same way.” Despite coordinating among themselves to transfer patients in need of a psychiatric bed, hospitals in Cleveland are often all in the same boat: at capacity. “In all honesty, we’re not very much help to those outside of our system, because just our own emergency systems alone keep us full,” Malone said. The Clinic’s volume of psychiatric patients has increased 18% in the last two years, he said. Getting patients from various emergency rooms into a psychiatric bed is a “daily puzzle.” Those admitted are “very sick,” Malone said. They are a danger to themselves or others or are sufficiently impaired and cannot care for themselves. Though the bar is high, he said, there’s more than enough

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people who reach that level of need. St. Vincent Charity Medical Center’s 64 in-patient psychiatric beds are at capacity a few days a month, said Bev Lozar, chief nursing executive, who said that has been the case for several years, despite adding 16 geriatric psychiatric beds about a year and a half ago. Horwath said the MetroHealth’s 20-bed inpatient psych unit is full most of the time, which has been the case for several years, but things got “even tighter” after the Medicaid expansion.

More patients, higher acuity Before the Medicaid expansion, it was “very unusual” for the Cleveland Clinic’s 248 inpatient psych beds to be at capacity — at most, 5% of the time, Malone estimated. Despite admitting and discharging almost 35 patients every 24 hours, it’s not unusual to still have five to 10 patients waiting each morning for a bed to open up at the Clinic. SEE UNITS, PAGE 50

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The Dish: Susan Condon Love

Human touch is important at Le Bistro du Beaujolais The two-story house, with roots going back to 1830, sits surrounded Susan Condon by antique shops, restaurants, other Love is a buildings with equal or older pedifreelance grees and is within a short walk of a writer who was picture-perfect, white-steepled an editor and church. All in all, a beautiful and writer at The quaint neighborhood made even Plain Dealer, more picture-perfect by the blazing The Las Vegas Review-Journal, colors of changing leaves. the Savannah (Ga.) Morning But the clapboard piece of history News and The Annapolis Capital. on Columbia Road in Olmsted Falls hasn’t been a home for decades. After being abandoned for many years, it plan that takes full advantage of sowas zoned for business in 1969 and, af- cial media and sites like TripAdvisor, ter several iterations including a resale about not discounting the power of shop, is now a destination for Franco- word of mouth. “Treat people well. Correctly. philes and foodies alike. Named Le Bistro du Beaujolais and owned by Know a little about the family. Be Georges and Claudie d’Arras, the concerned if there is something restaurant has an avid following for be- wrong. Make this human touch a part of the experience,” said Georges. ing so far off the beaten urban path. “See that gentleman over there?” “People like to be recognized.” “Ask how they heard of our restauasked Georges on a recent weekday afternoon, pointing to a lone man rant,” he said. What is the most comhaving lunch at a table in the 15-table mon answer, you wonder? “Word of (11 in the main room, four in a side mouth,” said Georges. Claudie, sitting across a small table parlor) restaurant. “He comes every single Tuesday for lunch. Same ta- from her husband of 32 years, nodded in agreement. ble.” recalled when The 83-year-old “Treat people well. She Ron, the 83-year-old man is far from patron who has alone in his devotion Correctly. Know a been coming to the to both the restaurestaurant since it rant and its owners. little about the opened, didn’t show When Le Bistro du family. Be up one week. Beaujolais moved to “We were so worOlmsted Falls in concerned if there ried,” she said. “I ac2005 from its locatually drove by his tion in Westlake, “we is something house to make sure were booked nine he was OK. He was months ahead on wrong. Make this on vacation. I asked opening day,” said human touch a him, ‘Please let us Georges, proudly. know’ when you are The couple love part of the gone!” the Olmsted Falls Georges added location, and Clau- experience. People that while he and die said it is more like to be Claudie know many successful finanof the longtime pacially than the recognized.” trons as friends Westlake location. “Westlake was al- — Georges d’Arras, co-owner of (they even taught Ron how to speak most our training Le Bistro du Beaujolais French), they know facility,” she said. “We had to train people to, for exam- how to identify when guests want to ple, not ask for a wine before they be left alone. “You go up to a table and you have selected their dinner.” Georges smiled as they related know,” said Georges. “You have to admany such stories. He has reason to just. You have to adjust. I visit each tabe happy. Le Bistro du Beaujolais has ble. Some want to talk, and when they beaten the odds and maintained a don’t, you move on from the table.” Another reason for the bistro’s sucsuccessful business for more than 16 years — five years in Westlake and 11 cess? “We have 15 tables; we book 15 tain Olmsted Falls. The bistro and its continued suc- bles,” said Georges. “Never, ever cess are part of a huge industry in should you make a customer with a Ohio, which has more than 22,000 reservation wait. You will never, ever eating and drinking establishments find someone sitting at the bar here with a projected $20.5 billion in sales (waiting for a table). “A bistro is living. It’s life. You can in 2016, according to the Ohio joke, talk, be with friends,” he added. Restaurant Association. A successful restaurant “has to So how do the d’Arrases explain the success of a French cuisine have a lot of feeling,” said Claudie. Georges has been in the restaurant restaurant with five full-time employees, located in the middle of the industry for 40 years; Claudie a little rural/suburban mix of antique stores less. The couple, who have two grown and farmhouses? To a large extent, they credit the bistro’s unique offer- children, made the move here from ings, as well as a warm and welcom- France on July 4, 1998, “because it was such a better business environing atmosphere. The couple’s philosophy is as comment to start a restaurant than France plicated as it is simple. It boils down was at the time,” said Claudie. She added, “We first came to to about a half-dozen rules and patterns of behavior that have little to do Cleveland … to visit my brother who with the food — which is a whole dif- lived here. He was having a party, so I ferent aspect of being a successful made a salad with vinaigrette. I could restaurateur. On this day, Georges not understand why so many people and Claudie talked about people: came up to me and said it was so about treating them with respect, wonderful and (asked) how did I about becoming friends with many make it. Every woman in France patrons, about honoring com- serves a salad with vinaigrette every mon-sense manners and congeniali- day. It is so simple and part of the ty, about using a simple marketing day.”

Le Bistro du Beaujolais owners Georges and Claudie d’Arras say their recipe for success is knowing their clientele. (Susan Condon Love for Crain’s)

She knew right then that French cuisine — “made with the right ingredients and put together the right way” — would be a success here. While their philosophy of good food paired with a friendly atmosphere has been successful, it hasn’t been totally smooth sailing. In 2008, shortly after restoration of the 1830 building was completed, the bistro caught fire. “It was an electrical fire,” said Georges, who kept track of the time almost to the hour. After being closed for “10 months and 10 days,” the bistro reopened in January 2009. Despite past adversities, life is good at the Bistro. The couple, who live in Berea, has no intention of starting a second restaurant. “The reason for our success is I am in the kitchen and Georges is upfront,” said Claudie. “We cannot duplicate that.” Le Bistro du Beaujolais — with its tin ceiling, wood floor, and sunshine yellow and green color palette — is a reflection of the France that Georges and Claudie love. “All these little details every day make it work,” said Georges. “We make sure all feel welcome.”

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CRAIN’S CLEVELAND BUSINESS

Opinion From the Editor

Time to retire Chief Wahoo

Editorial

Heads high in creative ways. Good things We got a look last Wedneshappen to institutions that hire day night, Nov. 2, at what really hard-working, thoughtful, dedmakes America, and Americans, great: resilience, maxiicated people and give them mum effort under trying cirthe space and resources to adcumstances, pure joy in victory, dress challenges. J Respect: The streets of grace in defeat. Our political figures would downtown Cleveland were do well this week to emulate filled with Cubs fans last week, the new World Series champiand Progressive Field didn’t ofons, the Chicago Cubs, and the fer much of a home field adAmerican League champs, the vantage. Partisans (the baseCleveland Indians, who gave ball kind) got in some baseball fans a Game 7 for the good-natured digs on social ages and underscored some media, of course, but they got important values that this disalong pretty well, all things mal election season has failed considered. The joy of the Cubs to provide. in winning a title after 108 years Jason Kipnis pumps up members of the Indians bullpen prior Among them: was palpable and, to Cleveland to Game 7. (Rob Tringali/MLB Photos via Getty Images) J Optimism: Sure, “wait ’til next year” is the time-honored cry fans who know the feeling, was genuinely moving. (Hard not to be won over by that smile on third baseman Kris Bryant’s face when of every team that fell short, but in this case, it’s perfectly apt. he made the final putout of the series.) The Indians offered genuThe Indians at full health have a strong core of young players, ine praise to the winners and didn’t grouse about the difficult hand and there’s every reason to think they’ll be back in contention they were dealt. in 2017. They competed valiantly over seven games, thrilled us Politics isn’t sports, of course. All of Cleveland can unite in the process and gave us hope that even better things are to around the Indians, and most of Chicago (save the White Sox come. Wish we felt that way about Election Day. But on a hopediehards) can come together to celebrate the Cubs. By contrast, ful note, pitchers and catchers report Feb. 18. J Innovation: The front offices of both the Indians and the Cubs even the most talented and hard-working politician in these hyper-partisan times is happy to have the support of 50.1% of are forward-thinking users of data, and they place sophisticated his or her constituents. analytics at the heart of their decision-making. There’s a reason But tone and attitude matter, and the teams not only put on a Cubs boss Theo Epstein has won titles in both Boston and Chicago, spectacular show, they demonstrated that opponents don’t aland that Indians’ executives are so coveted by other teams seeking ways have to be at each other’s throats. to improve their fortunes. The latest case in point: The Minnesota If you’re at all interested in politics, your side will win some Twins last month hired the Indians’ Derek Falvey as their executive and lose some on Tuesday, Nov. 8. Like the Cubs and Indians, vice president and chief baseball officer. On the field, Indians be good sports about it. After all, there’s always next year. manager Terry Francona set a new standard for using the bullpen

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Northeast Ohio has been under the hot media spotlight for months. Positive press has rightly followed. Forbes recently declared Cleveland the hottest city in the United States. We’ve got a lot going on, and the rest of our country is just now figuring it out. This is a place to plant your roots, grow and thrive. That media spotlight, however, exposed an embarrassing weakness, thanks to the World Series. The Los Angeles Times, The Washington Post, Sports Illustrated, ESPN, The New York Times and so many others wrote about it. Yes, Chief Wahoo, I’m talking about you. Love your team. Love your players. Love their grit and determination, their spirit and talent. Love that they took the Chicago Cubs to extra innings in Game 7 of the World SeElizabeth ries before relinquishing the championship. McIntyre So much to love. But that grinning Wahoo? Sorry, it’s time to go. Now, this has nothing to do with curses or superstitions. It has everything to do with what’s right. And wearing a grinning, red-faced caricature of a Native American is simply wrong. Yes, it’s a cartoon. Yes, many fans have an emotional connection to the symbol and may not intend to offend. And, yes, retiring Wahoo from the team doesn’t mean fans won’t still wear Wahoo gear. Doesn’t matter. It’s time for the Cleveland Indians to take the next step and make Wahoo a part of their history. The Indians made a step in the right direction at the start of the season by phasing out Chief Wahoo as its primary logo in favor of the block-letter “C”. Wahoo still appeared on players sleeves throughout the season and on one version of ball caps. “We do have empathy for those who take issue with it,” Indians owner Paul Dolan told The Plain Dealer in April. “We have minimized the use of it and we’ll continue to do what we think is appropriate.” Dolan stressed, though, that the team had “no plans to get rid of Chief Wahoo; it is part of our history and legacy.” Inexplicably, when the playoffs began, the team was back wearing the alternate Chief Wahoo logo caps, which caught the eye of many people, including the commissioner of Major League Baseball. Rob Manfred vowed to meet with Indians brass sometime after the World Series to discuss the use of Chief Wahoo. “I know that that particular logo is offensive to some people,” Manfred said before Game 2 of the World Series. I’m incredibly proud of our Indians. I have worn my Cleveland pride as often as possible during the team’s phenomenal playoff run this fall. They exceeded everyone’s expectations. Playoff nervousness usually sends me into a cleaning frenzy when I can’t handle the stress of just sitting there, watching the game. I cleaned out a lot of closets and drawers while listening to the nail-biting World Series games. Talk about an archeological dig. I unearthed a box of Indians jewelry from the mid-’90s; some of those treasures were store bought, others were handmade. Nestled in the box was a pair of Chief Wahoo earrings I wore two decades ago. The memorabilia brought back a flood of memories — the emotional connection so many people mention as justification for keeping Wahoo. But I’ve changed since then. And the team can, too. I wear the Block C, now, or some other Wahoo-less form of spirit wear. But this isn’t really about personal preference. It’s about respect. Wahoo is an offensive caricature of Native Americans. The Indians, a classy organization that does things the right way, ought to do right. “Wait ’til next year” applies to the terrific team and the promise of next season. But Wahoo has to go now.

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 letters@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.

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PA G E 11

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A Normandy veteran looks at the headstones of fallen comrades at Bayeux War Cemetery in Bayeux, France. (Matt Cardy/Getty Images)

Veterans Day connection hits home decades later I know Veterans Day is largely for living veterans, but I don’t have many of those in my life. I’ve been unintentionally shielded from that kind of service. Both of my grandfathers served, as did my husband’s, but they’re all gone. One of my grandfathers passed when I was a baby; the other was alive when I was a child, but Rachel Abbey if he shared stories from his time in McCafferty the Navy, it wasn’t around me. I’m grateful to them, and to my uncles and friends and classmates who have given part of their time on this planet to service — after all, I am a reporter who takes full advantage of the whole freedom of speech and press thing — but there was a personal disconnect. But in recent years, on these commemorative days, I’ve thought of a relative I never knew: my great uncle who died overseas during World War II. A great uncle I didn’t even know I had until my mom got a curious email from a man who was claiming to be helping a young French woman find my family. The woman, he said, had been caring for the grave of that great uncle, Joseph F. Kassan. It looked like a scam without a purpose, but I was curious. I’m close to my mother’s family, but they don’t talk much about the past. I had been just a year old when my grandfather died, and I knew nothing about his brother. Being a reporter, we decided that I would take the reins and respond to him. The man’s uncle was buried in Normandy, and he had befriended a woman in France who sent him photos of his grave and connected him with others who cared for the graves of the fallen U.S. soldiers. Stéphanie was one of the first overseas friends he had made, and he had helped her connect with a number of families of the soldiers’ graves she tended.

There’s something strangely touching about knowing that a stranger is caring for the memory of your family. I can’t quite call him a loved one, because I never knew him. But it’s like love. He’s part of my family’s story. I wasn’t sure what to expect, but I emailed her. I found myself chatting with a woman about my age named Stéphanie Pépin who was involved in the Les Fleurs de la Mémoire — the Flowers of Memory, an organization that connects volunteers with the forgotten graves. She visits the graves regularly, leaving flowers and taking photos. As time passed, she sent me documents, piecing together the life of this man I didn’t know. She had official letters and forms from the military to my family, detailing Joseph’s belongings, and heartbreaking ones from my great grandfather and great uncle, trying to learn where his final resting place was. My mom found pictures of these people who were part of me but whom I didn’t know at all, and I sent Stéphanie one of Joseph, young and rosy-cheeked. She sent me back a photo of it at his gravesite in Colleville-sur-Mer. But I always want to know the why. I’ve asked her questions to try to figure out her motivations: Why would she spend her time taking care of strangers’ graves? The answer is unsatisfying in a way, but straightforward and touching. It’s a lot of work, she said, but they released her country. They’re why her grandmothers survived the war, and why she’s here today. In our emails, it seemed as hard for her to explain as for me to understand. The men and women who died were young, she said. They came to free a country many knew little about, outside of Paris. “That’s the least we can do,” she told me in one of our emails. Her answer makes me feel selfish, but grateful. The least I can do is remind people here of how strongly those sacrifices are still felt.

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Web Talk Re: Sterigenics moving to Broadview Heights While it is great that Northeast Ohio is gaining a company, I think moving a headquarters for this reason — that this is where the CEO wants to live — is one of the worst reasons to move. It is, as Crain's Oct. 31 article about Sterigenics states, expensive. Even with a small headquarters, it disrupts the lives of dozens and dozens of people. When the next CEO comes in, that person, too, can feel free to move the headquarters again, creating instability. Unless there are other strong underlying reasons — lower labor costs, access to high tech workers, some kind of industry synergy, being closer to customers — boards, investors and leadership should not approve these kinds of moves. — David Levey

Re: Lake Erie wind farm LEEDCo is one of the most significant renewable energy projects to come along in many years. Some of us have been involved with this dedicated group for over five years because we recognized the importance. It is not just an off-shore wind farm, but the first fresh water wind farm in North America — and one of only a very small number of fresh water wind farms in the world. It is unique having to deal with a lake that freezes over and has a silt bottom. LEEDCo is something that helps us rise to the top of the renewable energy world. — Neil Dick

CRAIN’S CLEVELAND BUSINESS

Letters to the Editor What not to wear to the office

Remembering Cops and Kids program

Concerning your article on Clearsulting in the Oct. 17 issue (“Casual is a good fit for young consulting firm”), I feel casual (sloppy) dress is egocentric and shows total lack of respect for a client. From what I saw and read in your article, I wouldn’t give Clearsulting one minute of my time, much less a consulting fee. S. James Schill Bonita Springs, Fla.

I read Elizabeth McIntyre’s Oct. 2 column about the police chief reading to Head Start kids and how this seems to be a “new” idea. In fact there was a 501(c)(3) organization affiliated with the police department and run by retired police Capt. Joe Sadie called “Cops and Kids.” The present Cleveland administration let it fall by the wayside when Sadie retired and really did not give the organization much support after Mayor Campbell left office. The goal of the organization was to foster better relations in the community between the police and the citizens. It was aimed at the younger children and provided food, event tickets, restored bikes and other aid to primarily inner city families that were in need. Donations were solicited from many high profile citizens to enable the Cops and Kids organization to function. The city at one time provided some warehouse space and vehicles to also facilitate the organization’s mission. The 501(c)(3) status has been maintained so that there is a vehicle in place to help supplement actions that the police force might want to use as part of its transformation, to use McIntyre’s words, into “a department that is part of the community and responsive to it”. Robert H. Gray Westlake

Keeping eye on fair trade Last month, Ohio’s U.S. Sen. Rob Portman and Sen. Sherrod Brown urged the U.S. Trade Representative Ambassador Michael Froman to bring a World Trade Organization case against China to address aluminum overcapacity. They called for the administration to “bring swift and formal action against China’s unfair trade practices at the World Trade Organization (WTO) before U.S. manufacturers and their workers incur further irreparable harm.” China has unfairly subsidized its aluminum industry, which hurts American aluminum manufacturers and their workers. According to the senators, 15,000 workers in U.S. aluminum production have lost their jobs in the last decade, including 1,500 this year alone. Further, they report that China’s government, by violating its WTO obligations in subsidizing its aluminum sector, has caused a drop in global aluminum prices by 35%, catalyzing the layoffs in the U.S. aluminum sector. And even more recently, Ohio’s U.S. senators asked U.S. Department of Commerce Secretary Penny Pritzker to invoke stronger sanctions against two foreign manufacturers who they say are “dumping” washing machines in the U.S. consumer market, selling them at huge illegal discounts. The senators requested the secretary “use every available tool” to stop a pattern of “serial dumping” and “duty evasion.” The Commerce Department and U.S. International Trade Commission work together on illegal dumping cases. Ohio’s U.S. senators have long been focused on enforcing trade laws to protect Ohio and U.S. manufacturing as multiple domestic manufacturing subsectors have suffered from currency manipulation and illegal dumping from various foreign points of origin. In Ohio, the steel and steel tubular goods industries, among others, were significantly harmed by illegal trade practices. In June 2015, the Leveling the Playing Field Act was signed into law, a bill which strengthened trade remedies. The bill was introduced by Sherrod Brown and cosponsored by Rob Portman. In Ohio, manufacturing accounts for 17% of GDP, a larger contribution than any other business sector. Eighty percent of Ohio’s 700,000 manufacturing jobs are in traditional industries that are foundational to our economy, including fabricated metal, machinery, and primal metals. We thank Sens. Brown and Portman for keeping their eye on the ball of fair trade, and we will work with our allies, including the National Association of Manufacturers and Alliance for American Manufacturing, to keep fair trade a top priority of the next administration. Ryan Augsburger Ohio Manufacturers’ Association

Trump’s 100-day plan is headline worthy I was miffed to see that the most significant and aggressive first day plan ever undertaken by a presidential candidate did not get mentioned by Crain’s Cleveland in its Morning Roundup e-newsletter. Donald Trump’s first day and ensuing 100-day contract is rich with good common sense change that reflects the best interests of the people and wise strategy for the nation at large. This contract, in my opinion, should be headline banner news, as business will grow and the people will gain control of the country once again economically, politically and judicially. The security of the nation will be strengthened and our wealth will stop being squandered. An example of such squandering is No. 7 of Trump’s contract, which states that Trump will “cancel billions in payments to U.N. climate change programs and use money to fix America’s water and environmental infrastructure”. I know I am just one reader who has worked in Cleveland for 30 years, but my sense is that public opinion is with Trump. He is the only candidate who will bring about changes that can return America to greatness. His slogan can be seen in his plans and his plans reflect the slogan and it is certainly inspiring. May we all strive to make America great again. The alternative is to coast and extend the line, continue the decline and lose this last best hope given to mankind. It is our choice. Let’s give Trump and America a chance. Please show the contract to all your highly intelligent entrepreneurial readers and let them decide on Nov. 8. William Hanchosky Geneva

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CRAIN’S CLEVELAND BUSINESS

TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The lien is a public notice to creditors that the government has a claim against a company’s property. Liens reported here are $5,000 and higher. Dates listed are the dates the documents were filed in the Recorder’s Office.

LIENS FILED Nicholas Properties & Developments Inc. 2000 Auburn Drive, Suite 200, Beachwood Date filed: Sept. 13, 2016 Type: Employer’s withholding Amount: $604,682 MF Real Estate Partners LLC 6650 Beta Drive, Cleveland Date filed: Sept. 13, 2016

Type: Employer’s withholding, CIVP Amount: $145,973 1360 W. Chestnut Street LLC 161 Crocker Park Blvd., Apt. 303, Westlake Date filed: Sept. 13, 2016 Type: Partnership withholding Amount: $116,204 Employment Specialists International Inc. 12800 Shaker Blvd., Suite 200, Cleveland Date filed: Sept. 13, 2016 Type: Employer’s withholding Amount: $113,826 Home Heart Care LLC 26250 Euclid Ave., Suite 521, Euclid Date filed: Sept. 13, 2016 (two filings) Type: Employer’s withholding, unemployment Amount: $106,127 total

Ohio A1 Drywall Inc. 3452 W. 105th St., Cleveland Date filed: Sept. 13, 2016 Type: Employer’s withholding, unemployment Amount: $37,735 Starr Catering & Food Service Inc. 832 London Road, Cleveland Date filed: Sept. 13, 2016 Type: Employer’s withholding Amount: $33,484 Husni Inc. 10330 Lorain Ave., Cleveland Date filed: Sept. 13, 2016 (two filings) Type: Employer’s withholding, unemployment Amount: $20,354 total Dunecraft Inc. 19201 Cranwood Parkway, Warrensville Heights

Date filed: Sept. 13, 2016 Type: Unemployment Amount: $16,972 Prime IT Services Inc. 222 E. Washington St., Chagrin Falls Date filed: Sept. 13, 2016 Type: Employer’s withholding Amount: $12,820 Medical Care Center LLC 1250 Superior Ave. E., Cleveland Date filed: Sept. 13, 2016 Type: Employer’s withholding, unemployment Amount: $10,496 Anthony Group Inc./Dapper Dans 10703 W. Pleasant Valley Road, Parma Date filed: Sept. 13, 2016 Type: Employer’s withholding Amount: $6,860

Hanoi LLC 4675 W. 130th St., Cleveland Date filed: Sept. 13, 2016 Type: Employer’s withholding, unemployment Amount: $6,563

LIENS RELEASED AKA Construction Management Team Inc. 15508 Miles Ave., Cleveland Date filed: Aug. 27, 2013 Date released: Sept. 13, 2016 Type: Employer’s withholding Amount: $157,570 Ezzat Inc./Unity Food Market 10221 Union Ave., Cleveland Date filed: April 15, 2015 Date released: Sept. 13, 2016 Type: Employer’s withholding, failure to file complete return Amount: $6,010

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Focus

(Peggy Turbett for Crain’s)

SMALL BUSINESS

Cleveland BBQ: We’ve hit the pig time Local restaurateurs put their own spin on the southern classic By MARK OPREA clbfreelancer@crain.com

If 2016 is destined to be a year of magic for Cleveland sports historians, then it shall also be a memorable one for foodies — specifically those entranced by Down South barbecue. Just as the city’s sparked a train of craft-beer nerds, a chain reaction of authentic barbecue joints is set to create a sort of new Cleveland-based adherent, with mouths a-watering, clubs a-forming. And no, Geppetto’s isn’t in the mix. Among the handful of barbecue restaurants and takeout joints that popped up around the city this year none other than Michael Symon’s Mabel’s made a larger impact on the destiny of socalled “Cleveland Barbecue.” The city’s first silver-tray serving joint of its size, Symon’s seventh restaurant is bound to become the poster-child of the uprising. It’s perfect Symon aesthetic: from the hip lexicon found on the cut-to-serve menu, to the kielbasa-and-pork “This is Cleveland” special, the neon signs lighting up shiny brick. It was reported by Cleveland.com that, on opening day, April 11, Symon’s $2 million, 100seat joint brought in more than 700 customers before the six o’clock dinner bell, revelry that extended throughout the week. An article in Eater asked

ABOVE: Felisa Range dashes barbecue orders to tables on a busy Friday night at Woodstock BBQ in Lakewood. LEFT: The Proper Slopper is a smoked pile of beef brisket, pulled pork, Texas hot link sausage and maple bacon at the Proper Pig Smokehouse in Lakewood. BELOW: Tommy Plumley sauces a sandwich at the Proper Pig Smokehouse, which features Texas-style barbecue for in-house and take-out dining.

a logical follow-up question after the opening: “Can Michael Symon Take Cleveland-Style Barbecue Mainstream?” An answer? Yeah, probably. Yet he’s not doing it solo. Just four days after Mabel’s opened to madness, three Lakewood entrepreneurs tested the waters by converting a food truck experiment into a “fast casual,” brickand-mortar barbecue joint. Working in the middle of Proper Pig’s quaint kitchen, around metal smokers and seven-pound cans of beans, co-owner Jeff Truelson recalled fondly opening their corner shop on Detroit Avenue in Lakewood days after the Symon-penned hysteria. “There were so many people waiting outside, they were blocking off the entrances to the shops next door,” he said, smiling. “The whole thing was really a perfect storm. Barbecue’s finally here in Cleveland. It all just kind of happened so quick.” Like spreading embers, the concept surged. In July, West Side businessman and parttime pilot Robert Togliatti opened up Woodstock on Madison Avenue; Giovanni’s Ristorante head Carl Quagliata announced recently he was venturing into barbecue in Cleveland’s eastern suburbs; and just last month, a team of weathered chefs lead by Jon Ashton opened up Barabicu, a no-frills takeout joint in Parma in the same vein and, as Ashton suggested, “as far from the Mabel’s concept as you can get.” Thus a trend was born. At least for the time being. “The novelty wore off for a bit after a while,” Truelson said, referring to the week after. “But that doesn’t mean that we’re not hoping for some competition. Hey, it’s definitely not a bad thing.” SEE BBQ, PAGE 18

PA G E 16

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Small businesses organized as S corporations are usually familiar with the tax benefits of being structured as they are, but they may be less familiar with the potential complexities that emerge when a trust enters into the ownership mix. S corporations are popular because they enable income to pass through the business directly to shareholders to be taxed only once at the individual shareholder level. Tax rules limit the number of shareholders and types of shares that can be issued in an S corporation, and only certain types of trusts are allowed to be shareholders in such a business. A trust might hold shares of an S corporation for any number of reasons, but perhaps most commonly it arises when a shareholder dies and his or her shares are transferred to a trust. If not done properly, the S corporation can lose its S status, which would cause its income to be taxed at the corporate level before it is distributed to

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shareholders for another round of taxation. Thatâ€™s a bitter pill for an S corporation to swallow, so itâ€™s important for business owners and their advisors to be alert to transactions with trusts that could jeopardize the S status. There are several ways it can happen, but a few stand out as the more common risks for business owners to beware. One common way to muck up an S corporationâ€™s tax-favored status is to have a trust that has more than one individual as a grantor hold shares in the S corporation. A grant-

or trust is an entity the Internal Revenue Service disregards for income tax purposes, so it is eligible to own shares in an S corporation, whether the grantor trust is revocable or irrevocable. If that same trust is taxable to multiple individuals, however, it is not eligible to hold stock in an S corporation. The only possible exception would be for a grantor trust held by a married couple, as the IRS generally treats spouses as one shareholder. Another big way to jeopardize S corporation status is for an eligible shareholder trust to fail to make timely elections or to make election in some way that is incorrect. The documentation involved in making elections is specific and critical. If, for example, a trust election is filed timely, but the procedures for filing it are not followed, the S corporation status can be at risk. Trust election mistakes can include providing the wrong signature for either the trustee or the beneficiary,

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Halloween is behind us, but demons still lurk for many small businesses as they seek success in the sometimes scary world of digital marketing. One of the more intimidating subjects is â€œthe cloud.â€? Youâ€™ve heard the term but it is probably cloaked in mystery. Itâ€™s that ghost lurking around the corner. Small and mid-size business owners often fear it. Facts are, however, those who leverage the cloud gain monstrous advantages. Just ask your children. Theyâ€™re all on it. Cloud computing simply means using a network of computers rather than a single machine to store and process information. The result is information being available on-demand from any device. It doesnâ€™t mean computers are hovering in the atmosphere and magically devouring our data. Many business people donâ€™t realize a majority of the technology we enjoy today is on the cloud. If you use a mobile app, it is likely hosted on the cloud. The Chromebook your child may use in school is essentially a dumb terminal that interacts with the cloud. Google docs, apps and similar software services are hosted on the cloud. Have you used Dropbox, Netflix or Facebook? All on the cloud. Perhaps itâ€™s time for you to consider the cloud. What do you have to fear? Letâ€™s assess.

Security

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Security is everyoneâ€™s concern. Cyber breaches are common. Security breaches, however, are not specifically a result of the cloud. In fact, the security layers of reputable cloud systems are immensely better than what only a few corporations could ever hope to deploy.

Mark Vandegrift is principal, digital marketing at Innis Maggiore in Canton.

Cloud infrastructures invest billions of dollars to ensure the highest level of security protocols. Almost all are PCI (Payment Card Industry) compliant, meaning they meet or exceed one of the highest levels of security measures. PCI compliance and similar security certifications require physical security as much as data security. Because the cloud stores data on several servers â€” in different physical locations â€” your disgruntled employee canâ€™t just walk into your back room and take a server. Cloud server farms require multiple-level security clearance such as retinal scanning. Analysts suggest up to 75% of the business data breaches are â€œinside jobs.â€? Remember the Target credit card hack? Inside job. The Pentagon? Inside job. When your data is stored locally, there is typically little defense to keep an unhappy employee from walking out with his computer. When your data is on the cloud, itâ€™s far more difficult to breach data because it is not physically present at your business. Of course, physical separation of data often raises the next fear: accessing your data at a momentâ€™s notice.

Access Many business ownersâ€™ concerns arenâ€™t security as much as access. There

is a misconception that if the world wide web â€œgoes down,â€? having data sitting in the back room is the best option. If your internet service goes down, though, itâ€™s going to be rather difficult to use your local data. Most of your data is now served up through a browser or software that requires an internet connection. If your machines are offline, you canâ€™t access any data, locally or otherwise. Having an internet outage is about as scary as an electric outage. These monsters appear infrequently, but they do show up every so often. But hereâ€™s a not-so-scary fact about access: If you have your data on the cloud, your data will be accessible at the closest location you can find internet service. We have had local outages at our company and simply by working from home, our smartphones or the local Starbucks, we were fully functional. If our data had been locally stored, that data would have remained unavailable. Secondly, redundancy on the cloud is built in. It is the knitting of the cloud. Seamless data transfer, backups and accessibility make this â€œFrankensteinâ€? no scarier than a butterfly. Come out of the shadows and realize security and access is greater on the cloud than what could ever be achieved by hosting data locally. And a surprise treat to using the cloud? The cloud costs far less than traditional hosting â€” as little as a fraction of a cent per hour versus spending thousands for physical servers that are often out-of-date before they are even installed. As we all become integrated digital businesses, cloud computing is the least scary option.

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“Even if all the details of the trust election are correct, simply missing a filing deadline can be enough to render a trust ineligible to own shares in an S corporation. As straightforward as it sounds on the surface, it’s anything but simple or straightforward in practice.” for example. It might also include the lack of a signature for a spouse where otherwise required. Even if all the details of the trust election are correct, simply missing a filing deadline can be enough to ren-

der a trust ineligible to own shares in an S corporation. As straightforward as it sounds on the surface, it’s anything but simple or straightforward in practice. Deadlines for filing elections can depend on the situation, and situations can vary significantly. In some situations, the IRS provides “automatic relief” from late or missed elections if the oversight is reported as soon as it is discovered and within the time period outlined in official guidance. There are still more circumstances where a trust could be an ineligible S corporation shareholder. Foreign trusts, for example, may not own S corporation shares, nor can charitable remainder trusts, which enables a portion of the trust’s income stream to be donated to charity. Individual retirement accounts and Roth IRAs also may not own shares in an S corporation, although qualified pension plans can own shares in an S corporation. And if a trust that is an eligible S corporation shareholder is “decanted,” or closed and re-established under another trust, that can jeopardize the S status if not done correctly. Small business owners organized as S corporations should tread cautiously into any kind of transaction that involves trusts to be sure they don’t inadvertently lose their tax-favored S status.

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BBQ CONTINUED FROM PAGE 15 Though food magazines and Oxford dictionaries tend to mismatch sources, itâ€™s commonly agreed that â€œbarbecueâ€? originated from the West Indian term barbacoa, which can literally be translated as â€œslow-cooked over hot coals.â€? (Or, â€œcheerfully spit-roasting captured enemies,â€? according to another source.). The definition is pretty much the basis of what many consider authentic barbecue â€” from the Texan peppered-brisket smoked over cherry coals, to the meaty, red-sauce lathered ribs in Memphis, Tenn. All of Clevelandâ€™s recent barbecue debutants agree. To be â€œgoodâ€? means striving for â€œauthentic.â€? And to be authentic you must spend loads of time â€” and lots of money â€” to produce the best cut of meat possible. Standing in front of two Ole Hickory stainless-steel smokers, occasionally picking at fiery wood chips in firebox, is Tommy Chambers, pitmaster at Woodstock. Entrenched in barbecue since he purchased his first smoker 12 years ago, Chambers linked up with partner Togliatti two years back to open their Tennessee-influenced joint after a string of food tours across the South (like all of Clevelandâ€™s pitmasters have, along with their own â€œgenreâ€? to aim for). With his foodie-intellectual tinge, Chambers, a humble man with a ponytail, speaks fluidly about Woodstockâ€™s process: the average 16 hour-long smoking, the 6 a.m. meat preps, the minimalist rib rub alike to Texan standards. â€œSimple,â€? he said, but â€œcomplicated.â€? â€œWe like to let the meat speak for itself,â€? Chambers said. â€œBut the whole style thing? Iâ€™ve been to Kansas City. Iâ€™ve been to Memphis, to Austin a couple of times. The thing is thereâ€™s not really one kind of barbecue, like some folks think there is.â€? Itâ€™s true. Symonâ€™s Cleveland BBQ aspiration is lightly brushed with his Polish roots, a love for kielbasa and kraut; the Proper Pigâ€™s undeniably Texan (all of their meat is cooked until itâ€™s exactly 200 degrees, as they do in the Lone Star State). Togliatti, citing influences from Kansas City to the Carolinas, agreed.

Junior pit master John Hensler stokes a wood chamber in the smoke shack at Woodstock BBQ , which offers house-smoked chicken, pork and beef. (Peggy Turbett for Crainâ€™s)

Slices of house-smoked brisket pair with cornbread and pickled onion at Woodstock BBQ. (Peggy Turbett for Crainâ€™s)

Mabelâ€™s BBQ patrons likely donâ€™t need the encouragement of a large neon sign inside. (David Kordalski)

â€œI donâ€™t think thereâ€™s really a â€˜Cleveland Barbecue,â€™â€? he admitted, referring to Symonâ€™s declaration. â€œWeâ€™re talking about people who grew up on Geppettoâ€™s ribs, on Hot Sauce Williams. But people who havenâ€™t had real Southern barbecue tend to think that ribs should be falling off the bone. When really, they donâ€™t have to be sauced at all.â€? To Togliatti, Chambers and most likely Symon â€” who declined Crainâ€™s request to be interviewed â€” the gist of authentic, slow-cooked pork belly and beef brisket stems from its root definition. To be simple, carefully smoked and astutely observed. Or, as Chambers likes to say, â€œReal barbecue is cooked low and slow.â€? As Symonâ€™s giant neon-red sign â€” EAT MORE MEAT â€” shines like a vegan nightmare from inside his mega-restaurant, the question on all of the minds of like barbecuers is, â€œWhat now?â€? The logical thought, as a trend sparks a scene, is that competition will kick in, cause pitmasters to fight fire with more fire. But for these guys? Competition pales before what barbecue produces automatically. That is, community. â€œItâ€™s why we decided to put one long, 24-person table right in the middle of the restaurant,â€? Proper Pigâ€™s Shane Vidovic said. â€œWe didnâ€™t just want people to eat good food, but we also wanted them to sit and talk, have a conversation.â€? Yet, besides new barbecue addicts, the camaraderie is more importantly happening among the chefs. Even at Barabicu, a postcard-sized storefront a 45-minute drive south of Mabelâ€™s, a labor of love is proven to be mutual. All of the rising stars of Cleveland barbecue have tried everyone elseâ€™s (Crainâ€™s talked to Vidovic as he was eating at Barabicu). Recalling Aprilâ€™s lengthy lines, and selling out of 400 pounds of meat every day of his opening week, Barabicuâ€™s Ashton is undeniably on board a so-called uprising. More flavors, the merrier. And of course, the more converts. â€œIf that doesnâ€™t show that thereâ€™s a barbecue boom, then I donâ€™t know what does,â€? he said. â€œBut to have maybe a dozen? Even two dozen? And to have the ones already here pop up so fast. The waters are so wide open for other people to come inject their style, too. To me, this is all just fun competition.â€? Good news for foodies: More authentic barbecue lies ahead.

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My Heart Wall: Wallpaper with a mission By TIMOTHY MAGAW tmagaw@crain.com @timmagaw

Walking into Kathy Veghâ€™s home in Gates Mills, visitors are usually taken aback by a dramatic wallpaper that features a collage of family pictures. â€œIt has become the heart of our home,â€? said Vegh, the president and CEO of Danny Veghâ€™s Home Entertainment for the last 15 years since taking over for the companyâ€™s namesake, her father. â€œWhen people come over for the first time, they literally gasp and stop. There are a million stories on this one wall.â€? And while the wall has become the physical manifestation of Veghâ€™s commitment to her family â€” in particular, to her 3-year-old daughter, who was born with a congenital heart defect â€” it also has become her newest business venture. â€œFrankly, because of our struggles with our daughter. I really wanted to do something for her and our family that was this unified wall that told a story and was more of a celebration of her life,â€? said Vegh, who preferred her daughter not be named in print. â€œThere are lots of pictures of her on there, but only one of her in the hospital. Itâ€™s more of a celebration of every day, rather than focusing on all of the hardship.â€? On Nov. 11, Vegh will launch My Heart Wall â€” a customizable wallpaper company that allows consumers to upload photos through a web portal and transform their memories into wallpaper. Most importantly, Vegh said, 5% of My Heart Wallâ€™s sales will support charities like the Childrenâ€™s Heart Foundation and the Ronald McDonald House. It also will support the Heart Center at Texas Childrenâ€™s

A collage of family photos printed on wallpaper at Kathy Veghâ€™s home was the catalyst for her newest business venture. (Contributed Photo)

Hospital, which Vegh credits with saving her daughterâ€™s life, in particular the work of Dr. Charles Fraser. Congenital heart defects, in fact, occur in about one in 110 births. Proceeds also will support the pediatric cardiology department at Cleveland Clinic Childrenâ€™s. Vegh said the Clinic has offered her daughter wonderful follow-up care, but the health system also has a renewed commitment to working with other centers to advance research in this space. She also wants to support efforts that ease the transition of care for babies as they develop into young adults because there are so many more survivors today. Meanwhile, My Heart Wallâ€™s products arenâ€™t decals like those offered by, say, Dan Gilbertâ€™s Fathead venture, but rather actual high-grade, 20-oz. wallpaper. Think Shutterfly, but with wallpaper. Also, the process is much easier

Kathy Vegh and her 3-year-old daughter, who inspired My Heart Wallâ€™s mission.

than the one Vegh went through in creating her own wall, which involved emailing a few pictures at a time to a commercial printer. â€œEverything about this has been so organic,â€? Vegh said. â€œNone of it has been contrived. The reception that Iâ€™m getting even from the charities is just extraordinary, and itâ€™s a cool product.â€?

My Heart Wallâ€™s traditional wallpaper comes in five textures, while the repositionable wallpaper (which can be moved up to seven times) comes in three textures. All of these wallpapers â€” offered in collages, murals or mosaics â€” are built to the end userâ€™s specific wall measurements including cut outs around doors, windows and other fixtures. Aside from the very personal nature of the business as it relates to her daughter â€” who is listed as â€œBaby Oâ€? on the My Heart Wall website â€” the company also launches at an intriguing time in the design world. Wallpaper, which had been derided for years by many, is making a comeback. For one, todayâ€™s wallpapers, especially the repositionable kind, is more easily removed. â€œSo many people are still producing so much of wallpaper and inventorying it,â€? Vegh said. â€œBut with the digital word, how great images are, printers and inks, they should be printing on demand. Thatâ€™s what this is. Thatâ€™s why itâ€™s easy to personalize it.â€? In terms of pricing, the mosaic and the murals both start at $10 per square foot. The collages start at $12 per square foot. The additional cost accounts for the human element that goes into the creation of the collage. As for the repositionable wallpaper, it starts at $13 per square foot. The wallpaper is usable even in the most stringent commercial applications, like hospitals. Also, the company uses only latex ink, so the product is non-flammable and does not let off odors. Itâ€™s also made in the United States. Veghâ€™s business model also isnâ€™t completely online. Over the last several months, sheâ€™s forged relationships with profession-

al photographers, interior designers and even style-minded stay-at-home moms to work as so-called design consultants. These individuals, who will help spread the My Heart Wall gospel, will receive a commission for every sale they produce. They carry samples of the wallpaper stock and are also trained to use the websiteâ€™s software. The company, which Vegh is funding herself, is her first outside the family business sheâ€™s steered since she was 24. In a sense, itâ€™s also a nice change of pace. â€œWhen youâ€™re in a family business that has a 50-plus-year legacy, that carries a certain weight, fear and all these things because thatâ€™s a big obligation,â€? she said. â€œWalking into this, I never took it lightly for half a second. I took it as a massive responsibility.â€? She added, â€œItâ€™s nice to come out of the shadows because no one can say, â€˜Oh your dad started that,â€™â€? she said. â€œBut thatâ€™s not the motivation. What I canâ€™t get over with this is the connectivity it has with people.â€™â€? For example, Vegh said she has met other moms whose children have had the same issues as Baby O â€” heart warriors, they call them â€” and sheâ€™s told them the inspiration for her business. â€œIt was so meaningful. It was real. This is my heart,â€? she said. â€œThis is my daughter.â€? Vegh plans to keep My Heart Wall separate from the Danny Veghâ€™s part of her portfolio, saying thatâ€™s because she doesnâ€™t want to â€œdilute the mission.â€? Still, it is another family business. Baby O, after all, is recognized by Vegh as a company co-founder. â€œThatâ€™s not a joke,â€? she said. â€œI go home and tell her what I did with My Heart Wall today.â€?

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Q&A: Chuck Herman

Owner, Specialty Fitness Equipment A fan of athletics all his life, it’s no surprise Chuck Herman has spent his professional career over the last two decades in the fitness industry. Today, he runs Specialty Fitness Equipment, a Northeast Ohio firm in the business of selling fitness equipment to not only gyms, but also to corporate wellness, hospitality, public safety, schools and rec centers. And while the country’s increased focus on health and wellness has been a boon for business, so too has the explosion for urban living with luxury amenities. It turns out renters, traveling business folks and students aren’t only looking for some nice digs where they can kick back and relax, but also some top-flight fitness centers where they can break a sweat. Some of the local projects on which Herman and his colleagues have worked is the luxurious Cleveland Institute of Art’s student housing in Uptown near MOCA Cleveland. He’s also helped put together the fitness amenities at the Innova luxury apartments in the University Circle area. Crain’s recently chatted with Herman about his company’s growth and what it takes to put together a fitness center that’ll get people’s blood flowing. — Timothy Magaw What’s your sales pitch to these developers as they look to put together these sort of facilities? It seems like it’s much more complex than asking how many ellipticals they need. A lot of these developers, their forte is not picking out fitness equipment. There are so many different aspects of these projects, but a company like ours can work with architects and lay out the room. We help them understand what our method to the madness is and why we recommend what we recommend. We look at the demographics, the application and what’s going to be the right equipment to limit liability. We want it to be safe, functional and logical when it comes to the design. And, of course, they always want the best price. Since there isn’t really a one-sizefits-all approach for fitness amenities, how is each facility different? For a hotel, it’s going to vary, and depend on the operator. For the developer, it depends on the market, demographics. Some are luxury or high-end. Think about Innova. They’re going toward a higher-end demographic where there are some operators who just need the necessary evil of having fitness equipment. They could have the best of the basics. We’re talking about communities for those 55+, student housing and senior living. There are so many different things to take into account. What are some of the biggest mistakes developers can make when putting together these sorts of projects? The biggest one, of course, would not be calling us. I say that tongue in cheek, but we walk into situations where developers think we can throw something in there. They just

want to put home-grade equipment that they’d get at Sears, Dick’s or another store that does specialty retail. It can be an expensive piece, but with home grade, there aren’t warranties for commercial application. There’s also a liability issue. It’s expressly written in product guarantees whether it’s for light-commercial or full-commercial use. What are some things you look at when you’re trying to nail down the demographic makeup of who will use these facilities? There are a lot of things we take into account. We ask a lot of questions about the project as a whole — the rents, the location, whether they’re going to be market-rate, luxury or affordable housing. There are so many different aspects to it. We also ask who they’re marketing to — young professionals, active adults or students. We take into account what the average person is going to do. A regular fitness enthusiast would work out a typical 2-3 days a week for 30 minutes. How has the industry changed? It’s evolved. Equipment has evolved since I started in the 90s. Technology is huge. That’s a big part of it. Manufacturers are including all the bells and whistles. Aesthetics are also important. Developers aren’t always thinking, ‘Hey. I gotta throw something in a room.’ There needs to be a wow factor, and something really needs to pop. We want them to look within our realm of what we offer and find the best fit for them. Developers are also spending more money than in the early 2000s. Have you always been involved in the commercial space? It seems like that’s the space where you really carved your niche.

CRAIN’S CLEVELAND BUSINESS

PA G E 21

You also have a lot of corporate clients, correct? Corporate wellness is our second strongest market. On-site corporate wellness facilities not only lower insurance rates but also lower stress, increase productivity and create a stronger corporate culture and community. We take a great deal of consideration when designing corporate wellness facilities and work closely with human resources, architects and wellness managers. Most recently some of our installations include Philips Healthcare, GCRTA, Steris, and Paul Moss Insurance just to name a few.

At my old company, they had retail stores. People would come in, and we’d sell to the general consumer, but I was the guy who took the reins and did the B2B operation and learned it on the fly. As fitness and wellness has become a necessary evil of our lives, it’s evolved to the point where the commercial side of the business is where I spend most of my time. What are some of the challenges of the fi tness industry? You always want to continue to keep that pipeline full. You’ve got to build relationships with these developers. There have been a lot of changes with equipment and distribution. You just have to keep up with the trends. You don’t want to disappoint. Communication is always the key. We’ve been successful because that’s especially been the case with our company, and we’ve excelled at communication. Tell me about some of the projects of which you’re most proud of your work. I love the Cleveland Institute of Art space across from MOCA. You can see the cardio equipment from the street. It’s not crazy fancy, but just a really cool space. There’s also a group out of Illinois called JVM Realty. They have some apartments in North Royalton, Stow and North Olmsted where they bought these apartments and redone the fitness amenities. They’ve included a system called Well Beats, which is fitness on

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Specialty Fitness Equipment outfitted facilities in the Cleveland Institute of Art’s student housing near MOCA Cleveland. (Contributed photos) demand. Someone who might come home from third shift, go into a kiosk and up pops a virtual instructor. We’ve worked with some good groups. My job is to take this off your plate so you can focus on other aspects.

Where does your interest in fi tness come from? I was a wrestler, baseball player, football player. I played all sports all of my life. I grew up as a hardcore Cleveland sports fan. I always had a thing for science and was going to go

to college for med school. I decided not to go through with it and was still competitive in baseball. My interest in science and sports went together. That’s how I got into it. I’ve always been fascinated with machines and movement.

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Your business came about in an unusual way, didn’t it? I left a similar company to this one in about 2011 for a fitness equipment startup that didn’t really start up, but then from my previous job I had a non-compete and had to build this new business from outside the region in. About a year and a half later, I came back to Northeast Ohio and Cleveland after I was well established. I came home. There’s a very consultative approach to what we do. When we came back, Cleveland was definitely in a lull in terms of development. That has definitely changed. We’re working with customers who are looking for a one-stop shop. We can come in, design the room, measure it, consult. We sell the equipment, install it, deliver it, service it. We’re in the business of relationships.

CRAIN’S [M] POWER MANUFACTURING ASSEMBLY PRESENTED BY:

Customer collaboration, infrastructure upgrades help power manufacturing sector

ollaboration and communication were the overarching themes of the third annual [M]Power Manufacturing Assembly, held Oct. 19 at the John S. Knight Center in Akron. Presented by Crain’s Cleveland Business in partnership with the Manufacturing Advocacy & Growth Network (MAGNET) and the Cleveland Engineering Society, this year’s assembly drew a record crowd for keynotes and workshops that focused on how Northeast Ohio manufacturers — large and small — can achieve bottom-line efficiencies and compete and thrive on a global scale. Energy quality and reliability is a critical component for meeting those goals. During the breakfast keynote address, John E. Skory, regional president, The Cleveland Electric Illuminating Company, told manufacturers that his company, which is part of the Akron-based FirstEnergy family of utility operators, wants to be an active partner with the region’s industrial sector. “If you don’t have a customer support representative, please get in touch with us. We will get one assigned to you. This individual will work with your business, this individual will learn your business, this individual will be your point of contact should you start having any type of problem,” Skory said. “Our objective is to keep everybody working. We know you depend on us and upon our power. We take great pride in that.” The Illuminating Co. services 750,000

PHOTO BY JOHN GOLDY

John E. Skory, regional president, The Cleveland Electric Illuminating Company, opened the [M]Power Manufacturing Assembly at the John S. Knight Center in Akron. customers across five Northeast Ohio counties. In recent years, the utility provider has honed its focus on being more customer-friendly, Skory said, often working with companies on a one-toone basis to tailor energy solutions. Inadequate power quality, for example, can negatively impact additive manufacturing. The Illuminating Co., he said, has collaborated with customers such as Thogus in Avon Lake to enhance energy quality and successfully integrate 3-D printing

equipment into their manufacturing processes. It also partnered with the Cleveland Clinic as part the health care organization’s expansion in University Circle. Skory said that project included the construction of five substations and the installation of 17 miles of underground cable to create a completely “closed loop” system and bring the Clinic’s power grid up to par with other global medical powerhouses, such as Johns Hopkins. On its end, The Illuminating Co. is strengthening the region’s energy infrastructure as part of FirstEnergy’s $4.2 billion transmission system enhancement project. Skory said $237 million is being invested in The Illuminating Co. territory via new power lines, new towers, new or upgraded substations and the replacement of underground circuits. Add to that, $369 million in the Ohio Edison service area and $150 million in the Toledo Edison service area and total infrastructure upgrades in the North Coast top $720 million, he said. “This is going to help us be more reliable moving into the future and more flexible in order to meet our customers’ needs.” In addition, the utility firm is increasing engagement in energy research, workforce development, economic development and international trade — all of which will benefit its business customers, according to Skory. “There are a lot of things we can do together when we know your business,” he said.

Timken touts importance of regionalism, community involvement to overall growth

“S

tronger together” could have been the slogan of Ward J. “Tim” Timken Jr.’s luncheon keynote address at the 2016 [M] Power Manufacturing Assembly. The chairman, CEO and president of Cantonbased TimkenSteel Corp. told a room full of Northeast Ohio manufacturers, economic development leaders, industry representatives and educators that “coming together” through industry associations, community involvement and regional initiatives is the key to accelerating growth. “It’s important to our respective businesses, but also to the economic health of our individual companies and communities and the region as a whole,” said Timken, adding that while regional stakeholders should take pride in their role in rejuvenating the Ohio manufacturing sector, now is the time to ask, “How do we move faster?” Boosting the business base is first and foremost, according to Timken. Had the region’s job growth kept pace with the national economy over the last 25 years, Northeast Ohio would have 400,000 more jobs. The region also lags the national average in gross regional product and per capita income, and

PHOTO BY JOHN GOLDY

Ward J. “Tim” Timken, chairman, CEO and president of Canton-based TimkenSteel Corp., presented the luncheon keynote address at the 2016 [M]Power Manufacturing Assembly.

it is economically polarized with 200,000 people living in neighborhoods that are “disconnected from our regional economy,” he said. “We have to get this right. … So many people in our region have been working in meaningful initia-

tives, but they have been doing so in silos,” he said. Team NEO, Timken said, was established to break down those walls. He is a member of the board and a past chairman of the organization. Among Team NEO’s goals is to work closely with partnering organizations and agencies to elevate regional job growth and match the national average by 2024, which will require a 50% increase in new jobs over the next decade. And, it wants to target that growth to include “disconnected” segments of the population. “I make this regional work a priority because it strengthens both the region and my own company,” Timken said. “I’d ask you to consider doing the same.” Along with his Team NEO leadership, Timken is actively involved with Canton area community development groups – a commitment encouraged among TimkenSteel employees worldwide. The “all-out effort” to bring the skills and knowledge of TimkenSteel employees to the local charities and initiatives, he said, strengthens the community, which in turn strengthens the region. “It’s a circle. It just feeds on itself.”

FOR MORE FROM THE EVENT, GO TO www.CrainsCleveland.com/MPower

Track sessions dig into sector’s pressing issues Attendees had the opportunity to select from six track sessions in the morning, as well as six different track sessions during the afternoon portion, which was hosted by the Cleveland Engineering Society. The morning sessions covered such topics as sales and marketing; how service providers can more effectively work with manufacturers; and lean practices, while the focus of the afternoon sessions ranged from technology utilization and growing your business value to protecting your business and stem educators. Here are a few panel highlights: n For job shops, competition is fierce

and marketing your business is critical. Bringing specific product ideas to potential clients has been the key to a successful marketing campaign at M7 Technologies, according to general manager Dan Yemma, a “Best Practices in Sales and Marketing” breakout session panelist. Yemma said approaching companies with “specific examples or success stories” gave his firm a foot in the door. n Responding to high turnover sometimes means understanding what external factors may be at play. Suzanne Bloomfield, senior HR business partner at ShurTech Brands, told attendees of the “Take on Turnover and Win” panel that quarterly “open communication forums” provide an opportunity for companies to get a better handle on contributing variables. n Innovation holds the promise to improve quality and drive efficiency, but it also can throw companies off balance with respect to resource use or job roles. In “How Innovation and Utilization Will Save Your Business,” Mar-Bal director of global marketing and brand Ron Poff said a “top-down” culture shift is one way to offset problems. n Safety training and accountability can help minimize the risk associated with allowing outside contractors to work inside your organizations, according to “Emerging Risk Watch List: Lessons from Leaders Taking Ownership Over Uncertainty,” presented by Oswald Cos. Mark Stempak, safety manger of COSMAX USA in Solon, for example, said external contractors should undergo specialized safety training and fill out a risk assessment plan. In addition to the speakers, attendees had the opportunity to visit 50 exhibitors who were onsite, including a traveling welding lab from Lorain County Community College.

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Estate Planning CRAFT A SOLID STRATEGY TO ENSURE LEGACY LIVES ON

Estate Planning Council of Cleveland

INSIDE

Changing climate should prompt estate plan review

Motivations for charitable giving may evolve

New regulations may impact family business interests

ESTATE PLANNING

S2 November 7, 2016

PRESIDENT,S LETTER

Estate Planning Council offers bevy of resources to help ensure your legacy lives on By MICHAEL MATILE

he state Planning Council of Cleveland is pleased to once again partner with Crain s Cleveland usiness to present our annual estate planning special section. he purpose of this section is to provide the community with timely information and valuable resources reflecting our multi disciplinary ap proach, including financial, insurance, business succession, and estate and charitable planning matters. he arti cles and commentary on the pages that follow have been provided by some of the region s most experienced profes sionals in these fields. hey may help you address some of your financial and estate planning concerns, or spur fur

ther discussion with your adviser. state planning often is an overloo ed aspect of personal financial management. illions of Americans do not have an up to date estate plan and or medical directives, leaving them vulnerable in the event of illness, accident or untimely death. Committing a modest amount of time to establishing Matile these documents can save much time, expense and hardship for families, loved ones and businesses. rom a tax standpoint, we have spent the past few years in a relatively stable period. owever, the political climate is shifting and a new administration

will soon ta e office. he I recently issued long awaited proposed regulations that could severely restrict the opportunities for business owners to transfer shares of their business to family members in a tax efficient manner. usiness succession plans, business agreements and estate documents that contemplate intra family transfers will need to be reviewed. In addition to the political and economic instability abroad, it is imperative that people protect and preserve the assets they have spent their lifetime building. It is wise to see and rely upon the services of experienced professionals who are familiar with income, gift and transfer tax laws and who are current in their nowledge of

the financial and investment world. Plenty of such experienced professionals ma e up the membership of the state Planning Council of Cleveland. hey can help you evaluate how your personal financial goals have been affected by mar et and legal changes in the nited tates, as well as events on the world stage. hese professionals can help you determine your estate and financial planning goals and analy e your ability to achieve financial independence throughout your pro ected lifetime. Perhaps you have family members with special needs. ou may have a family business that you want to transfer to a future generation or prepare for sale. aybe you are in a position to fulfill your charitable intentions. Our members can help you with the methods, techni ues and documents that will enable you to attain these and other goals. ounded in the s, the state Planning Council of Cleveland is composed of more than members wor ing in the reater Cleveland area, including attorneys, accountants,

ban ers and trust officers, financial planners, insurance agents, appraisers and representatives from charitable organi ations. 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 uni ue situation. e are pleased to present you with this special section in Crain s Cleveland usiness, which contains important insights and commentary on a variety of estate planning issues. e hope that you will find it to be an indispensable resource as you wor with your advisers to plan a sound financial future. Michael Matile is senior vice president and senior wealth and planning specialist at FNB Wealth Management. Contact him at 216-331-1906 or MatileM@fnb-corp.com.

Table of Contents ESTATE PLANNING

3-12

CHARITABLE PLANNING

13-14

14-19 TAX PLANNING 20-21 INSURANCE 22 PLANNING CHARITABLE GIVING

What Will We Do Without You? Your current support is critical to CMAâ€™s success today. But have you considered including the museum in your estate plan to help enrich lives in our community through the beauty and power of art for generations to come? For creative ways to continue your support of the museum for the next 100 years, contact Diane Strachan, CFRE at 216-707-2585 or dstrachan@clevelandart.org

Advertising director Nicole Mastrangelo, nmastrangelo@crain.com Managing editor, custom and special projects Amy Ann Stoessel Section editor Kathy Carr Graphic designer Staci Buck For more information about custom publishing opportunities, please contact Nicole Mastrangelo.

ESTATE PLANNING

November 7, 2016 S3

Estate planning 2016: A changing focus Climate stabilization should prompt thorough review By LINDA M. OLEJKO

ESTATE PLANNING

fter a decade of uncertainty, estate planners are enjoying the stability of “permanent” estate tax laws, a consistent tax rate of 40% and historically high exemption levels that increase annually with inflation. Interestingly, as a result of these changes, less than 0.2% of Americans who pass away in 2016 will owe federal estate tax. The same legislation that introduced estate tax relief and stability also increased income tax rates, phased out various income tax exemptions and limited itemized deductions for high earners and investors.

When combined with the new Medicare taxes on net investment income and wages, and increasing state budget deficits, many Americans now face combined federal and state income tax rates in excess of 30% on capital gains and more than 50% on ordinary income. The Internal Revenue Code has long provided for a step-up in tax basis on assets passing from one individual to another at the time of death. Previous conventional wisdom may have led an individual to defer the

distribution of his or her IRA until the last possible moment, instead spending down a stock portfolio to save current income tax. However, with the estate tax diminished or eliminated, children likely would prefer to inherit appreciated real estate or stock rather Olejko than a parent’s IRA. Any distribution from an inherited IRA would be taxed at the highest income tax rates and could push the child into a higher tax bracket. Further, charitable gifting directly from IRAs during life (if over age 70½) or at death can provide substantial income tax savings over the use of

‘‘

With the proper use of trusts, diligent planning with advisers and the passage of time, individuals can reduce or eliminate estate tax exposure for multiple generations.

appreciated property. For the wealthiest Americans, who are still subject to estate taxes under the new laws, lifetime wealth transfer strategies remain a viable option. With the proper use of trusts, diligent planning with advisers and the passage of time, individuals can reduce or eliminate estate tax exposure for multiple generations. However, traditional planning methods that remove rapidly appreciating assets

from an estate have left some taxpayers with low-basis assets sitting in trusts. With the current estate tax laws appearing to have settled, and federal and state income tax rates increasing, now is the time to refocus on a comprehensive estate and income tax strategy. Linda M. Olejko, CFP®, CEPA is a managing director of Glenmede. Contact her at 216-514-7876 or Linda.Olejko@glenmede.com.

Estate planning is still relevant and necessary By MARY EILEEN VITALE

lanning for your estate is still important in today’s environment when many won’t exceed the federal estate tax exemption. Estate planning was done long before the estate tax was implemented. A good estate plan should provide for a number of documents, including a will that directs where assets should go. Additionally, a will can relay the individual’s wishes to the custodians of minor children and how their financial

ESTATE PLANNING

affairs should be handled. A will can even name pet caretakers. Trusts are another product of estate planning. They protect wealth for future generations and can be used to protect heirs from creditors, spouses in divorce, gambling or drug addictions and spendthrift issues. Trusts also provide disabled heirs the ability to qualify for government

benefits while still accessing their allowable assets. These documents may protect an heir in the case of lawsuits caused by intentional or inadvertent actions. The individual can still access assets held in the trust while forestalling payment Vitale of amounts related to a legal judgment. Assets left in trust are protected in the case of an heir’s divorce if it has been managed properly. In many

states, inherited assets are not counted as assets considered to be split. Spendthrift issues of an heir can be reined in by putting assets in trust rather than leaving the assets outright to the individual. Because a trustee controls distributions, trusts help control heir spending. However, heirs can often request additional distributions if they need the income for extenuating circumstances. The trust can also own assets used by the heir for such items as housing and transportation. Sound estate planning also safeguards

heirs with addiction problems. Protecting these individuals from their own challenges is a benefit. Certain trust provisions can address how the trust should be administered should the beneficiary incur a physical or mental health issue. No matter the estate tax environment of today or the possible changes in the future, estate planning will always be important. Mary Eileen Vitale, CPA, CFP™, AEP, is principal at HW&Co. Contact her at 216-831-3164.

Expert Estate Planning Advice

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ESTATE PLANNING

S4 November 7, 2016

Estate planning in a global environment Complex issues warrant case-by-case examination By DANA MARIE DECAPITE

nternational estate planning issues come into play for multinational families domiciled in the U.S. and for U.S. citizens with assets abroad. This article serves as an overview of the considerations and certain planning tools and techniques for clients with global interests, based on personal domicile, the domicile of a non-citizen spouse or foreign assets of U.S. citizens.

Domicile and transfer tax. The concept of domicile is extremely important in determining how international estate planning and transfer tax considerations will apply to a certain client or family. It is also imperative to note that domicile, as related to transfer tax, is an entirely separate determination than residency requirements for income

I BELIEVE IN

ESTATE PLANNING tax purposes; therefore, an individual can be a U.S. income tax resident, but a non-domiciliary for U.S. transfer tax purposes, or vice versa. A client is generally considered to be domiciled in the U.S. for transfer tax purposes if physically present in the U.S., with the intent to remain indefinitely. In order to assess one s intent to remain indefinitely, the subjective determination is made on a case-by-case basis, and a number of factors are considered, including: location of homes, location of family members, location of business contacts, driver s license and automobile registration, voter registration, location of bank accounts,

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The Cleveland Orchestra’s endowment is supported by a group of visionary leaders whose high expectations of musical excellence, community service, and generous philanthropy continue to characterize the Orchestra’s relationship with its hometown. Now, as the Orchestra approaches its Centennial in 2018, your estate gift can provide support long into its second century – allowing new generations to enjoy everything you love about The Cleveland Orchestra. Join the many Centennial Legacy donors who are supporting the Orchestra’s future with estate gifts. For more information, please contact us at 216-231-7535 or at plannedgiving@clevelandorchestra.com.

and declarations of residence made in various legal documents.

International transfer tax planning. The current federal estate and gift tax exemptions pose little worry for most U.S. citizens, with the exclusion amount at $5.45 million per individual (annually indexed for inflation , the concept of portability between spouses and an allowance for unlimited marital de- DeCapite duction for transfers to spouse during lifetime or at death. However, for non-citizen clients, or clients with non-citizen spouses, many of the tax benefits afforded to a married couple are nonexistent. For instance, lifetime gifts to noncitizen spouses (regardless of whether the donor is a . . citi en or not are not eligible for the unlimited gift tax marital deduction, rather the annual gift tax exclusion amount is reduced to $148,000. Oftentimes in this scenario, a lifetime gifting strategy is implemented, wherein the citizen spouse shifts wealth to the noncitizen spouse over time within the confines of the applicable annual gift tax exclusion, effectively reducing the value of the citi en spouse s estate. Additionally, for U.S. citizen spouses who desire leaving assets to a noncitizen spouse, the federal estate tax

marital deduction may only be utilized by the non-citizen surviving spouse if the property passes to a ualified Domestic Trust, unless otherwise allowed by treaty. In other words, the QDOT is designed to allow the noncitizen surviving spouse to qualify for the unlimited marital deduction. Under this structure, distributions from the QDOT are taxable for federal estate tax purposes (insofar as they exceed the decedent spouse s exclusion , with two exceptions income distributions or distributions made to the surviving spouse experiencing “hardship.” A hardship distribution is made to a spouse in response to an immediate and substantial financial need related to the spouse s health, education, maintenance or support, where there are no other sources of funds available to the spouse. Currently, the United States has treaties with sixteen nations regarding estate tax and/or gift tax, which determine transfer tax implications of internationally held assets, and in certain circumstances provide for mitigation of double taxation and other unfair tax treatment. For instance, certain treaties reduce the tax burden on the non-citizen spouse by increasing the marital deduction available to such non-citizen spouse. The application of a certain treaty depends on the domicile of the client and the location of the property, but can be very important to tax and

estate planning considerations.

International assets of U.S. citizens. International jurisdictions have separate and distinct laws of intestacy, laws of succession and tax regimes to consider when planning for a U.S. citizen client owning foreign property. Generally, it is favorable to execute a separate set of international documents with the assistance local counsel, to properly control the disposition of such international assets. However, the U.S. documents and international documents must be carefully drafted to ensure simultaneous operation, rather than an unintended revocation or supersession of one set of documents. Additionally, certain jurisdictions such as civil law countries do not require estate planning documents to complete a certain bequest, rather, property ownership vests in one s heirs immediately upon death. It is important to note that all international estate plans should be evaluated on a case-by-case basis, as the domestic and international estate planning, tax and probate laws can be cumbersome in application as they relate to a particular client situation. Dana Marie DeCapite is an associate in Benesch’s Business Succession Planning/Wealth Management Practice Group. Contact her at 216-363-4443 or ddecapite@beneschlaw.com.

When is it time to bring your estate plan in for a check-up? By NICK SHOFAR and SUSAN RACEY

ou finally signed your estate planning documents, retitled your assets and completed beneficiary designations to avoid probate. Now what? Typically, estate planning attorneys recommend that clients update their estate plans every few years, but as we all now, life doesn t happen every few years. Events in your life that affect you or your family often also affect your estate plan. The following are a few of those “life events”:

Marriage A marriage in the family (your own or your child will impact your estate plan. Should a prenuptial agreement be signed? If the marriage has occurred or a prenuptial agreement is not desired, you should consider other options available to protect assets if the marriage ends.

Divorce Although under Ohio law, a divorce revokes provisions for your ex-spouse in your estate planning documents and

ESTATE PLANNING beneficiary designations, these laws should not be relied on as a substitute for updating your estate plan.

Birth, death and other life events The birth of a child or grandchild may require changes, such as the need to name a guardian for a child or to provide for the new addition to your family. Changes may need to be made upon the death or deterioration of health of a family Shofar member or if the person you designated as a fiduciary such as a health care agent, executor, guardian or trustee has died or, due to age or Racey incapacity, is no longer the appropriate choice. If you have discovered that a family member has creditor, substance abuse, gambling or marriage problems, changes should

be made to protect your loved one.

Change in assets, employment or residence ignificant increase in assets, or a change of employment or state of residence will often require modifications. A sudden increase in assets could occur because of an inheritance. A new job requires updates to beneficiary designations for benefits obtained through your new employer. Anytime you acquire a valuable asset, you must make sure that the ownership of the asset is properly titled, so that upon your death, it will be disposed of as you desire and avoid probate. A relocation to a new state may require changes due to the differences in the laws between the two states. Simply, the best estate plan is one that keeps up with your and your family s ever changing lives. Nick Shofar is an associate in the Tucker Ellis Estates, Trusts & Probate Group. Contact him at 216-696-4147 or nick. shofar@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.

ESTATE PLANNING

November 7, 2016 S5

Proper asset titling channels estate accordingly By STEPHANIE M. GLAVINOS and LINDA DELACOURT SUMMERS

nderstanding how assets will pass following your death is an important component of creating a proper estate plan. state planning is really a two part process. Part A is the formulation of the plan and the execution of the documents. Part is carefully reviewing and aligning the titling of your assets and or the beneficiary designations for your assets with the provisions set forth in your estate planning documents. any clients operate under the false assumption that by executing estate planning documents, they have ensured their assets will pass outside of

ESTATE PLANNING probate to their heirs and in the manner designated in their estate planning documents. his is not always the case. Probate can be avoided if you choose to pass on your assets either by naming designated beneficiaries, through oint and survivorship titling, transfer on death payable on death designations or titling assets in a trust. ach of these asset titling choices is discussed below. n eneficiary designation can be used with assets, including retirement accounts, life insurance policies and annuities. y completing and signing

the beneficiary designation form, you are ma ing a contract with the custodian of that asset that the asset will pass directly to the beneficiaries listed on that form. his occurs despite what you may provide under the Glavinos terms of a last will and testament or trust. If a surviving beneficiary is designated on the form, these assets pass on to that beneficiary outside of probate. Summers

oint and survivorship titling is commonly used by married couples who own ban accounts, n

investment accounts and real property. his type of titling is a contract between those individuals and upon the death of the first owner, the entire ownership of that asset passes outside of probate directly to the survivor by contract, again despite what may have been provided under the terms of a last will and testament or a trust. n ransfer on death designations or payable on death designations can be used for real property, automobiles, boats, ban and investment accounts. he beneficiary of these types of titling can be individuals or a trust. hese assets pass outside of probate to the beneficiary listed on the designation. n inally, by titling assets in the name of a trust, those assets pass outside of

probate to the beneficiaries designated under the terms of the trust agreement. nsuring that you have proper asset titling is a critical step in the estate planning process. Although it can be somewhat daunting and time consuming to complete this Part of the process, it is necessary so that Part A, the documents themselves, actually carry out your wishes regarding who, how and when your beneficiaries receive your estate. Stephanie M. Glavinos is counsel at Ulmer. Contact her at 216-583-7230 or sglavinos@ulmer.com. Linda DelaCourt Summers is counsel at Ulmer. Contact her at 216-583-7212 or lsummers@ulmer.com.

Family giving makes powerful, lasting impression By KATE BROWN

ris ovember s first gift to etro ealth edical Center matched perfectly her personality a supply of teddy bears for the hospital s child life program. A few years later, Iris and her husband, orton ort ovember, began the first of several gifts in memory of ort s daughter, Debra Ann. In , the couple came together with other family members for a transformational gift. he etro ealth iddleburg

ESTATE PLANNING

eights ovember amily ealth Center opened the following summer. nli e some philanthropists, the ovembers always have been public with their giving. e have a very strong feeling about not giving anonymously, Iris ovember says. very time we have given, people who now us as , ow do I get involved If you do it anonymously, it

doesn t have the same impact. arry ovember already participated in etro ealth fundraisers and contributed to a newly created endowed chair. In , he began giving to etro ealth s Cancer Center in memory of his wife, inda. he Brown most recent gift was for a new hope and healing garden. y father was a good example, said arry, a member of the board

Trusted Advisors. Respected Advocates.

of directors of he etro ealth oundation, which raises money for programs and services supporting etro ealth s mission. atching him give for a number of years inspired me. A new generation of ovembers has continued that commitment as members of the emerging professionals group etro ealth . . . As the ovembers illustrate, family philanthropy doesn t always involve the creation of a family foundation. Direct gifts to a favorite charity or organi ation are often a preferred

alternative when considering the tax benefits or even the absence of administrative costs. All of these considerations are helpful to weigh as you and your family review your philanthropic goals and giving strategy today and in the coming years. Kate Brown is president of The MetroHealth Foundation and chief development officer of The MetroHealth System. Contact her at 216-778-7509 or kbrown@metrohealth.org.

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S6 November 7, 2016

Breathing new life into old life insurance trusts Review advantages of maintaining policy By KATHERINE E. WENSINK

n irrevocable life insurance trust is one way to assist with the payment of estate tax while keeping life insurance proceeds out of a decedent’s estate. This is helpful when an estate is comprised of illiquid assets, such as a family business. he unified credit the amount of assets an individual may transfer during their lifetime and at death

ESTATE PLANNING combined without incurring gift or estate taxes) has increased to $5.45 million. Many families with ILITs no longer need them to create liquid assets to pay the estate tax because their assets are below the larger unified credit. So, what to do with the life insurance policies and ILIT? If the individual has the ability to

continue the premium payments, without reducing their quality of living, then keeping the policy may make sense. If the original irrevocable life insurance trust no longer fits, options include: n Transferring the Wensink policy to a new ILIT. This can be done through a process called “decanting,” where the policy

Demystifying trust decanting By STEVEN D. HINKLE

hat is it? A new trust is created and the trustee distributes all of the assets of the old trust to the new trust. The trustee is making the distribution using its discretionary authority to make distributions, including distributions in further trust.

Who must receive notice? Thirty days in advance of the transfer to the new trust, notice must be given

ESTATE PLANNING to the current beneficiaries of the old trust. hese are the beneficiaries of either mandatory or discretionary principal or income, as of the current date.

Limitations When the standard for distributions contained in the trust agreement are fairly strict, such as for the “health, support, maintenance and education” of the beneficiaries, the new trust

agreement cannot “materially change the interests of the beneficiaries of the first trust. owever, if the standard for distributions is broader, such as for the “best interests,” “welfare” or “comfort” of the beneficiaries, the new trust agreement can Hinkle also delete one or more of the old trust s beneficiaries. Regardless of the distribution standard, the new trust agreement may

is moved to a new trust with the same beneficiaries. n Terminating the trust and distributing the policy outright to the beneficiaries. n Changing

the trustee. If a friend or corporate trustee served, often an adult child can step into the role, reducing the need for third parties. If the policy no longer makes sense, surrendering the policy if possible in exchange for the cash value may make sense. Once the ILIT has cash, the options include:

not reduce a mandatory distribution of income or principal of the old trust, or reduce a right to withdraw a percentage of the value of the old trust, or to take distribution of a specified dollar amount.

Advantage compared to using a Private Settlement Agreement ecause only current beneficiaries need to be notified, and even then do not need to agree to the decanting, it is a less cumbersome procedure than a private settlement agreement. The trustees, the beneficiaries, and any creditors must agree and execute the private settlement agreement.

n sing the funds for the beneficiaries’ expenses, such as education or to buy a home. n Investing

the cash value.

n Terminating the ILIT and distributing the proceeds.

Periodically revisiting old irrevocable life insurance trusts is an important estate planning tool. Katherine E. Wensink is an attorney with McDonald Hopkins LLC. Contact her at 216-348-5729 or kwensink@ mcdonaldhopkins.com.

eneficiaries is a much broader class than the current beneficiaries who must be notified of a decanting. With a private settlement agreement, beneficiaries includes both the beneficiaries who are presently entitled to mandatory or discretionary payments of income or principal, as well as those who may benefit in the future. Potential future beneficiaries must agree even if their interest is contingent on one or more future events. Steven D. Hinkle is senior vice president of Key Private Bank, Family Wealth/ Wealth Services. Contact him at 216689-0333 or steven_d_hinkle@key.com.

One legacy. Working together, we can make a difference. By making or assisting with gifts to Cleveland Clinic, you are supporting the brightest minds, exceptional patient care and advanced technology. Our gift planning professionals will work with you to create customized plans. To learn more contact Nelson J. Wittenmyer Jr., Esq., wittenn@ccf.org or 216.444.1245 or visit powerofeveryone.org

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November 7, 2016 S7

Several factors influence best college funding spigot Carefully weigh pros, cons of using trust versus 529 plan By PATRICK J. SACCOGNA and JAMES SPALLINO

e are often asked by clients what source of funds they should use for a child’s college education costs when the child, let s call him ohnny, is a beneficiary of an irrevocable trust established by a parent or grandparent, and is also the beneficiary of a ection ualified tuition program account established with a state college savings program (“529 plan account”). Trust distributions are typically subject to the discretionary distribution standards set forth in the trust agreement. A 529 plan account will have someone, typically a parent or grandparent of the beneficiary, who is designated as the account owner. The account owner Saccogna has the sole authority to request distributions from the 529 plan account. So, how do the trustee of the trust and the owner of the 529 plan account decide which pot of Spallino funds to choose from when making a distribution to Johnny for his college education and related costs? In some cases, the trustee and the account owner of the 529 plan account are the same person, but not always. In any event, the trustee and the account owner should consider several factors in order to determine what portion of any given distribution comes from the trust, on the one hand, and the 529 plan account, on the other. The trustee of the trust must carefully review the terms and provisions of the trust agreement to determine the scope of the trustee’s discretion to make distributions for Johnny’s education.

ESTATE PLANNING Does the term “education” include only undergraduate programs at a fouryear institution, or are community colleges and vocational schools also included? What about graduate school? Will the trust cover only tuition costs, or other expenses too? Also, are there any limitations on the timing, amount or frequency of distributions that the trustee can make for Johnny’s education? The account owner of the 529 plan account must be familiar with the rules governing distributions from the account and how they apply in Johnny’s situation. Distributions from a 529 plan account can only be made for ualified educational expenses” without incurring negative income tax consequences. In addition to the terms of the trust agreement and the 529 plan account, the following additional factors should be considered.

to current income tax. Conversely, a distribution of funds from the trust would carry out taxable income to Johnny that would likely be taxed at a lower rate than if such funds remained in the trust and were taxed to the trust. In addition, the assets of the trust do not grow on an income tax-deferred basis because the trust is a taxpaying entity.

Transfer tax considerations. Contributions to a 529

plan account are typically “annual exclusion gifts,” which are exempt from federal gift tax and federal generation-skipping transfer tax. Contributions to the trust may be annual exclusion gifts or may require use of the donor’s applicable exclusion amount. The assets of the trust will be exempt from GST tax if GST exemption is applied to all transfers to the trust. Distributions from the trust and the 529 plan account

generally will not be considered a gift or a generation-skipping transfer.

Other factors. The trustee and the account owner should bear in mind that the 529 plan account assets may be withdrawn by the account owner, and that the account owner may change the beneficiary to someone other than Johnny. Of course, these changes may have income and transfer tax ramifications. Also, the trustee may be able to distribute funds to Johnny for things other than education. As you can see, a number of important factors go into the analysis, and, depending on the specific facts and

circumstances surrounding any given distribution and the relative importance of each of the factors to the parties involved, the trustee and account owner may decide to make the distribution solely from the trust, solely from the 529 plan account, or partly from each. Patrick J. Saccogna, J.D., LL.M., AEP, is a partner in Thompson Hine LLP’s Personal & Succession Planning practice group. Contact him at 216-566-5761 or Patrick.Saccogna@ThompsonHine.com. James Spallino, Esq., is a partner in the firm’s Personal & Succession Planning group. Contact him at 216-566-5865 or James.Spallino@ThompsonHine.com

Asset protection. Assets in an Ohio 529 plan account are protected from creditors of the beneficiary and the account owner under Sections 3334.15 and 2329.66 of the Ohio Revised Code. Unless the trust is an Ohio Legacy Trust or another domestic asset protection trust protected by the similar laws of another state, however, the assets of the trust could be subject to the claims of Johnny’s creditors. This could happen if a creditor were to obtain a judgment against Johnny and then successfully satisfy such judgment by forcing the trustee to distribute to the creditor under one of the trust’s distribution standards.

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Income tax ramifications.

Assets held in a 529 plan account appreciate on an income tax-deferred basis. A distribution from a 529 plan account to pay for ohnny s ualified educational expenses will not be subject

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ESTATE PLANNING

S8 November 7, 2016

Special needs trusts offer security for disabled individuals By ALLISON M. McMEECHAN

amilies with special needs children re uire an estate plan that ta es into consideration benefits and services from public sources. he family s attorney should have experience drafting trusts for disabled individuals and understand the different programs and services available to these individuals. If a trust is not drafted in accordance with appropriate federal and state laws, the disabled individual may lose means

ESTATE PLANNING tested public benefits. wo types of trusts for disabled individuals exempt from means tested public benefits are third party and self settled trusts. A third party trust is established by someone other than the disabled individual for the disabled individual s benefit. he trust assets, which are never owned by the disabled

individual, are intended to supplement, but not replace public benefits. Upon the disabled individual s death, any assets remaining in the trust may be paid to designated beneficiaries. A properly drafted trust allows parents to set McMeechan aside funds for their disabled child s benefit. A self settled trust is established by a disabled individual with his or her

own funds. or example, a settlement awarded to someone on edicaid can be placed in a self settled trust to allow the individual to continue to receive edicaid. wo types of self settled trusts are special needs d A and pooled. A d A trust is exempt if established by a parent, grandparent, court, or legal guardian, with the assets of a disabled individual who is under the age of . A pooled trust is a separate account maintained by a nonprofit association. A pooled trust account is

established by the disabled individual or by his or her parent, grandparent, legal guardian, or court. nli e the d A trust, there is no age limit to establish this trust. oth trusts re uire that the tate of Ohio is the trust beneficiary upon the disabled individual s death if the state provided medical assistance on behalf of the disabled individual. Allison M. McMeechan, LPA, is the cochair of Reminger Cos. Elder Law and Special Needs Planning Practice Group.

Intended, unintended consequences of naming IRA beneficiaries By DORIS SEIFERT DAY

ith the estate tax exemption over $5 million, many estates need not worry about paying the tax. owever, estates still have the challenges of minimi ing income tax

ESTATE PLANNING on inherited I A distributions. ho your beneficiary is determines both whether the I A can be rolled over, and the time period over which it

must be withdrawn. he decision on who will inherit your I A assets may seem simple, but there are several unforeseen benefits and conse uences

them to treat the IRA as their own and name their own beneficiaries. his allows for more years of tax-deferred growth and a oth Conversion.

Not naming a spouse: pousal Naming an estate: If the estate is

beneficiaries have a uni ue opportunity â€” a rollover option â€” that allows

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the beneficiary, then distributions must be taken over either of two periods. If the decedent owning the I A had not reached his or her re uired beginning date, then the I A must be distributed by the end Day of the fifth year following the owner s death. If the owner had reached his or her re uired beginning date, the re uired distributions are based on life expectancy. his generally re uires distributions to be ta en faster than if an individual was named.

Not naming contingent beneficiaries: If the primary

beneficiary dies prior to the account

owner and a new beneficiary is not named nor is a contingent beneficiary, then the estate is the beneficiary.

Establishing

trusts: hile trusts provide control over the I A distributions, they re uire the distributions be made over the oldest ualified designated beneficiary s life. If the distributions remain in the trust, the income tax liability will generally be higher than if paid to an individual. he trade off for the control is generally a shorter deferral and higher income tax.

Giving: Unlike other assets held by

a decedent, I A assets do not receive a step up in basis to the fair mar et value at the owner s death. If leaving assets to a charity, the charity will not pay taxes on the I A distributions, but the other beneficiaries will.

Doris Seifert Day, CPA, MBA, is director of tax at Walthall CPAs. Contact her at 216-573-2330 or d.day@walthall.com.

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There’s no time like now to create a GRAT By WADE T. WEBER

rantor Retained Annuity Trusts are an effective vehicle to transfer wealth when interest rates are low and valuation discounts are available for transfers of closely held businesses to family. A GRAT is a trust in which the grantor transfers assets to an irrevocable trust for the benefit of a beneficiary or beneficiaries , while retaining a fixed annuity payment for a term of years. hen the term ends, the property in the A transfers to, or is held in future trust for, the remainder beneficiary. If the grantor survives the term, the trust property is excluded from their estate for federal estate tax purposes. If the grantor dies during the Weber term, some or all of the A will be taxed in the grantor s estate. The GRAT strategy for transferring wealth leverages the difference between the return generated by the A property over the I assumed interest rate. he grantor s annuity is discounted by the I ection rate effective when the GRAT is created. The gift amount is the value of the property less the present value of the grantor s retained annuity. The current low interest rate increases the value of the retained annuity and decreases the value of the gift. If the GRAT is structured so that the value of the annuity equals that of property contributed, there will be negligible taxable value of the gift s remainder interest. Appreciation of the assets in excess of the ection rate during the term also passes to the remainder beneficiary, tax free. herefore, ideal contributions to GRAT are assets that generate income, while also appreciating in value. When transferring a closely held business interest to a A , valuation discounts should be available. owever, the I recently issued proposed regulations that would eliminate such discounts for closely held interests transferred to family, outright or in trust. he proposed regulations may be effective as soon as Dec. 31. y creating a A this year, business owners can save substantial transfer taxes by ta ing advantage of current valuation discounts and low interest rates.

Wade T. Weber is a lawyer in McCarthy Lebit’s Trusts & Estates, Taxation and Business & Corporate practices. He can be reached at 216-696-1422 or wtw@ mccarthylebit.com.

November 7, 2016 S9

Fashion a solid plan that addresses sudden wealth By KENNETH SABLE

hether from the sale of a business, a structured settlement, an inheritance or the lottery, the issues that individuals deal with when they receive a large sum of money are the same. hile planning for sudden wealth is not always an option, in some of these circumstances, a sound plan can be put in place prior to receiving wealth. Too often we hear of business owners who sell their business for less than they need to sustain their standard of living. his places them

ESTATE PLANNING in the aw ward position of reducing their style of living, returning to wor or running out of money during retirement. Depending on the means and the amount of wealth ac uired, the client will have to ma e Sable some major decisions. Can they retire? Will their lifestyle change? Can they spend it all in their lifetime

If not, how do they want to leave the remainder to their beneficiaries hat are the most tax effective ways to invest the money? How can future income and estate taxes be minimized? Clients should be advised to build a team of ualified and trustworthy professionals as soon as they are aware of the potential windfall. hat team should consist of an accountant, lawyer and financial adviser. It is imperative that these professionals wor with the client as a team to develop and implement a solid plan. usiness owners, specifically,

should wor with professionals well in advance of their business exit and subse uent receipt of sale proceeds. he team can help the business owner maximi e the value of his her business and meet future financial needs and goals. It is never too early to spea to a professional about the future sale of a business. Proper planning will maximi e the proceeds and minimi e expenses and taxes. Kenneth J. Sable, JD, MBA, AEP, is director of planning at Strategic Wealth Partners. Contact him at 216-800-9000 or ken@swpconnect.com.

CREATE YOUR JEWISH LEGACY

Caring for those in need never goes out of style. Whether we are feeding the hungry, comforting the sick, or caring for the elderly, our Jewish values have always inspired us to act. Those same values teach us to care for the next generation. By making a legacy gift, you leave your children and grandchildren a precious inheritance and a lasting testimony to your values. Find out how you can become a member of the Jewish Federation of Cleveland’s Legacy Society by contacting Carol F. Wolf for a confidential conversation at 216-593-2805 or cwolf@jcfcleve.org.

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S10 November 7, 2016

Making a gift and keeping the income By MARTA KELLEHER

ESTATE PLANNING

he most tax-advantageous assets to contribute to charity are those that have appreciated most in value. If you are considering selling an appreciated asset, would like to continue to receive income from this asset, and ensure the financial future of your charitable organization, you may want to consider a charitable remainder trust. The CRT is a form of split-interest charitable trust in which the donor (or heirs) receives an income stream, for either the life of the donor or a term of years, and the charity receives the

remainder value. he income can be a fixed sum of money an annuity trust or a fixed percentage of the trust that is revalued each year (a unitrust). This charitable tool can provide both a solid lifetime income and immediate tax benefits for the donor and the donor’s family. For example, if Mary wants to convert one or more of her assets to produce a significant income, the C is a good option. Mary (age 76) owns appreciated

stock worth $300,000 that she bought some years ago for $50,000. The growth stock provides little income. Mary could sell the stock and invest the proceeds, but she would incur capital gains taxes of $59,500. If she invested the after-tax sales proceeds Kelleher of $240,500 in CDs earning 2%, she would only realize an income of $4,810 that year. On the other hand, Mary can transfer the appreciated stock to an annuity

trust and name one or more charities as the remainderman. She receives $15,000, or 5% a year in income and an income tax charitable deduction of $161,922 (the deduction assumes an annual fixed rate of . and an annual payout). Mary’s charitable deduction will ultimately result in a tax savings of approximately $64,121. The tax savings and the annual lifetime payouts make the CRT a big win for Mary. The fact that what remains in the trust will go to a charity makes it a win for the charity.

The charitable remainder trust is flexible and can be tailored to meet individual needs and objectives. It can be a vital and rewarding part of a donor s financial, retirement and estate planning. It can be a means of increasing spendable income or providing a reliable income for another person while carrying out a donor’s philanthropic objectives. Marta Liscynesky Kelleher, Esq., MBA, AEP, is the senior gift planning officer at University Hospitals. Contact her at 216-844-7912 or Marta.Kelleher@ UHHospitals.org.

Firearms require special considerations in estate planning By KEVIN R. McKINNIS

ESTATE PLANNING

f all the unique assets that may be covered in the estate planning process, firearms perhaps present the most unique set of challenges and considerations. Owners of firearms need to ma e sure they disclose ownership upfront during the planning process and seek counsel from an attorney who knows

the right questions to ask. Important considerations include the type of firearm involved, its value, bac ground on the beneficiary and location of the beneficiary. here are multiple types of firearms and firearm accessories each sub ect

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to different rules and regulations on the federal, state and local levels. While many of these issues may not arise until the individual dies and the estate or trust is being administered, they need to be considered when drafting the estate planning documents. Firearms not sub- McKinnis ject to the National Firearms Act are the most commonly owned and include hunting rifles and pistols. Two primary issues could arise when attempting to transfer ownership of these types of firearms either the beneficiary is dis ualified from owning a firearm because of being a felon or the particular firearm may be illegal in the

state in which the beneficiary lives. In addition, consideration should be given to whether the firearms should pass through probate or be transferred into a trust upon death because of the laws regarding the transferring of firearms. Of all firearms, itle II firearms create the most difficult estate planning issues. hose firearms fall under the authority of NFA and include sawed-off shotguns, silencers and machineguns. One strategy for passing on itle II firearms is to have a firearms trust own the firearms. If a firearms trust is not used, a new background check, registration paperwork and a fee of must be filed for each firearm when it passes to a beneficiary. hen an owner of A firearms passes away, his or her attorney must

inform the trustee or executor as to who can possess the firearms during the administration process and where the firearms can be legally and properly stored during the administration process. If the firearms are improperly transferred or possessed, an individual can be fined up to , and receive up to 10 years in prison. Without a doubt, there are many issues that can arise from passing on firearms. ut good communications early in the estate planning process with an attorney knowledgeable about special firearms considerations will help avoid problems later on. Kevin McKinnis is an attorney in the tax and wealth practice group of Clevelandbased Walter | Haverfeld LLP.

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M. Patricia Culler Jason S. Damicone Thomas A. DeWerth Carina S. Diamond David S. Dickenson, II James G. Dickinson Sarah M. Dimling Nick DiSanto Mary Ann Doherty Lynda Doland Terry Ann Donner Kara Downing Timothy Doyle Emily A. Drake Therese Sweeney Drake Jill Dugovics William A. Duncan Carl J. Dyczek Howard B. Edelstein Elaine B. Eisner Michael Embrescia Michael E. Ernewein Christopher M. Essig Heather R. Ettinger Christina D. Evans Susan M. Evans Darren A. Ewaska Frank Fantozzi Charles E. Federanich J. Paul Fidler

November 7, 2016 S11

Julie E. Firestone Mary Kay Flaherty Linda Fousek Patricia L. Fries Robert R. Galloway Naomi D. Ganoe Stephen H. Gariepy Rao K. Garuda James E. Gaydosh Kyle B. Gee Christopher Geiss Thomas M. Genco Arthur E. Gibbs, III Thomas C. Gilchrist Stephanie M. Glavinos 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 Gary Haas Ellen E. Halfon Patrick A. Hammer Sarah Hannibal Lorie Hart Lawrence H. Hatch Albert G. Hehr, III Theodore N. Hellmuth James M. Henretta Jean M. Hillman Joanne Hindel Mark L. Hoffman Ronald D. Holman Harold L. Hom Robert S. Horbaly Brent R. Horvath Michael J. Horvitz Stuart M. Horwitz Douglas Ingold Lynnette Jackson George A. Jacobs Paula Jagelewski Christopher P. Jakyma Barbara Bellin Janovitz Theodore T. Jones James O. Judd Matthew F. Kadish Stephen L. Kadish Ronald L. Kahn

Matthew A. Kaliff Joseph W. Kampman Karen J. Kannenberg Lori L. Kaplan William E. Karnatz, Sr. William E. Karnatz, Jr. Bernard L. Karr Howard Kass John D. Kedzior Marta L. Kelleher Lesley Keller Jonathan M. Kesselman Alexis Kim Amy I. Kinkaid Richard B. Kiplinger Elizabeth D. Klein Paul S. Klug Victor G. Kmetich Daniel R. Kohler 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 Kristen Kuzma Louis D. LaJoe

THE ESTATE PLANNING COUNCIL OF CLEVELAND President Michael W. Matile

Vice-President Emily Shacklett

Gary E. Lanzen Steven P. Larson Donald Laubacher Mary Lavin Paul J. Lehman Kevin J. Lenhard David M. Lenz Wendy S. Lewis Keith M. Lichtcsien Dennis A. Linden James Lineweaver Jennifer R. Loan 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 Karen T. Manning Monique W. Marinakos Wentworth J. Marshall, Jr. Donald C. May Nancy McCann Karen M. McCarthy Robert F. McDowell, Jr. Erica E. McGregor Ryan P. McKean Kevin R. McKinnis

Joseph M. Mentrek Lisa H. Michel Charles M. Miller William M. Mills Wayne D. Minich Ginger F. Mlakar Marie L. Monago M. Elizabeth Monihan Michael J. Monroe Robert C. Moore Kenneth R. Morgan Philip G. Moshier Joseph L. Motta 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 Anthony J. Nuccio Eric A. Nye Michael J. O’Brien Lacie L. O’Daire Linda M. Olejko Matthew S. Olver Leslie A. O’Malley Robert J. O’Neil Richard M. Packer Jodi L. Penwell Dominic V. Perry

Secretary Julie A. Fischer Craig S. Petti Marla K. Petti Timothy J. Pillari Thomas Pillari Jennifer N. Pinkerton Douglas A. Piper Candace M. Pollock Mary Ellen Potter Douglas Price Rebecca Yingst Price Matthew M. Pullar Maria E. Quinn Susan Racey Uma M. Rajeshwar Timothy L. Ramsier Charles L. Ratner Melissa Anne Register Linda M. Rich R. Andrew Richner Radd L. Riebe Elton H. Riemer Kathleen K. Riley Michael G. Riley Frank M. Rizzo Lisa Roberts-Mamone Kenneth L. Rogat Carrie A. Rosko Philip B. Rosplock Debbie Rothschild Larry Rothstein Alexander I. Rupert Alexander I. Rupert Rennie C. Rutman

Treasurer Peter Balunek

Program Chair Dana Marie DeCapite

Kenneth J. Sable Patrick J. Saccogna Jennifer A. Savage Fran Mitchell Schaul Ronald S. Schickler Dennis F. Schwartz June A. Seech John S. Seich Doris A. Seifert-Day Andrea M. Shea Stanley E. Shearer Nick Shofar Douglas E. Shostek Roger L. Shumaker Gary M. Sigman Michael A. Simmons Judith C. Singer Mary Jean Skutt Mark A. Skvoretz John M. Slivka N. Lindsey Smith Cristin Snodgrass Arthur K. Sobczak, III Sondra L. Sofranko James Spallino, Jr. Richard T. Spotz, Jr. William L. Spring Laura B. Springer M. Randal Stancik Stacey Staub Kimberly Stein Laurie G. Steiner Saul Stephens

Immediate Past President Michael T. Novak

E. Roger Stewart Beverly A. Stiegele David J. Stokley Diane M. Strachan Thomas E. Stuckart John E. Sullivan, III Linda DelaCourt Summers Scott E. Swartz Joseph N. Swiderski David A. Szabo Yeshwant K. Tamaskar Richard Tanner Barbara Theofilos Maryann Fremion Thomas James K. Thompson Donna Thrane Floyd A. Trouten, III Mark A. Trubiano Thomas M. Turner Diann Vajskop 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 Robert W. Wasacz Neil R. Waxman Kimberly A. K. Walrod

Robert W. Wasacz Neil R. Waxman Ronald F. Wayne Julie A. Weagraff Michael L. Wear Wade T. Weber Stephen D. Webster David G. Weibel Jeffry L. Weiler Richard Weinberg Miles P. Welo Katherine E. Wensink Elizabeth Wettach-Ganocy Marcia J. Wexberg Terrence B. Whalen Andrew Whitehair Frederick N. Widen Geoffrey B.C. Williams Erica K. 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 7, 2016

For end-of-life wishes, document, communicate intent with family By EILEEN BEAL

ESTATE PLANNING

Do the paperwork he first, and most important, is to create a living will and medical power of attorney. “These are advance directives, and they should be kept up to date,” says Lori Lozier, a Benjamin Rose Institute on Aging board member. Living wills are medically and legally recognized documents. They give a patient’s health care providers instructions about the procedures, treatments and care they do and do not want if they are terminally ill, seriously injured, in a coma, in the late stages of dementia or near the end-of-life. “Every state has its own document and it must be witnessed by two people who are not the person’s physicians or on their nursing home’s staff, but it doesn’t have to be notarized,” says Lozier, who also is director of geriatrics, palliative care and post acute care services at University Hospitals Case Medical Center. The other document is a Power of Attorney for Health Care/Medical Power of Attorney. This authorizes the person named in the document to speak and make decisions on the patient’s behalf. “Their decisions can’t go against what’s in the living will, so they need to know what it says,” Lozier says. Advance directives can be ignored, however, if those who should know about them don’t. To decrease the chance that happens, copies of both documents should be included in all medical records. They also should be given to the person appointed power of attorney for health care, close family members and friends, and posted where an team can easily find them.

‘‘

Because these conversations are about so much more than words on paper, they need to take place at home, not in a lawyer’s office, hospital or ICU.

Have the conversation Even when advance directives are in patient files and in the hands of those who should know about them, they may not get read. Or the person who reads them may not agree with them. To make sure that everyone hears both what the documents say and what they mean, discuss them before they are needed. Because these conversations are about so much more than words on paper, they need to take place at home, not in a lawyer s office, hospital or IC . “This is a kitchen table conversation. At the kitchen table there’s no stress and no crisis, so everyone can discuss things calmly,” Lozier says. Having that advanced conversation helps get everyone on the same page and can lessen the pain and anguish of a loved one’s passing. “That’s because they (the loved one) too the burden of ma ing difficult decisions off them,” she says. “And also it’s because they know their loved one got the care and experience of dying that they wanted.” Eileen Beal is a local health and aging issues writer. Contact her at eojb@visn.net.

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f you want your end-of-life care to reflect your wishes and values, and meet your quality-of-life goals, you need to make sure you’ve done three things.

What do billionaire Howard Hughes and rock icon Prince have in common? By JAMES S. LINEWEAVER

hen Prince passed away prematurely, he left behind an estimated $300 million estate that included several highend real estate holdings around the globe, and song and movie royalties, along with many unreleased songs. Prince also died single, childless, and “intestate,” or “without a will.” As a result, the complex process of resolving his estate and distributing the net assets has fallen to the federal and state probate courts. Ironically, despite having no wife or children, 36 potential “heirs” have laid claim to Prince’s estate, and it will likely take years to sort out. Several of these potential heirs will also undergo genetic testing to validate their claims. Similarly, Howard Hughes, the billionaire aviator, industrialist, and filmma er, died childless and without a will in 1976. Hughes’ death set off a decades-long battle over his estimated $2.5 billion estate, with the last payout from his estate coming in 2010 — 34 years after his death — with a payment from a bankrupt mall owner to a loose federation of Hughes’ distant relatives.

Mistakes cost money, privacy and more What can we learn from the life and death of these extraordinary people? Quite simply, everyone should have a thorough and coordinated estate plan, and it’s never too early to create one. Why? Probate fees can skyrocket: appraisal costs, executor’s fees, court fees, legal and accounting fees, and surety bonds can reduce your estate value 3% to 8%. And, all court proceedings will be open to public scrutiny. So much for discretion and privacy. But probate costs and invasion of privacy are only part of the story. Lack of a will and proper planning also most likely mean higher state and federal taxes. In the case of Prince, the attorneys for the firm overseeing his estate estimated that Prince’s tax bill and fees could amount to almost half the value of his entire estate, or around $150 million. As a result, Prince’s estate will probably have to liquidate some real estate holdings and sell the rights to a number of his unreleased and released music, probably at a discount to true value. A 2015 online survey by Harris Poll revealed that 64% of Americans still don’t have a simple will or estate plan. Why? One of the most common reasons for the lack of an estate plan is “I don’t think

ESTATE PLANNING I need one.” Even if your own wishes aren’t a priority to you, at minimum you should want to make sure you don’t leave a disorderly financial mess behind for your loved ones. Regardless of your net worth, everyone should have a proper estate plan that identifies distribution of bank accounts, retirement accounts, Lineweaver family heirlooms, personal possessions, avoids probate and provides guidance to the next generation. Medium-sized estates might want to consider a revocable living trust to keep money in their bloodline, control distributions from the grave and minimize taxes. Larger estates should consider more sophisticated strategies listed below. Without a proper estate plan, a court may distribute your estate in a manner that is not in accord with your wishes or family’s needs. You could also expose your loved ones to unnecessary tax liabilities and extraordinary fees.

Where to go? Certainly there is no shortage of professional specialists willing to act as estate advisers. Attorneys, accountants, insurance agents, stockbrokers, private bankers, and others can all be valuable players. But, it’s only natural that each of these professionals will make recommendations most familiar to them. For example, attorneys might rec-

ommend some type of trust such as credit shelter, bloodline dynasty, charitable lead or charitable remainder trusts. The accountants might recommend gifting programs, LLCs, Roth conversions, stretch IRAs or family limited partnerships. The insurance agents will look at second-to-die life insurance inside an irrevocable life insurance trust, annuity trusts or charitable gift annuities. The stockbroker might recommend donoradvised funds and private foundations. All these are valid concepts and are worth looking into, as no two estate situations are exactly alike. Intelligent estate planning requires the use of a ualified, experienced adviser who is going to create, communicate, coordinate and monitor the proper estate planning strategies between yourself and the other relevant professionals. We refer to this adviser as a financial uarterbac . His or her role is to ensure your entire professional team works effectively and efficiently to develop and monitor a worry-free estate distribution plan. In this context, perhaps the question to ask yourself is, “Who is your financial uarterbac Sources for this article can be found at www.lineweaver.net James S. Lineweaver, CFP® AIF®, is founder, president and financial quarterback™ of Lineweaver Financial Group. Contact him at 216-520-1711 or www.lineweaver.net. Securities offered through Triad Advisors, member FINRA and SIPC. Advisory Services offered through Lineweaver Wealth Advisors, LLC. Lineweaver Wealth Advisors is not affiliated with Triad Advisors.

ESTATE PLANNING

November 7, 2016 S13

A simple thank you can go a long way By JULIE A. WEAGRAFF

S A primer on charitable donations of personal property By JAMES CORCORAN

any charitable donations are motivated by altruism. hey may also provide substantial tax benefits. his primer covers the basics of the process. he I re uires that charitable donations of personal property be made to nonprofit institutions with, for example, a c status. A CPA can provide a full list of tax exempt nonprofit institutions. Donated property must directly relate to the institution s stated Corcoran mission and be in the institution s possession on or before Dec. of the tax year in which the deduction is claimed. enerally, a donor may deduct the fair mar et value of a donation from gross income. I regulations re uire a ualified appraisal for charitable donations in excess of , in fair mar et value. In part, a ualified appraisal is an

CHARITABLE PLANNING appraisal prepared by a ualified appraiser. electing an appraiser who belongs to at least one of the national appraisal organi ations American ociety of Appraisers, Appraisers Association of America or International ociety of Appraisers is the best option to avoid re ection of a claimed deduction, or even a full blown audit. Along with the properly prepared ualified appraisal, the donor will file orm and orm , which re uires the signatures of the ualified appraiser and ran ing officer of the donee organi ation. Additional nuances re uire the assistance of a ualified appraiser. James Corcoran, JD, AAA, ASA, RICS, Esq., is an IRS qualified appraiser at Corcoran Fine Arts. Contact him at 216-767-0770 or corcoranfinearts@ gmail.com.

Julie A. Weagraff, CFRE, is the director of fund development for Girl Scouts of North East Ohio. Contact her at 330983-0399 or jweagraff@gsneo.org.

Security and Stability Ulmer & Berne’s estate planning attorneys rely on decades of experience to maximize opportunities, minimize risk, and protect your life’s work.

James A. Goldsmith jgoldsmith@ulmer.com 216.583.7114

Maximizing the value of your exit is our number one goal. Chris Wagner, MBA Director of Transaction Advisory

Phase 1: Strategic Wealth Plan and Business Valuation Phase 2: Pre-Transaction Planning Phase 3: Market the Business and Advise Throughout Transaction For additional information on how Strategic Wealth Partners works with our clients, please visit www.swpconnect.com/sudden-wealth.

are so overused that they often lose their meaning. ut to a charitable donor, a than you can be expressed in a number of creative ways. o the donor who has contributed to a scholarship fund, a hand written than you note from the student who received the scholarship can be extremely meaningful. o the donor who has supported a Weagraff chamber orchestra, an invitation to a reception to meet the conductor ma es a music lover s heart sing. o the donor who has given to a social service agency that provides food and clothing to those in need, a newsletter sharing

the story of a family who was helped can inspire a legacy of giving. Donors who ma e charitable commitments are ma ing an investment in their communities and in the lives of others who need their support, whether it s a scholarship, basics needs or the arts. onprofit organi ations have the opportunity to build long term relationships with their donors through a variety of stewardship activities throughout the year. eyond the initial than you letter, an invitation, a greeting card and even a personal visit from a staff member are all ways that the organi ation can continue to remember their donors and remind them of how their investment is ma ing an impact.

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Meet Our Business Succession Specialists We work with business owners well in advance of their exit and when the time is right to sell, our in-house investment banker will market the business and oversee the transaction. Our three Advisory Phases position the owner to receive maximum value for his/her business.

tewardship is defined as the careful and responsible management of something entrusted to one s care. onprofit organi ations as the beneficiaries of charitable donations are responsible for ma ing sure that their donors gifts are used in the manner they intended. very donor deserves to be properly ac nowledged for a contribution, no matter how big or small the gift. A timely than you letter, a phone call of appreciation from a volunteer and recognition in an organi ation s annual report are all standard ways of expressing than s. ut when an organi ation goes above and beyond a standard than you to a personal and creative than you, then the path to true donor stewardship is achieved. ometimes the words than you

CHARITABLE PLANNING

Linda DelaCourt Summers lsummers@ulmer.com 216.583.7212

Frederick N. Widen fwiden@ulmer.com 216.583.7340 Stephanie M. Glavinos sglavinos@ulmer.com 216.583.7230

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Ken Sable, JD, MBA, AEP® Director of Planning

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ESTATE PLANNING

S14 November 7, 2016

Donor-advised funds ideal charitable vehicle for owners who sell By LAURA J. MALONE

n discussions owners of closely held business have with their trusted advisers, there are often two important and interrelated questions about business exit: What is the best strategy for leaving the business, and how can I get the most financial and tax benefits from that exit Business owners and their trusted advisers may also ask: How can I take a portion of these proceeds to make my world a little better ow can I ensure that my life’s efforts have made a difference ow can I be certain that my

CHARITABLE PLANNING success won t alter my children s values A donor-advised fund is that point of intersection where the owner’s personal and social interests intersect in simple, taxsmart and meaningful ways. Many owners find the donor advised fund enables them the Malone opportunity to ensure the same benefits of a private foundation but without the laborious oversight and, ironically,

with more privacy.

Business owner benefits Charitable planning with donor-advised funds can often increase the business owner s personal benefit. ifts of closely held stock, real estate or other assets ualify for the highest benefits available including: n Maximum income deduction available; n No capital gains on gifts of longterm assets; n No estate taxes on the portion that is donated; n Possibility of reduced alternative

minimum tax and net investment income tax; and n Tax-free growth of charitable assets.

No need to fear Owners often have concerns that making a charitable gift before the sale may lead them to losing control of the business. ifting non voting shares or a minority interest in the business allows the owner the ability to maintain majority control in the running and selling the business. Also, because the gift must be made before any formal, legally binding agreement to sell or merge the company, donating the shares

to the donor-advised fund and the subsequent transition of those shares to the buyer can take place without slowing down the transaction process. With the help of a multidisciplinary team of tax, legal and financial professionals, the simplicity and costeffectiveness of a donor-advised fund provides owners a meaningful way to create both leverage and legacy. Laura Malone, CAP®, CEPA, is vice president of corporate/complex giving for American Endowment Foundation (AEF). She can be reached at lauramalone@ aefonline.org or 888-440-4233.

Family philanthropy is one of the greatest charitable legacies By KAREN J. KANNENBERG

amily philanthropy has been a part of the Cleveland area since its founding. Many notable names come to mind as pillars of Cleveland’s philanthropic history, as

CHARITABLE GIVING well as for the support they continue to provide throughout Northeast Ohio. In recent years, several “new” families

have made significant gifts that have had a tremendous impact on Cleveland. Although there is not a specific definition for family philanthropy (or Internal Revenue Service legal classification , most people associate a private family foundation with the term

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

family philanthropy. However, family philanthropy can also be accomplished through donor-advised funds or simply through siblings pooling their resources. Family philanthropy is not limited to those with exceptional means and it is an ideal way to introduce children to “giving back.” Ultimately, creating a plan for Kannenberg family philanthropy can be as unique as the individuals involved. For most families, creating a plan for family philanthropy begins with assessing assets and selecting the most appropriate financial or estate planning techniques. The Cleveland area is fortunate to have a wide range of estate planning professionals who have experience working with families to develop philanthropic plans from a financial perspective. owever, finding the most appropriate charitable organizations to support can be the most challenging, yet rewarding, part of the process. To be truly effective, family philanthropy requires all generations of a family to evaluate their charitable

objectives. This includes not only selecting the organizations to support but how to make gifts. For example, some families focus on one or two organizations that will receive ongoing support based on a specific connection to their family such as a health-related issue, or religious affiliation. Others choose to define a specific geographic region. Identifying categories for support such as education or basic human need is also a common way for families to determine what organizations they would like to support. Holidays such as Thanksgiving can be a great time for families to start a conversation about family philanthropy or review their charitable plans. In addition to being an important part of estate planning, family philanthropy is a special way to keep multiple generations of families connected while making an impact on the community. Karen J. Kannenberg, CFRE, is manager of gift and donor development at Cleveland Metroparks. Contact her at 216-635-3217 or kjk@ clevelandmetroparks.com.

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 150 years. Join the many who are making a difference.

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ESTATE PLANNING

November 7, 2016 S15

Motivations for giving may evolve with time Donors tend to have personal stake in mission-driven bequests By CAROL F. WOLF

CHARITABLE GIVING should be taken seriously and often requires professional advice. Individuals who give to many charities annually will probably include only one or two charities in their wills, demonstrating another reason for the serious consideration that a bequest requires. The charities included in an estate plan are those that the donor thinks of as family — an additional child whom they wish to support even after they have passed away. Potential donors ponder several questions as they make charitable plans that “do good and feel good.”

What are my charitable priorities? In other words, what

do I care most about? Perhaps human services, religion or education. And, education may mean supporting an inner city tutoring program to one person and donating to a college campus building to another.

What impact do I want my gift to have? Donors may

Do I trust the organization? Donors need to feel

control over how their future gifts will be used are less likely to make unrestricted gifts, preferring designated or field of interest funds. Donors who require less control may prefer making a gift that may be used where it is

wish to fulfill an existing need or help create a new and innovative program.

that the organization receiving their bequest will use it as intended in a fiscally responsible manner. All this will happen long after the donors, and maybe their surviving family members are deceased. It is important that donors learn about the organization’s effectiveness, stability and experience with planned gifts. The relationship between the donor and key staff members, including the CEO and development professionals, is of utmost importance in establishing trust.

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if they want to be recognized for their planned gifts at all. The desire for recognition may motivate donors to reveal testamentary intentions during their lifetimes.

Carol F. Wolf, LISW, CFRE, is managing director of planned giving and endowments at Jewish Federation of Cleveland. Contact her at 216-593-2805 or cwolf@jcfcleve.org.

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needed most, usually determined by the organization’s current leadership.

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close friend who is a cancer survivor sends an email asking you to sponsor her for a run/walk to support an organization that provides services for cancer patients and their families. You are somewhat familiar with the charity but have not supported it before. How long does it take to decide to make a donation? Most likely, you clicked on the link to her fundraising page and gave immediately. Will you continue your support annually? Will you include the organization in your estate plan? The annual gift takes Wolf thought, but the decision to make a testamentary gift requires much more consideration. Most people who give charitably support several charities each year for different reasons. As noted, it may be as simple as a quick response to a friend’s request. It may involve a business obligation or an event one wants to attend. Deciding to write a check or click on a link once or even annually may not take much soul searching or selfreflection. In contrast, the decision to include a charitable organization in an estate plan may take years and involve others in the decision-making process. Often, tax benefits may prompt charitable conversations but as the discussion progresses, it is the person’s philanthropic intent and goals that will lead to an actual commitment. Experienced development professionals know that charitable gifts made solely for financial reasons often end with regret. Testamentary gifts are usually much larger than charitable gifts that donors have made during their lifetimes. Therefore, it makes sense that the decision of what to give to whom

Charities appreciate knowing about expected gifts, and donors may enjoy being part of the charity’s Legacy Society. Once these questions are answered, donors may have a better idea of the organizations they wish to support. Next, deciding how to make the gift may involve a team of advisers, including a financial professional, CPA, attorney, development professional and hopefully, family members. The most successful philanthropic plans include open communication between donors and the team of advisers. By working together, they help the donor achieve his or her personal, philanthropic and financial goals. Charitable giving has been scientifically proven to improve health and quality of life. Russell James, director of graduate studies in charitable planning at Texas Tech, has a theory about the core reason for philanthropy. “Deep down in a person’s head, perhaps in the subconscious, there is something that drives a person to seek meaning outside of themselves, and it often finds expression through charitable giving. Giving to help others and/or to a cause greater than one’s self gives meaning to our own lives.” Perhaps that is the most influential factor that motivates donors’ philanthropic decisions, and all other details are secondary.

ESTATE PLANNING

S16 November 7, 2016

Tax-beneficial IRA charitable rollover rules now permanent By HOWARD ESSNER

CHARITABLE GIVING

id you now you can ma e a charitable contribution di rectly from your I A, avoid federal and possibly state taxation on the distribution, and have the con tribution count toward your re uired minimum distribution his special provision, which has been around in temporary form since , is now permanent. If you ta e money out of an I A and contribute it to a charity, the distribution would be taxable, but you might not get a full Essner tax benefit from the corresponding charitable contribution deduction. ow, a ualifying charitable distribution from an I A is excluded completely from your federal taxable income. his can help save taxes in the following situations n If you do not itemi e and would not reali e a tax benefit from the contribution. n If you have maxed out your charitable deductions at of ad usted gross income, since gifts from the I A do not count against this limit. n If you are sub ect to taxes or limitations on deductions that are limited because of high income,

because the charitable distributions from I As are not counted as income. n If you live in a state that does not allow charitable deductions and or taxes retirement distributions li e Ohio. In order for a distribution to be excluded from income, the following re uirements must be met n he distribution must be made from a traditional or oth I A. Distributions from , b, P, eogh or defined benefit plans are not eligible. n he owner of the I A must have reached age by the date of the contribution. n he distribution must be made to a ualified charitable organi ation. Donations to private foundations, donor advised funds and supporting organi ations do not ualify. n he amount excluded from gross income is limited to , per year per taxpayer. n he contribution must be made directly by the I A custodian to the charitable organi ation. Howard Essner, J.D, is general counsel, managing director and family wealth advisor at Ancora Inverness LLC. Contact him at 216-839-5130.

Team-based strategy best for executing gifts By STACEY L. McKINLEY

hen finali ing estate plans, many individuals wish to include their favorite charities. hile charitable giving often is through wills or trusts, advisers may want to remind their clients that they can ma e a meaningful philanthropic gift through a beneficiary designation. A charity easily can be named a beneficiary of a life insurance policy, an I A or other retirement account, or another transfer on death asset such as a ban or bro erage account.

Reasons for giving here are significant reasons for naming a charity as beneficiary of these assets. amily members could face a hefty personal tax burden if they were named as the beneficiaries of a retirement account. In addition, beneficiary designation forms are simple to execute and often can be completed or updated online at no cost. pon a donor s death, a beneficiary designation allows an asset to be transferred to the charity uic ly and outside of the probate process.

Documentation that nonprofits need Advisers should remind donors that a beneficiary designation form ta es precedence over a will. hen assets are transferred through a beneficiary designation form, a will is simply a bac up document.

ESTATE PLANNING PRACTICE GROUP

Russell Meraglio, Jr. Co-Chair of Probate, Trust & Guardianship Administration and Probate & Trust Litigation Practice Groups

Adam Fried Named Best Lawyers® 2015 Litigation-Trusts & Estates“Lawyer of the Year” in Cleveland

John Patrick Master’s Degree in Taxation and Member of the Estate Planning Council of Cleveland

Leon Weiss Named Best Lawyers® 2012 & 2014 Litigation-Trusts & Estates“Lawyer of the Year” in Cleveland

Franklin Malemud Chair of Cleveland Metropolitan Bar Assoc. Estate Planning, Probate & Trust Law Section

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CHARITABLE GIVING A donor naming a charitable organi ation as beneficiary of a retirement or other account will need some basic in formation from the charity to complete the gift. his includes the organi ation s legal name and tax identification number, which can be obtained by calling a develop ment or gift planning professional at the McKinley organi ation. his information also might be found on the charitable giv ing page of an organi ation s website. Charities often as donors to notify them if the organi ation is named an account beneficiary. A donor can give the charity a copy of the beneficiary form. Another option is to complete an or gani ation s gift intention or notice of future philanthropy document that in cludes the donor s name and address, gift type, estimated value of the gift, and the name of the donor s attorney or financial adviser. his form typical ly is non binding and can be revised at any time. An added benefit of these forms is that they allow donors to notify a charity when their gift is to be used for a specific purpose, something the beneficiary form may not provide. aving a copy of a donor s beneficiary form also may ma e it easier for a charity to collect a gift upon that individual s death. ife insurance and financial services companies typically re uire beneficiaries to submit a certified copy of a donor s death certificate to collect funds. In many instances, a charity can purchase a copy of a death certificate online through a third party vendor. In some urisdictions, such as ew or , death certificates are obtainable only by immediate family members or others with a documented claim or court order. aving a copy of a donor s beneficiary designation form is the most effective way to prove a charity s legal claim to a decedent s asset.

inancial services companies also re uire other items from the charity in order to distribute a gift through a beneficiary designation upon a donor s death. A development or finance officer can facilitate and ma e sure these items are readily available in both print and electronic files. ost finance and life insurers will re uire a corporate resolution and a certificate of incumbency. he resolution indicates that the charity is authori ed to collect the gift. he certificate of incumbency shows who is authori ed to sign documents on behalf of the organi ation. hese fre uently are within one document. Organi ations should ma e it a point to update these documents regularly to ensure that they have the signatures of their current officers and executives. any financial companies also will re uest a nonprofit corporation s Articles of Incorporation, a document that serves as the official recognition of the corporation s existence. Corporate articles usually can be found by searching the secretary of state s web site. Organi ations should eep a PD copy of their organi ation s articles in their electronic files in order to retrieve a copy uic ly when needed. inally, charities should include a letter to the financial services company re uesting immediate payment along with the forms and other items re uest ed for collection. A financial services company may not issue a chec auto matically after receiving these items. Charities should ma e it clear that the funds are not to be held in an account, but immediately should be sent to the charitable beneficiary.

Teamwork is important y wor ing together, donors, financial advisers and charities can use retirement funds, life insurance or other assets to ma e a significant philanthropic gift that is easy to establish and can provide generous support for years to come. Stacey L. McKinley is director of gift planning at Cleveland Clinic. She can be reached at 216.445.8552 or mckinls@ccf.org.

ESTATE PLANNING

CHARITABLE GIVING

Planned gifts free up funds to spend on life By MARY GRACE HERRINGTON

November 7, 2016 S17

Donating household items may require an appraisal By LORIE HART

CHARITABLE GIVING

onating household goods and clothing is a great way to clear out a home and help others. However, the donor must comply with the 2006 Pension Protection Act when making a non-cash contribution of household goods for a tax deduction. This act was partly enacted to stop taxpayers from donating household items and clothing in poor condition and claiming tax deductions. Broken chairs and torn shirts are no longer acceptable items for donation. According to the act, clothing and household goods must be in “good”

condition. ood is not defined, however. Household goods are defined as furniture, furnishings, electronics, appliances and linens. Donations may be made to a qualified tax exempt organi ation that has 501(c)(3) tax-exempt status. Churches and other religious organi ations are not required to obtain this tax-exempt status. There are several other types of organi ations that are also tax exempt, thus, it is best to consult with your CPA to confirm your donation is deductible. Keep records and receipts of all dona-

tions. For items totaling more than $500, IRS Form 8283 must be submitted. Keep a list of donated items, including condition, value and charity names and addresses. For a single item donation of $500 to $5,000, you must include how you acquired the item and when you acquired it. If the item is in Hart poor condition, you need a formal appraisal from a ualified appraiser. A broken Windsor fan back chair made by Charles Chase may have value and qualify as a donation. A moth-eaten

Victorian gown may not have value and would not qualify. Non-cash donations valued at more than $5,000 must have a formal appraisal and a completed Form 8283. A personal property appraisal is a written document that provides a value for an item based on research. An appraisal is written according to the Uniform Standards of Professional Appraisal Practice. ualified appraisers are compliant with PAP and have a certificate stating that they are up-to-date. Lorie Hart, ISA, AM, is a founder of L&L Estate Liquidation & Appraisal Services LLC. Contact her at 216-470-7002.

hen you really believe in an organi ation and its cause, you may be drawn to support it with small, targeted gifts — tickets to an annual fundraiser or an annual donation. Though every dollar counts when it comes to charitable giving, planned gifts allow you to make a lasting financial difference in your chosen charities without impacting your current cash flow. There are ways to balance your philanthropic values so that you’re able to support organi ations long term while still invest- Herrington ing in life’s current moments. Donors should seek counsel from their trusted financial advisers on the specifics, but to get you started, here are three simple ways to make the most out of your assets through planned giving:

WE HE LP CROOK E D S TOCK BROK E R S M AKE SOME THING OF THEMSELV ES.

Make a charitable bequest ou can leave organi ations gifts in your will or living trust either as a percentage of your estate or based on what remains after other obligations have been met. This allows you to ensure that group’s mission continues.

Redistribute your retirement plan assets Consider naming your favorite charity as the beneficiary of your I A or pension plan. This is an especially good fit for planned giving because charitable organi ations do not owe taxes on retirement plan assets they inherit. If the same assets go to family heirs, they will typically owe income and estate taxes.

Leverage your life insurance policy There are a few ways to leave a life insurance policy as a charitable gift, including naming your favorite charitable organi ation as the beneficiary of a new or existing life insurance policy or signing over ownership of the policy to an organi ation so the donor receives an income tax deduction for the approximate policy value as of the transfer date. hese legacy defining actions can be reviewed and updated at any time, but setting them up now is the first step to leaving the exact legacy you want for yourself. Mary Grace Herrington, CFRE, 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.

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ESTATE PLANNING

S18 November 7, 2016

Frame your estate plans early on Proactive approach helps build lasting legacy By JENNELL C. VICK

he goal of estate planning is to make arrangements for your estate, before death, through various means, like wills, trusts or insurance policies. You might think that estate planning happens a very long time from now — closer to death, or

CHARITABLE GIVING minimally, long after the kids moved out and you ve had sufficient time to amass any sort of “estate.” The reality is that estate planning can and should happen now, and should reflect your values and priorities, includ-

Your success is our foremost concern.

ing the causes and charities that are meaningful to you. Optimally, estate planning is one component of any financial plan that begins with the end in mind. While we assume death will occur much later in life, establishing life and disability protection, Vick as well as maintaining an updated will, should be part of every financial plan.

idea could not be further from the truth. A financial plan that begins with the end in mind will help you protect those you love, accumulate more on your journey and ultimately leave a legacy greater than you imagined. Financial plans that include estate planning will help you meet your financial goals and make a meaningful philanthropic impact along the way. Jennell C. Vick is executive director of the Cleveland Hearing & Speech Center and an assistant professor at Case Western Reserve University.

Open discussion with charitable beneficiaries is mutually beneficial By DAVE STOKLEY

To learn more, contact Gary Poth at 216-689-5607 or go to key.com/kpb today.

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When you build a home, the contractor starts at the foundation and builds up. he same is true with financial planning. Once a strong foundation of protection is in place, you will build walls of accumulation as your assets continue to grow. But long before the contractor poured your foundation, an architect helped design a plan the contractors would follow. That crucial design piece is often absent in early financial plans, if they even exist. People tend to assume they have to accumulate assets before seeking assistance from a financial adviser. his outdated

onors are often reluctant to notify charitable beneficiaries of planned gifts they have made to these organizations. Understandably, some donors value their privacy, while others may worry about committing to something that seems distant in their future or perhaps uncertain. Organizational development staff understand and honor these valid concerns and are here to help. Here are just a few reasons it may be in your favor to notify charitable beneficiaries of your plans:

CHARITABLE GIVING Avoid surprises any donors have specific passions at the organizations they support and choose to direct their gifts accordingly. As time passes, however, the needs and functions of an organization often change, which can cause restrictions on the use of the gift to severely limit its impact. A Stokley conversation will go a long way toward maximizing your gift’s impact and intent.

Set an example

SMART ADVICE

Many people make gifts after being inspired by seeing someone else give. When you tell an organization about your gift and allow them to recognize it, you create the possibility that others will follow your example.

Enjoy special benefits Many charities have special groups designed to thank and recognize those who have made estate gifts.

Retain flexibility and anonymity In terms of flexibility, charities understand that circumstances can change and that your gift may be less than originally intended. Many types of gifts can be changed (e.g. wills, revocable trusts), and notifying your charity of the gift can be done without being legally binding. For those who do not want public recognition, your charity will be happy to keep your gift anonymous. Anonymity does not prohibit you from discussing your intent, inspiring others or en oying other benefits offered. Dave Stokley, JD, is the associate director of principal giving at the Cleveland Museum of Art, where he also advises donors on planned giving strategies. Contact him at 216-707-2198 or dstokley@clevelandart.org.

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November 7, 2016 S19

5 smart ways to maximize your donor-advised fund By KAYE RIDOLFI

onor-advised funds have become a universally popular tool in charitable giving, and for good reason. These funds are a smart choice for your philanthropic investments, and with careful planning, can bring you great tax savings, flexibility and the benefit of centrali ing your charitable dollars in one convenient account. In 2015, donor-advised funds at the Cleveland Foundation invested nearly $18 million in our community and beyond. Some simple strategies can help you fully reali e the impact of your fund and boost the satisfaction you get from giving:

CHOOSE THE RIGHT PARTNER: You have options in who you choose to set up and manage your donoradvised fund. Be sure to think through what is most important to you in your giving. When you choose the Cleveland Foundation as your charitable partner, for example, you have access to expert grantma ing and financial teams. Our staff members have a deep understanding of the community’s needs and the most effective nonprofits who serve them. A dedicated adviser will work with you to customi e a giving plan that will help you make your charitable giving more impactful.

INVOLVE YOUR FAMILY: You may choose to involve your family by designating members as current advisers or successor advisers to your fund. Some donors have even opened up separate donor-advised funds for each of their children. Many donors like the idea of teaching their children how to make grantmaking decisions and experience firsthand how their philanthropic choices can transform the community. A customi ed philanthropic plan helps donors and their families establish a shared vision. Engaging your family members is one way to demonstrate the importance of charitable giving and to perpetuate your legacy of giving through the generations.

MAXIMIZE FLEXIBILITY: Timing: The nature of a donoradvised fund allows you to make philanthropic decisions whenever it works for you. When you make a contribution, you can claim an income tax deduction right away, and decide which charities to support at your convenience. Assets: The most popular types of contributions to donor-advised funds are cash and appreciated securities. If you choose to gift appreciated securities to your fund, you claim full market value as a deduction without paying taxes on appreciation. What’s more, the Cleveland Foundation can facilitate your fund’s gift of appreciated securities to smaller charities that may not have the means of handling your donation directly. Convert your private foundation: If you created a family foundation years ago and now find that circumstances are different, perhaps as a result of a changing family, geographic dispersion, or updated charitable pri-

CHARITABLE GIVING orities and estate plans, you can convert your private foundation into a donor-advised fund. You can focus on the grantmaking and won’t have to worry about the administration of the fund, and will li ely receive tax benefits. Gifts from others: Not only can you add to your fund anytime with a variety of assets, but others can too. This creative option can increase the impact of your fund, and also expose friends, family and community to the power of

giving. Many Cleveland Foundation fund holders have shared news of their fund with friends and family, encouraging donations in memory of a loved one, or in place of wedding, anniversary, retirement, birthday or bar and Ridolfi bat mit vah gifts.

CONNECT TO THE COMMUNITY: Inform your giving by connecting with other fund holders as well as the many nonprofits in

Greater Cleveland and beyond doing meaningful work worthy of your investment. Donors can use their funds to contribute to any 501 (c)(3) nonprofit organi ation in the . . ou can choose the causes and charities you want to support here at home, or in other communities that are important to you. Grants made from your donoradvised fund can always be made on an anonymous basis.

LEAVE A PERMANENT LEGACY: As you review your estate planning options, consider using your donor-advised fund to

leave a lasting legacy. You can designate children or other beneficiaries to continue grantmaking in your name after you pass away. The Cleveland Foundation has a long history of partnering with professional advisers to design creative solutions so your fund remains part of your larger estate, or so your favorite charitable organi ations are supported by you in perpetuity. Kaye Ridolfi is senior vice president of advancement at the Cleveland Foundation. Contact her at 216-615-7168 or kridolfi@clevefdn.org.

Trust your legacy with our top-ranked Personal & Succession Planning practice. Thompson Hine’s professionals in our Personal & Succession Planning practice advise high net worth clients, business owners, executives, family offices and nonprofit organizations on a variety of sophisticated estate planning, business succession planning and charitable planning matters. Our lawyers also advise fiduciaries on trust and estate administration matters, risk management, conflict resolution and litigation. Working with a client’s other advisers, we implement comprehensive plans for our clients. We address clients’ needs as they relate to: t 8JMMT USVTUT QPXFST PG BUUPSOFZ BOE health care documents t 5SVTU BOE FTUBUF BENJOJTUSBUJPO t #VTJOFTT TVDDFTTJPO QMBOOJOH t 5BY NJOJNJ[BUJPO BOE HJGUJOH strategies t 'BNJMZ 0GåDFT t *OUFSOBUJPOBM QMBOOJOH NBUUFST t 1IJMBOUISPQZ t 3FUJSFNFOU QMBOOJOH t 'VOEJOH DPMMFHF DPTUT t *34 BVEJUT BOE EJTQVUFT t 'JEVDJBSZ MJUJHBUJPO

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ESTATE PLANNING

S20 November 7, 2016

Communication is key to succession planning By CHUCK FEDERANICH

s few as 3% of all family businesses survive to a fourth generation, let alone thrive. The methods of effectively transferring a business, whether to family members or by other means, are constantly changing, either out of evolution or as a result of challenges by taxing authorities. Gifts of equity interests are popular, either outright or in trust. Nonvoting interests transfer value without giving

TAX PLANNING up control. Recently proposed Section 2704 regulations would prevent the use of valuation discounts when transferring equity to family. Shifting ownership before law changes take effect will be an important issue through the end of 2016. Other ideas can be explored if attractiveness of family gifts is limited. Lost discounts may not be a problem

for married owners with lifetime gifts and estates below $10.9 million in value. More equity will be conveyed at death, giving heirs a basis step up to the equity’s fair market value. Tax-free basis stepup of assets is being questioned in current proposals, but outright Federanich repeal would adversely affect many more small business owners. This reduces the chances of the business

making it to the next generation. However, not all business owners have family members interested in taking over. If owners have built a strong team internally, an employee stock ownership plan is worth considering. Employees buy the business on a taxdeferred basis, typically using debt for the purchase. The ESOP itself is not subject to income tax. Funds that would have been used for taxes can instead pay down the note. Practitioners can propose numerous solutions from the alphabet soup of

Grantor Retained Annuity Trusts (GRAT’s), Intentionally Defective Grantor Trusts (IDGT’s), and the like until their clients’ eyes glaze over. The real solution is for advisers and their clients to communicate regularly about owners’ objectives for transitioning their business, to ensure that owners’ wishes are truly being met. Chuck Federanich, CPA, MT, AEP®, is director of tax at Pease & Associates CPAs. Contact him at 216-348-9600 or cfederanich@peasecpa.com.

Proposed family business valuation rules warrant attention By JOSEPH M. MENTREK

n August, the Treasury Department released long-anticipated regulations aimed at curtailing or eliminating the discounts traditionally allowed in determining the value of non-marketable minority interests in a family business for federal estate, gift and generation-skipping tax purposes. The perceived valuation discount “loophole” has been on the current administration’s hit list since 2009, with a call for either legislative or

TAX PLANNING regulatory action to eliminate the benefit and its alleged abuse. The proposed regulations mount a powerful attack in response to previously failed attempts by the IRS to limit such discounts. The changes would apply to transactions where 50% or more of the equity in the business is owned by the family of the person transferring the interest.

The regulations impute control and liquidity in the form of a three-year look back rule that ignores a transfer establishing a minority interest for a decedent and a broader concept of disregarded restrictions that effectively eliminate the discounts altogether. The regulatory pro- Mentrek nouncement allows the IRS to impose what amounts to an affirmative and proportional right of liquidation or

redemption on the part of the person holding the interest to be valued (a “put” right) whether or not such right actually exists, unless such a restriction is actually mandated by state law. Fortunately, the effective date of the proposed regulations is neither immediate, nor retroactive. Depending on the provision, the regulations do not take effect until they are published in final form, or 30 days thereafter. Even then, we are not certain which provisions will survive. For now, it appears that if you are considering a family business transition

strategy, the perceived success of which could be measured by the magnitude of the valuation discount allowed, it may be time to consider action. We encourage you to engage your professional advisers to evaluate your options and define a favorable course of action. Joseph M. Mentrek, Esq, AEP®, is a partner at Calfee, Halter & Griswold LLP and is the co-chair of their Estate and Business Succession Planning Practice. Contact him at 216-622-8866 or jmentrek@calfee.com.

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ESTATE PLANNING

Proposed regulations could impact family business interests

Laws could eliminate discounts on transfers By KEVIN G. ROBERTSON

n Aug. , , proposed regulations were released under Internal Revenue Code section 2704. The proposed regulations would eliminate most valuation discounts on redemptions and transfers of family business interests among family members when a single family “controls” the business both before and after the transfer. Congress enacted Chapter 14 (Sections 2701 through 2704) of the code back in 1990, to curb perceived abuses in the discounted valuation of property transfers between family members. For this purpose, “family members” of any individual include (i) his or her spouse, (ii) any ancestor or lineal descendant of such individual or of his/her spouse, (iii) any sibling of such individual, and (iv) any spouse of any person described in (ii) or (iii). Further, a business entity is “controlled by” members of a family if the members of a single family hold (a) at least 50% of the stock of a corporation (by vote or by value); or (b) at least of the capital or profits interest in a partnership; or (c) any general partner interest in a limited partnership. Under current law, a parent may avoid a so-called control premium on transfers of equity interests in the family business as long as the parent transfers equity interests before death, so that the parent does not hold a controlling equity interest at death. Generally, equity interest transfers to children during the parent’s life may be valued (for gift and estate tax purposes) at the same discounts that an unrelated third party would apply when offering to purchase such equity interests at “fair market value.” The proposed regulations would disallow traditional valuation discounts by “disregarding” various real-world restrictions that apply to noncontrolling equity interests. The proposed regulations include several new valuation rules that would negate valuation discounts when transferring equity to a family member, even though such discounts are comparable to realworld discounts demanded by unrelated buyers when purchasing such equity interests. Similar rules would disallow or restrict discounts (and sometimes “ignore” noncash consideration paid) when redeeming a family member’s equity interest in a family-controlled enterprise. For example, the proposed regulations would impose the following new valuation rule: When an equity interest is transferred among family members in a business entity controlled by family members, the equity interest would be valued without regard

TAX PLANNING

‘‘

In the real world, no business could operate if all equity holders, at any time, could demand ‘full liquidation value’ redemption of their equity interests.

to the actual economic fact that the donee-equity holder cannot compel liquidation or redemption of his/her gifted interest (much less liquidation of the entire business enterprise). Under such new rule, any equity interest gifted among family members would be valued, for transfer tax purposes, no lower than the equity interest’s “share of the net value of the entity determined on the date of liquidation or redemption.” The proposed regulations would create an assumption that the donee-equity holder had the power to compel a liqui- Robertson dation of his/her interest in the entity at a price equal to the equity holder’s pro rata share of the net liquidation value of the enterprise. Such a new valuation rule would be unfair. In the real world, no business could operate if all equity holders, at any time, could demand “full liquidation value” redemption of their equity interests. This is only one of many examples where the proposed regulations would prohibit a family member from recognizing real-world economic discounts in determining the transfer tax value of equity

transferred between family members. The Notice of Proposed Regulations provides for a written comment period followed by a public hearing on Dec. 1, 2016, in Washington, D.C. he proposed changes, as reflected in the final version of the regulations, generally would apply to transfers of equity interests occurring on or after the date the regulations are published as final regulations. As a practical matter, final regulations under code section 2704 likely will not be issued until sometime in 2017, at the earliest. Given the broad scope of the proposed regulations, and the numerous new valuation rules they would impose, the final version of the regulations may be modified significantly. The proposed regulations will be commented on (and likely criticized) by any number of groups representing taxpayers, tax professionals and family businesses. The threat posed by the proposed regulations is considerable. If the regulations were to be finali ed “as is,” the transfer tax valuation rules for equity interests transferred between family members would change dramatically. The level of discounts for lack of control, illiquidity and for the closely held nature of equity interests all could be reduced severely. Business succession planning and wealth transfer planning with closely held business interests should be considered with renewed vigor through 2016 by any individual with an estate potentially subject to the federal estate tax. If a senior-generation family member is willing to consider transferring equity interests in a closely held enterprise this year, the ideal approach would be to work with tax and business planning advisers to plan and execute such transfers before these proposed regulations become final. Kevin G. Robertson is a partner at BakerHostetler. Contact him at 216-8617977 or krobertson@bakerlaw.com.

November 7, 2016 S21

Tax buckets may help maximize retirement savings By GARY SIGMAN

“I

TAX PLANNING

t’s not what you make, but what you spend.” When applying this idea to retirement plan distributions, many individuals discover if they have not managed their distributions efficiently, they will have less money than anticipated as a result of paying higher tax. For example, you retire at age 65 with $2 million in a traditional I A and $50,000 in other taxable income. You also Sigman have $25,000 in deductions/exemptions. In this scenario, you fall safely into the 15% tax bracket. Even if you add , in social security benefits in two years, you may still remain in that bracket. However, at age 70 ½, the required minimum distribution from your I A could be roughly $80,000, and as a result, you move into the 28% bracket. What can you do? We advise clients of the advantages of creating tax “buckets” for their retirement savings: n Pre-tax 401(k) accounts and traditional I As lower taxable income and reduce current taxes. Tax is owed when money is withdrawn in retirement.

n In after-tax Roth 401(k) or Roth I A accounts, money grows tax free. ualified withdrawals in retirement are also tax-free. n With taxable investments, taxes are due each year on investment earnings whether you are retired or still working. (Dividends or gains may be tax-free or reduced.) Going back to the example, if you were to withdraw $50,000 from your raditional I A at age , and are married, you may be at the top of the brac et. hile it is difficult to pay tax when you don’t have to, consider the 13% future tax savings. Doing this reduces your future required minimum distribution and the associated tax. When structured properly, buckets allow greater flexibility for reducing your tax obligation on plan distributions. Before you initiate any of these options, consult with your adviser and prepare a multi-year tax projection to ensure what you saved is maximized during retirement.

Gary Sigman, CPA, M.Tax, PFS, AEP, is a senior tax manager at Zinner & Co. Contact him at 216-831-0733 or gsigman@zinnerco.com.

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he cost of a private room in a nursing home facility is projected to cost about $165,000 in 20 years. Therefore, many advisers encourage their clients to start planning for long-term care in their 40s and early 50s. In the 1990s and 2000s, long-term care insurance was a popular and seemingly prudent way to insure the risk of long-term Judd care. However, many of the people who purchased this coverage are facing steep rate increases, some more than 100%. For those who have traditional longterm care insurance and have received a rate increase, there is the option to pay the increased premium. There is also the option to reduce the benefit or the benefit period, drop or reduce inflation riders and or extend the elimination period, which is the length of time one must wait before benefits begin. For those who are considering the purchase of long-term care insurance, there are a few items to consider.

INSURANCE PLANNING First, many of the large insurers have exited the mar et, leaving only a few who offer true long-term care insurance. These policies could be subject to future rate increases, and consumers should be aware of a carrier’s rate increase history before purchasing a policy. Second, there are alternatives to traditional long-term care insurance that offer rates guaranteed to never increase. One is life insurance with a long-term care rider. These are permanent life Insurance policies that allow the insured to take an advance of the death benefit to pay for ualified long term care expenses. Another alternative acts more like an annuity in that a lump sum is placed with an insurance carrier. In return, the insured has a cash balance, a longterm care benefit and a death benefit that pays if the long term care benefit is never used. James O. “Dell” Judd, CLU, ChFC , is senior vice president of Oswald Cos. Contact him at 216-367-8754 or djudd@ oswaldcompanies.com.

CRAINâ€™S CLEVELAND BUSINESS

COUNTY CONTINUED FROM PAGE 1 to advance into higher-skilled employment. The decision to move in a new direction stems in part from a story Budish heard soon after he became county executive in 2015. A business owner told him about a promising, once-reliable employee who started missing work. The business owner was about to let her go when he found out that the woman had lost her eligibility for day care services for her child and couldnâ€™t find an affordable solution. â€œSo the county stepped in and helped,â€? Budish said. â€œWe have those social services. So it makes sense for the county to view economic development part and parcel with social services.â€?

Making an investment The county has been spending $9.8 million a year on a variety of contracted workforce programs. But those programs have been tied to a separate workforce system largely

funded by the state of Ohio and the federal government, which in Cuyahoga County has been run by a collaborative agency, now called Ohio Means Jobs/Cleveland-Cuyahoga County. It was seen as the starting point for the newly unemployed. Someone could go to one of three centers in the county or log on remotely to find a GED class, a resume writing workshop or a job fair. That might work for a laid-off office worker or a returning veteran. But for the long-term unemployed on public assistance, who may not own a car to get to work, the needs can be more basic. Too often, the county has found, a welfare recipient finds that a low-paying, dead-end job ends up being a setback when public assistance support, including day care or food assistance, is lost. Now, Cuyahoga County will invest $3 million a year for the next two years to get the career pathways program off the ground. It will use that to staff the WORC center and to coordinate $14 million of county, state and federal workforce money â€” through Ohio Means Jobs and other agencies â€” with $14 million worth of human services programs.

The county also will rely on several nonprofits that have experience helping people onto a career path, including Catholic Charities and Towards Employment. The services could include providing day care or finding a course for certification as a state-tested nurse aid. Sharon Sobol Jordan, chief of staff and a principal architect of this new program, said the county has been in the workforce business for a long time, but it has been constrained by state and federal restrictions. â€œUnfortunately, the way itâ€™s come down from our funders, the federal government and the state, itâ€™s been more about getting people â€˜work activity,â€™ so they can stay eligible for the public benefits they need to survive,â€? she said. â€œThe work part of it has gotten lost.â€? For instance, the federal Temporary Assistance for Needy Families (TANF) program has narrow definitions of the kind and duration of work programs allowed to families receiving assistance. The county program has state and federal approval to stretch those limits. The county is training 20 coaches who will be expected to manage the careers of about 1,400 clients a year.

Can it work? Outside observers see the program as promising. â€œOne of the bewildering disconnects in our town is the fact that we have unemployed people and lots of unfilled jobs,â€? said Joe Roman, president of the Greater Cleveland Partnership, the region's chamber of commerce. Roman believes that this new program can help solve that longstanding problem. He also believes the business community, which has not been broadly engaged in the existing workforce system, is ready for this new program. â€œIâ€™ve seen in the last year or year and a half (as the new program was being developed) the engagement level (of the business community) has ramped up dramatically,â€? he said. The program has the benefit of its collaboration with Towards Employment, which was part of a national pilot program called WorkAdvance that created a hybrid welfare-workforce development system. The Towards Employment program guided unemployed and low-income people along career pathways in health care and manufacturing. According to executive director Jill Rizika, program participants moved

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up in their careers from entry-level jobs to jobs paying at least $2 an hour more within two years. â€œWeâ€™re quite excitedâ€? about the county program, Rizika said. â€œThe county is certainly breaking down silos.â€? Like any untested program, though, pitfalls may lie ahead. Because itâ€™s a public agency that canâ€™t be selective about candidates for the program, the county has a harder road to climb than the pilot program run by Towards Employment. â€œThe WorkAdvance program run by Towards Employment produced increases in employment and earnings and also produced improvements in some important job characteristics such as work predictability and stability. These are huge issues for low-wage workers,â€? said Richard Hendra, a senior associate at MDRC, a New York City nonprofit formerly known as the Manpower Demonstration Research Corp. MDRC specializes in improving programs targeted at low-income people. Hendra designed the four WorkAdvance pilot programs, including the one run by Towards Employment. â€œBut the question is how much will these findings generalize to broader populations and industries?â€? he said.

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CRAIN’S CLEVELAND BUSINESS

Business of Life Top: The head of a violin begins to take shape. Center: Eugene Holtier holds the only example of a finished instrument he has in his North Ridgeville home. Holtier made this violin for his daughter. Most of his violins, violas and cellos are reserved before they are completed. Bottom: Holtier applies his own varnish mixture to a wood sample. Holtier always applies the varnish by hand.

By LYDIA COUTRÉ lcoutre@crain.com @LydiaCoutre

s clients for his prototype and model-making work began heading abroad, Eugene Holtier, an industrial designer by training, knew he needed to find something with more stability. “I got to the position that I have to do something where nobody can take it from my hands,” said Holtier, who came to the United States from Romania in 1985. While selling cars at a dealership to pay the bills, he began making string instruments from scratch. He slowly began making more and began to have some success. “My wife gave me a lot of credit and trust, and she said, ‘You know what, forget about selling cars. Make instruments,’ ” Holtier said. So he committed to the craft. Today, a decade later, his basement workshop is full of different woods from around the world, which he’ll hold up and tap to show off their sound. Because Cleveland isn’t sunny year-round, he has a UV cabinet to cure the varnish, which he makes himself and rubs on with his fingers, having learned that a brush isn’t the right tool for the viscosity of the varnish. Resting on his various work stations are several parts of instruments at different points in the process — a handle, the back, pieces that will be the curved sides of the cellos, violas and violins he makes. He’s currently working on a violin for the Violin Society of America’s 44th Annual Convention & 22nd International Competition, which will be held Nov. 13-18 in Cleveland. The VSA, which promotes the art of violin making, is an organization made up of violin makers, players, enthusiasts, scientists, collectors and hobbyists. There’s a finite number of traditional Italian instruments, and they can cost millions of dollars, said VSA president Lori Kirr. But modern makers provide quality, handcrafted instruments at an affordable, accessible price. “A lot of times players will work with the violin makers to describe what kind of tone or shape and what they’re looking for out of the instrument,” Kirr said. “That’s really incredible for a player to be able to work one on one with a craftsperson to create an instrument that is going to fit their needs and their requirements and their likes.” Other than playing the violin for three years as a child and helping his brother work on guitars occasionally, Holtier didn’t have much experience with the instruments. But his work as an industrial designer proved to be great training. Holtier still doesn’t play the instruments, which he said is common among makers. “A lot of people say how can you make a good instrument if you don’t play it, but you get your senses when you make it,” he said. He senses quality by sound and touch. Just as old instruments have minor tool marks, Holtier believes in leaving texture on his instruments, such as a chisel mark in the carving on a handle. “It shouldn’t be perfect; it should be just right,” he said. “After so many instruments and so many years, you know where and when to stop.” Though he doesn’t take notes of what he does or how many he has sold, he knows his instruments have found homes in Ohio, Oregon and Florida. One of his cellos now is in the Cleveland Orchestra. For Holtier, the convention in mid-November is a good chance to see the makers he knows from across the country. He’s less focused on winning the competition. “My winning is when the instrument is sold and is played and I know it’s finding a good home,” he said.

He doesn’t play, but has key role in beautiful music

Holtier shapes a violin back with a band saw.

CRAINâ€™S CLEVELAND BUSINESS

N O V E M B E R 7 - 13 , 2 016

Craftsman Eugene Holtier carves the neck of a violin out of maple. He began making string instruments from scratch in the mid-1980s. (Tim Harrison for Crainâ€™s)

Wood sourced from the United States and Europe lines the shelves of the workshop.

Holtier planes a thin ribbon from a maple strip.

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CRAIN’S CLEVELAND BUSINESS

BUSINESS OF LIFE

Source Lunch Kareemah Williams said she has always had an “affinity” for making or reusing things. The program director for Wire-Net’s Cleveland Industrial Retention Initiative has also always been drawn to small businesses. Her father had been a marine salvager, she said, and her parents later opened a deli. Williams said her work with CIRI gives her the opportunity to talk to people whose companies have been around for generations and whose families were able to turn know-how into a business. CIRI works with industrial businesses to help them grow and stay competitive. The job also satisfies her curiosity in seeing how everyday things are made. Getting to see how people took their knowledge and turned it into a business — it’s an art and a science, she said — is what makes her job interesting. What keeps her at CIRI is the chance to make an impact. Williams said as the program helps companies, it also helps its employees. And those employees are able to spend money, which strengthens the community overall. — Rachel Abbey McCafferty

Tell me about the Cleveland Industrial Retention Initiative. What’s the goal of the program? The Cleveland Industrial Retention Initiative (CIRI) is a resource provided through the partnership of the city of Cleveland and Wire-Net to assist Cleveland manufacturing and industrial firms in improving operations, maintaining profitability and remaining competitive in the modern era. CIRI engages with close to 500 manufacturing and industrial firms each year. These engagements have led to jobs being created or preserved as companies were stabilized or growth was supported, company sales being increased or preserved, operating costs were reduced allowing for reinvestment in workforce, facility and process improvement. What role does manufacturing play in Cleveland’s neighborhoods today? Manufacturing matters to Cleveland. It is the foundation of the community’s current and future economy. Manufacturing employs local residents, provides payroll tax to the city of Cleveland and helps to create jobs in other sectors. Manufacturers invest in the people they employ by providing ongoing training to improve skills, they invest in facilities as they purchase new space or maintain existing real estate and they invest in other businesses in their supply chain. These investments result in dollars flowing through the local economy.

Has that role changed over time? Manufacturing has always been important to Cleveland. You can go into many Cleveland neighborhoods and see manufacturing businesses nestled right next to residential housing. In large part, this is a remnant of a time when workers would leave their homes and walk a short distance to their job at the manufacturing firm in the neighborhood. This is still true today. Just as manufacturing has always been a significant employer in our region, it has been and continues to be a source of innovation. Manufacturing has been part of the innovation from the combustible engine to the robotic welder to 3D printing. What issues are Cleveland’s manufacturers currently facing? Last year, CIRI completed over 470 services and interventions, and this year the program will complete about that same number of services. The issues that are identified most often include workforce (the challenge to attract, train and retain employees, as well as promoting manufacturing to the next generation of manufacturing workers) and overcoming barriers to growth, which includes increasing sales, improving market strategies and overcoming market decline. CIRI actively engages firms in the Accelerate Cleveland Manufacturing initiative, a collaboration between Wire-Net and Magnet to help manufacturing firms grow and develop job opportunities for Cleveland residents.

Kareemah Williams MANUFACTURING

So, how does CIRI help them solve those? CIRI provides ongoing support to businesses through the in-plant assessment of the company’s current business situation, research of appropriate private and public solutions, recommendation to the company about the solution, engagement of the solution and follow-up. CIRI provides local companies with information and connection to solutions in the areas of financing, sales and marketing, employment and training, real estate and land assembly, infrastructure, technology and modernization, permits and zoning, safety and security and general business assistance.

Five Things

Has CIRI had to change its goals over time? The goals of CIRI have become more rigorous over time. The environment in which manufacturers operate has become more competitive and the need to retain and grow more good paying jobs in the region more pressing. Today, CIRI is still the feet on the street out connecting and building relationships with companies every day but it is also a proactive response to business retention for the city of Cleveland. CIRI identifies the issues that could potentially put a company at risk by understanding the company’s priorities, the challenges they face, their recurring issues and their strengths, and engages the right solution for the company.

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KJK is proud to welcome Associate Anna L. Seiger to KJK’s Litigation Practice Group. Anna will perform imperative tasks throughout all phases of the litigation process including discovery, document review, pre- and post-trial motion practice, and appellate advocacy. Anna graduated from Cleveland-Marshall College of Law this past May and passed the 2016 Bar Examination in July. Anna is regarded by clients and colleagues as diligent, motivated, and will make an excellent asset to the firm.

Chelsea Snyder, CPA Senior Associate The Siegfried Group Chelsea Snyder, CPA, joins Siegfried’s Cleveland Market as a Senior Associate. She always brings a positive attitude to the table and can integrate quickly into any team. She earned her Bachelor of Science in accounting from Miami University. Most recently, she was an Assurance Senior at EY.

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BANKS CONTINUED FROM PAGE 1 Like Huntington, one of the largest banks in Northeast Ohio, other banks are being proactive in facing the questions and concerns coming from investors, customers and their boards of directors for fear of making headlines the way Wells Fargo did, while similarly bracing for the coming regulatory impact. And that goes for smaller banks, too, not just the big Wall Street companies. “All of this, it’s going to trickle down to us,” said Thomas Caldwell, president and CEO of Middlefield Bank. “It always does.” Larry Magnesen, a spokesman for Fifth Third Bank, said the company hasn’t “made any changes in policies or compensation. However, we recognize that trust in the banking industry may have been called into question because of the recent development.” A bank is still a business, and sales and performance incentives should be expected. The average incentive target for an individual banker at Fifth Third is 5% to 7% of their base salary, and 11% for a branch manager. Yet, acknowledging that general sense of distrust perpetuated by the Wells Fargo scandal, Magnesen said the bank will now mail “welcome” letters to customers following the opening of any new checking, savings or credit card account that, among other things, directs those people to contact them if they think the account wasn't actually set up by them, or even if it just wasn’t what they expected. “We want to make sure every customer gets exactly what they think they are getting and are entirely comfortable,” he said. These past several weeks, banks have been reinforcing a message of trustworthiness while adding the caveat that reviews are underway. PNC Bank, Cleveland’s second-largest bank, is no different.

CRAIN’S CLEVELAND BUSINESS

“We believe we’ve been successful in building our business without encouraging the widespread, unauthorized account opening activity that appears to have occurred at Wells Fargo,” said spokesman Frederick Solomon. “Of course, we are taking a fresh look at our sales and incentive programs following the actions taken against Wells Fargo.” The Office of the Comptroller of the Currency has been contacting large and midsize banks requesting information on the same practices now creeping up to the front of the market's mind. In October, the OCC announced it was embarking on an investigation — featuring on-site reviews — into questionable sales tactics at banks with $10 billion and more in assets. That’s being coordinated, to no short extent, with the Federal Reserve, the Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau as a result of the Wells Fargo incident. The greater concern is whether those efforts could translate to more compliance and regulatory burdens for banks in the smaller end of that spectrum, said James Thurston, a spokesman with the Ohio Bankers League trade association. “Whenever you have a big issue like this develop in the industry, there is always a fear there will be some regulatory overreach that results from it,” he said. “After the financial crisis, we probably swung the pendulum too far and ended up with (the Dodd-Frank Act).” Maintaining compliance is costly. And while banks at $10 billion certainly aren’t small, those between $10 billion to $50 billion are less likely to have the same staffs of dedicated, year-long examiners that their larger counterparts might have. So while these reviews will likely turn up few negative findings, smaller and midsize banks — including those not being immediately targeted by the OCC now — are leery of how this will affect them in the long run, considering the potential to add to the regulatory burden that’s been

squeezing bank margins for years. That margin squeeze can be suffocating for community banks. “Do we expect an impact? I think you don’t have to look any further than (the Dodd-Frank Act),” said Caldwell of Middlefield Bank, which has just under $1 billion in assets. “There is no doubt that the biggest concern we have is what new legislation or regulatory actions are going to be taken to prevent this type of action in the future.” Caldwell, a state delegate with the Community Bankers Association of Ohio, said smaller banks are more concerned about the regulatory impact than reviewing internal practices or customer distrust. “The bigger banks create these problems,” he said. “But water runs downhill. And eventually, it’s going to hit us, and we’re going to have to deal with it. That’s why you see consolidation within the industry. These smaller banks, at some point in time, are just saying we can’t afford to do business as usual.” Caldwell also lamented what often seems like lopsided treatment of large, Wall Street banks following revelations of scandal. “If my bank would’ve done something like this, I can almost guarantee I would be banned from banking, and probably made to pay a civil money penalty, and my board members probably would too,” he said. Wells Fargo, a company with nearly $1.8 trillion in assets, was fined $185 million in September for the scandal. CEO John Stumpf, meanwhile, stepped down from his role in October, but he had the potential to still take home over $100 million if he was fired by their board of directors. That all has left many onlookers with a sour taste in their mouths. “As far as I’m concerned,” Caldwell said, “these regulators or Congress need to start setting an example with these large banks and make the folks in charge of running these banks personally liable for what happens because we try to do things the right way, but disproportionately suffer the fallout.”

UNITS CONTINUED FROM PAGE 8 At times, patients at MetroHealth may have to wait a day or two in the emergency room for an inpatient psych bed, Horwath said, because, “unfortunately, we don’t have another choice.” UH has an average of 10.3 patients on its waiting list for psychiatric beds, Locke said. Alongside the challenge of more patients, she said she’s seeing a higher level of acuity. The emergence of free-standing behavioral health facilities — which she applauds — has ended up siphoning some of the less acute patients in part because many don’t accept Medicaid patients, who tend to be more acute. This leaves the general hospitals treating fewer patients with less severe symptoms. “So it becomes kind of cyclical,” she said. The units at UH aren’t designed to care for a high level of massive acuity, Locke said, but rather they’re built for a broader mix of patients. With many double rooms, UH and other hospitals hit capacity before every bed is actually filled because some patients simply cannot share a room because of their conditions or symptoms. The challenge of reaching capacity while still having empty beds in some rooms is a common refrain. St. Vincent runs around 72% occupancy in its psychiatry beds, but “that doesn’t necessarily mean we aren’t always full,” Lozar said. St. Vincent’s Psychiatric Emergency Department — one of two in the state and a handful in the country — brings in more patients, Lozar said, and also provides more resources to stabilize patients before they’re discharged or admitted. Adding more inpatient beds could help, Horwath said, but it is incredibly expensive. An investment instead

in outpatient mental health and outpatient substance abuse services in Cleveland “would help tremendously” in treating people before they became so ill they need to be admitted. Malone agreed that in an ideal world, providers could prevent patients from needing a hospital, but he’s concerned that community treatment is not sufficiently reimbursed. “I worry that reimbursement is going to go down for these community mental health centers, which would be a disaster for the area,” Malone said. “Inpatient is not where you want to treat people. It’s not.” To try to mitigate the influx of patients, the Clinic lowered the age for its geriatric unit to shift adult patients there, he said. The system also integrated its mental health care predominantly into Marymount and Lutheran hospitals, which has allowed for “more concentrated care,” said Malone, who is also president of Lutheran Hospital. Nurses and behavioral health technicians can move between various units depending on needs, now that the units are co-located. Also challenged by a shortage of psychiatrists and psychiatric-trained providers, University Hospitals is rolling out telemedicine to expand its reach. Through tele-intake systems, intake workers can contact case managers, providers, community resources and other options and find a plan of care to recommend to an emergency department. Locke said this will help avoid admission on about 390 cases in the next year, though that figure is still a small amount of the total backlog. For now, the hospitals continue to explore other options and coordinate with one another. Locke tries to remain optimistic. “As long as everybody kind of does their fair share, I think we can get through this,” Malone said, “but it’s a daily problem.”

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The List COMPANY THIS ADDRESS YEAR PHONE/WEBSITE

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LARGEST HOSPITALS

Ranked by 2015 Net Patient Revenue NET PATIENT REVENUE ($ MILLIONS) 2015

2014

% CHANGE

STAFFED BEDS

FTE EMPLOYEES AS OF 9/1/ 2016

YEAR FOUNDED

HEALTH CARE SYSTEM

TOP EXECUTIVE TITLE

(1)

Cleveland Clinic Ñ main campus 9500 Euclid Ave., Cleveland 44195 (216) 444-2200/www.clevelandclinic.org

4,519.0

4,293.9

5.2

1,265

17,775

1921

Cleveland Clinic Health System

Toby Cosgrove, MD president, CEO

University Hospitals Cleveland Medical Center 11100 Euclid Ave., Cleveland 44106 (216) 844-1000/www.uhhospitals.org

2,049.6

1,880.7

9.0

814

16,795

1866

University Hospitals

Daniel I. Simon, MD president

Northeast Ohio VA Healthcare System 10701 East Blvd., Cleveland 44106 (216) 791-3800/www.cleveland.va.gov

1,017.2 (2)

929.7 (2)

9.4

674

4,719

1946

Department of Veterans Affairs

Susan M. Fuehrer medical center director

MetroHealth Medical Center 2500 MetroHealth Drive, Cleveland 44109 (216) 778-7800/www.metrohealth.org

808.1

793.3

1.9

407

6,439

1837

The MetroHealth System

Akram Boutros, MD president, CEO

Summa Health System Ñ Akron and St. Thomas Campuses 525 E. Market St., Akron 44309 (330) 375-3000/www.summahealth.org

721.1 (3)

717.0

0.6

545

3,344

1892 and 1922

Summa Health System

Thomas Malone, MD president, CEO, Summa Health

Akron Children's Hospital One Perkins Square, Akron 44308 (330) 543-1000/www.akronchildrens.org

667.7

616.8

8.3

400

4,601

1890

Children's Hospital Medical Center of Akron

William H. Considine president, CEO

Cleveland Clinic Akron General One Akron General Ave., Akron 44307 (330) 344-6000/www.akrongeneral.org

528.5

481.1

9.9

391

2,802

1914

Cleveland Clinic Health System

Brian Harte, MD president

Fairview Hospital 18101 Lorain Ave., Cleveland 44111 (216) 476-7000/www.fairviewhospital.org

428.9

413.6

3.7

426

2,449

1892

Cleveland Clinic Health System

Neil P. Smith, DO president

Hillcrest Hospital 6780 Mayfield Road, Mayfield Heights 44124 (440) 312-4500/www.hillcresthospital.org

413.7

399.8

3.5

444

2,487

1968

Cleveland Clinic Health System

Donald B. Ford, MD interim president

Aultman Hospital 2600 Sixth St. S.W., Canton 44710 (330) 452-9911/www.aultman.org

382.0

382.5

(0.1)

542

4,051

1892

Aultman Health Foundation

Christopher E. Remark CEO

Mercy Health Ñ St. Elizabeth Youngstown Hospital 1044 Belmont Ave., Youngstown 44501 (330) 746-7211/www.mercy.com/youngstown

320.8

309.7

3.6

382

1,825

1911

Mercy Health Youngstown; Mercy Health

Donald Koenig, president, St. Elizabeth Youngstown Hospital; executive vice president, COO, Mercy Health Ð Youngstown

Southwest General 18697 Bagley Road, Middleburg Heights 44130 (440) 816-8000/www.swgeneral.com

318.0

309.2

2.8

311

1,779

1920

partnering with University Hospitals

William A. Young Jr. president, CEO

Mercy Medical Center 1320 Mercy Drive N.W., Canton 44708 (330) 489-1000/www.cantonmercy.org

311.5

288.1

8.1

250

2,059

1908

Sisters of Charity Health System

Thomas E. Cecconi president, CEO

Firelands Regional Medical Center 1111 Hayes Ave., Sandusky 44870 (419) 557-7400/www.firelands.com

239.6

210.6

13.8

203

2,000

1876

Firelands Regional Health System

Martin E. Tursky president, CEO

University Hospitals Elyria Medical Center 630 E. River St., Elyria 44035 (440) 329-7500/uhhospitals.org/elyria

233.3

227.4

2.6

251

1,782

1908

University Hospitals

Charlotte Wray president

Summa Health System Ñ Barberton Campus 155 Fifth St. N.E., Barberton 44203 (330) 615-3000/www.summahealth.org

201.4 (3)

198.6

1.4

172

737

1915

Summa Health System

Michael Hughes, MD senior vice president of hospital operations

University Hospitals Ahuja Medical Center 3999 Richmond Road, Beachwood 44122 (216) 844-2273/www.uhhospitals.org/ahuja

197.1

175.3

12.4

148

1,181

2010

University Hospitals

Susan Juris president

University Hospitals Parma Medical Center 7007 Powers Blvd., Parma 44129 (440) 743-3000/uhhospitals.org/parma

192.2

178.8

7.5

271

1,533

1961

University Hospitals

Kristi Sink interim president

Mercy Regional Medical Center 3700 Kolbe Road, Lorain 44053 (440) 960-4000/www.mercyonline.org

188.4

201.9

(6.7)

317

1,238

1892

Mercy Health

Edwin M. Oley CEO, president

West Medical Center 36000 Euclid Ave., Willoughby 44094 (440) 953-9600/www.lakehealth.org

183.5

180.2

1.9

267

2,133 (4)

1961

Lake Health

Cynthia Moore-Hardy president, CEO

TriPoint Medical Center 7590 Auburn Road, Concord Township 44077 (440) 375-8100/www.lakehealth.org

180.9 (5)

177.6 (5)

1.9

135

2,133 (4)

2009

Lake Health

Cynthia Moore-Hardy president, CEO

University Hospitals St. John Medical Center 29000 Center Ridge Road, Westlake 44143 (440) 835-8000/UHStJohn.org

170.8

165.1

3.5

161

1,240

1981

University Hospitals

Robert David president

Mercy Health Ñ St. Elizabeth Boardman Hospital 8401 Market St., Boardman 44512 (330) 729-2929/www.mercy.com/youngstown

166.2

138.8

19.8

193

835

2007

Mercy Health Youngstown; Mercy Health

Eugenia Aubel president

Mercy Health Ñ St. Joseph Warren Hospital 667 Eastland Ave. SW, Warren 44484 (330) 841-4000/www.mercy.com/youngstown

158.2

148.7

6.4

141

799

1924

Mercy Health Youngstown; Mercy Health

Kathy Cook president

St. Vincent Charity Medical Center 2351 E. 22nd St., Cleveland 44115 (216) 861-6200/www.stvincentcharity.com

158.0

148.3

6.6

213

884

1865

Sisters of Charity Health System

David F. Perse, MD president, CEO

Marymount Hospital 12300 McCracken Road, Garfield Heights 44125 (216) 581-0500/www.marymount.org

150.9

150.7

0.1

284

1,080

1949

Cleveland Clinic Health System

Richard D. Parker, MD president

10 11

RESEARCHED BY CHUCK SODER The online version of this list includes 49 hospitals, and the Excel version includes additional data. It is available for purchase at crainscleveland.com/section/data_lists. Information is submitted by the hospitals unless otherwise noted. Crain's does not independently verify the information and there is no guarantee these listings are complete or accurate. We welcome all responses to our lists and will include omitted information or clarifications in coming issues.

(1) Revenue and employment numbers often include outpatient clinics and other offsite locations affiliated with the hospital. (2) Total operating budget for all locations in Northeast Ohio; includes flat annual per patient payments. (3) In 2015, Summa Health System started reporting financials as one institution. This figure is estimated based on net patient revenue for the entire system. (4) Represents all of Lake Health, including both hospitals. (5) Includes 14 off-site locations and Lake Health Physician Group practices.