Crain's Cleveland Business

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FAST

50

Find out who the fastest-growing businesses in Northeast Ohio are and how they made our list

By JEREMY NOBILE jnobile@crain.com

here competitors saw risk, Alego Health saw opportunity.

W Jonathan Levoy, executive vice president at Alego Health, a health care IT solutions and service provider, said his company flocked to those markets across the country that others simply “wouldn’t touch.” And whether it comes to leveraging market opportunities, implementing new services or investing in talent, the No. 1 company in the Crain’s Cleveland Fast 50 said one of the keys to its success is taking risks.

“You need to take risks and you need to have courage and you need to go out there and try things that are really outside your comfort zone …,” said Jacqueline Forestall, Alego president and founder.

With revenue growth of 1,072% over the past five years, Alego topped the list of fast-growing companies that was partially unveiled Wednesday at Crain’s inaugural Fast 50 event at the Western Reserve Historical Society.

Data were crunched by accounting partner Apple Growth Partners to identify businesses achieving the most substantial margins of revenue growth between 2009 and 2013. Companies had to be at least five years old and have accrued a minimum of $5 million in revenue at the end of 2013.

Crain’s publisher John Campanelli said the success of businesses being honored “prove there’s a transformation going on in Cleveland.”

“Like much of the Midwest, Northeast Ohio is steadily recovering from the downturn of the last decade,” said Sean Richardson, president and CEO of the North Coast region for FirstMerit Bank, title sponsor for this year’s Fast 50 program.

Despite their industries, the top companies enjoying the See FAST 50, page 12

Above, the Cleveland Clinic’s Richard E. Jacobs Health Center in Avon, which opened in 2011. See page 55 for a roundup of health care-related building projects, acquisitions and other activities in Lorain County.

Healthy competition Lorain County is the latest battleground for Northeast Ohio’s largest health care providers, who see it as ideal spot for more development

By TIMOTHY MAGAW tmagaw@crain.com

Cleveland Clinic had only a modest presence in Lorain County until late 2011, when it opened its sprawling, 190,000-square-foot Richard E. Jacobs Health Center in Avon. With its iconic mirrored façade and high visibility from Interstate 90, it was a dramatic statement by the regional health care juggernaut — though only a hint of what was to come.

Since then, the Clinic has continued its conquest in eastern Lorain County, having opened an emergency department, acquired a large independent medical practice and broken ground on a new rehab hospital — a joint venture with Select Medical, a publicly traded health care company. Also, the system recently broke ground on a $143 million inpatient hospital in Avon — a first for the city — that will be built onto the north side of the Jacobs health center.

At the same time, the Clinic’s chief rival — University Hospitals, a historically East Side-centric system — staked its own claim in the western county by rolling EMH Healthcare in Elyria into its enterprise

earlier this year and forging a relationship with Mercy Health and its non-religious auxiliary, HealthSpan. Plus, UH recently announced plans in Avon to build its own $17 million rehab hospital, a joint venture with Centerre, another for-profit health care company.

“As a city, you always dream of having a niche,” Avon Mayor Bryan Jensen said. “It seems like the perfect area for all this to develop.”

What has transpired in Lorain County is something all-too-familiar to Cuyahoga County residents: a spirited war for their health care dollars. But now, with the population surge in eastern Lorain County, local health systems are staking a claim. Take Avon, one of Greater Cleveland’s fastest-growing communities, where the population surged by 85% between 2000 and 2010. The Clinic’s Avon-based health center quickly has become the health system’s busiest family health center and grown to average 42,000 patient visits each month.

“We focus on our mission, which is to provide health care throughout Northeast Ohio,” said Brian Donley, president of the Clinic’s community hospitals and family health centers and the incoming chief of staff. “We’ve See HEALTHY, page 55

Voters aren’t about to pay more

THE TOP TEN:

Ballot issues that asked for new money were most often rejected

By JAY MILLER jmiller@crain.com

FULL RANKINGS AND COMPANY PROFILES — PAGE 15

Despite their frustrations with the sluggish economy and national political leaders, Northeast Ohio voters last week generally were willing to support renewals of city and school tax issues. But most of the region’s governmental bodies that sought additional money had a hard time convincing voters they needed the increases to maintain the levels of service they believed citizens want.

The results from the money issues on the Nov. 4 ballot might have been better, one keen observer noted, had voter turnout been higher. (Turnout statewide was about 40%, the lowest in even-year elections since the Ohio Secretary of State’s office began tracking turnout in 1978.) Still, taxpayers appeared more

willing to sign off on spending than they have been since the recession hit in 2008.

Also, school issues fared slightly better than municipal tax issues, suggesting that more voters are believing that better education of children is increasingly important.

Jurisdictions in the seven counties of the metropolitan area put 149 money issues before voters last week. The issues ran from general income tax levies to levies for specific purposes such as road improvements, police and fire departments and school operations and capital improvements.

Of those 149 issues, 108, or 72.5%, passed. However, only one-third of the 57 issues that asked for new money — 19 levies — passed.

Of the school issues, 18 of 21 renewal issues passed, while only six of 16 issues asking for additional See VOTERS, page 7

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A year of milestones for sports marketing firm Westlake company is finally able to bring in former IMG agents and has success with debut of tournament

By KEVIN KLEPS kkleps@crain.com

Milestone Sports Management was formed in 2012, but it didn’t become whole until two years later.

The Westlake company, which, according to Ben Cooke, is a “niche sports marketing agency� that focuses solely on golf, was started by Cooke and Jon Wagner.

Its first year was tumultuous. Two weeks after Wagner left IMG, where he was co-managing director of IMG Golf’s North American business, in April 2012, he was sued by the sports management giant, which claimed Wagner violated his employment agreement by soliciting IMG clients and employees. At the same time, IMG went after former senior vice president Kevin Lynch and former player representative Jeff Stacy, who bolted the company soon after Wagner.

In August 2012, Wagner agreed to pay IMG, whose golf division still has its U.S. headquarters in Cleveland, an undisclosed sum to settle a breach-of-contract lawsuit. Court filings said Wagner resigned after his contract expired and the company told him he would have to take a significant pay cut. “I was surprised, obviously,� Wag-

CONTRIBUTED PHOTO

The Cleveland Open will return to the Lakewood Country Club — but with a new name, the Rust-Oleum Championship — on June 11, 2015. ner said of IMG’s lawsuit. “I didn’t realize we were that valuable. I thought we could step away and no one would care that much. They obviously felt differently and did the best they could to keep us out of the market. But the day came that we were unencumbered.�

That day occurred this past spring, when Lynch and Stacy, after what Cooke calls a “pretty nasty litigation� with IMG, were finally free to join Milestone. “It all came together at once,�

Wagner said. “In many ways, (the court-induced delays) helped us.

We were able to do some things repping golfers and corporate clients. But when it all came together, since then it’s been a blast.�

Cooke, who left Jones Day to form his own law practice, Cooke & Co. LPA (which he still operates), is

the only member of Milestone’s five-employee firm who isn’t an IMG alumnus. The company’s other full-time employee is Cameron Marcus, a former IMG intern who manages the day-to-day logistics for some of the 28 golfers Milestone represents.

Included among Milestone’s upand-coming clients is Sam Saunders, a grandson of Arnold Palmer who is a full-time member of the PGA Tour for the first time in 201415, PGA regular Andrew Loupe and Harold Varner III, a 24-year-old Akron native who was 30th on the Web.com Tour money list in 2014.

Milestone also has four corporate consulting clients and, though Wagner says they “aren’t in the event business,� the company in 2014 made a successful debut as the owners of a professional

tournament.

Cleveland Open is rebranded During Wagner’s 12 years at IMG, which moved its headquarters to New York in 2010 (50 years after it was founded in Cleveland), he said, “We realized we really didn’t do anything to give back to Cleveland.�

That opportunity was presented to Wagner’s new company after a year of discussions with the Web.com Tour — a professional circuit young golfers use as a springboard to the PGA Tour. Last June, the Cleveland Open — hosted by the Greater Cleveland Sports Commission and under the direction of Milestone — drew more than 11,000 spectators to Lakewood Country Club. Cooke said the event ranked among the top five in atten-

dance on the Web.com Tour, and surveys completed after the tournament showed a 93% spectator satisfaction rating.

The tournament, with a budget of “a little over $1 million,� was “about a break-even proposition� in its first year, Cooke said.

That should change in 2015, thanks to a title sponsorship with Rust-Oleum that Milestone and the Illinois-based company will formally announce on Tuesday, Nov. 11.

Cooke said Rust-Oleum is paying “a significant fee� to be the title sponsor of the tournament, which is being rebranded as the Rust-Oleum Championship. Rust-Oleum is owned by RPM International Inc., which is based in Medina.

The move is a critical one for a group that has lofty goals for 2015 See MILESTONE, page 55

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Flying Fig restaurant owner and chef Karen Small knows all too well the perils of posting job openings on Craigslist or other websites.

In many cases, those postings lead to a lot of interviewing and not much hiring. “It’s kind of a nightmare to absorb that kind of time and not get anything out of it,� said Small, whose modest eatery is nestled on Market Avenue in Cleveland’s Ohio City neighborhood.

However, about a year ago, she got a call from the Society of St. Vincent de Paul Cleveland offering up a pre-screened worker and a promise to cover 50% of that person’s hourly wages during the training period.

The offer was part of a pilot program the nonprofit launched to provide more opportunities in the culinary industry for Northeast Ohio’s unemployed poor who want to work but lack experience or job-training accessibility.

Now, the nonprofit is expanding the program into additional areas, including nursing homes and hotels, to allow more businesses to find entry-level, hourly workers who have received some training and shown a willingness to work hard. At present, the nonprofit said it can afford to subsidize the wages of three to five trainees simultaneously, though that number could increase as interest grows. “As we get to know these people, we know they’re hardworking individuals who just need a break,� said John Litten, executive director of the Society of St. Vincent de Paul Cleveland. “We’ve been able to do this with this small pilot program and been able to connect people with employers and the training they need to give them that second chance.�

The program brought to Flying Fig Luisa Lopez — a native of Lorain County who had worked as a home health aide but was looking for a career change.

Lopez had searched for a job for just less than a year before she was referred to the program. After being screened, Lopez trained for 10 weeks at Small’s eatery.

Training can be an expensive process, and Small said she liked that the nonprofit covered half the cost. She was impressed with Lopez’s work ethic and ultimately brought her on as a part-time employee working 30 to 35 hours a week. “She became part of the family quite quickly,� Small said.

Litten said the program is the So-

GETTY IMAGES

By TIMOTHY MAGAW tmagaw@crain.com

ciety of St. Vincent de Paul Cleveland’s first foray into job training.

For almost 150 years, the nonprofit has provided emergency assistance to those in need, so Litten said the job-training program was a natural extension of the group’s mission.

Those participating in the program must be motivated, physically and mentally capable of doing the work, have some level of literacy, not have a violent felony conviction and may not hold a college degree. “There’s a need for someone to offer a hand and pull people up out of the ditch,� Litten said. “This is a way for us to look more systemic at things. We can help teach a person to fish instead of just giving them the fish.�

Grovewood Tavern on the city’s East Side contacted the nonprofit after a dishwasher it had hired didn’t work out. The program brought the restaurant Solomon Rallings, whom Beth Davis-Noragon — the restaurant’s managing partner — said is always cheerful and does whatever needs done. She liked the

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training program because if Rallings didn’t work out, she could have the nonprofit feed them another trainee. Thankfully, she said Rallings turned out to be a great employee, and she’ll go back to the nonprofit when she needs another employee. “He’s a great guy, and he comes to work on time,� Davis-Noragon said. “He’s just so happy to have a job.�

The organization isn’t characterizing the job-training initiative as a placement program or referral service. Instead, the group’s leaders say it is designed to pave the way for future employment for trainees who go through the program. Those who complete the program are awarded a certificate verifying they’ve earned real-life work experience. Still, that didn’t stop Lopez from getting scooped up by Flying Fig. “Within a week of finding out about the program, I was working here and been working here ever since,� she said. “It opened a door that wasn’t there.�

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5

LIGHTING THE WAY WITH LEDs Energy Focus is using large Navy contracts to jump-start business and expand into D.C. area

By CHUCK SODER csoder@crain.com

After losing money for at least 15 years, Energy Focus decided to focus its energy on a particularly powerful customer: The U.S. Navy.

Now the Navy is spending $15.6 million to replace some of its fluorescent tube lights with Intellitube LEDs made by the Solonbased lighting technology company.

They cost more than fluorescents, but they’re more efficient and they last longer — important qualities when you’re in the middle of the ocean.

The first contract, worth $7.7 million, was the biggest deal Energy Focus had ever closed.

That is, until it won the second contract, for $7.9 million.

Combined, they represent a big win for the company, which makes LED (light-emitting diode) products designed to replace fluorescent tubes and other lights found in both offices and aircraft carriers.

The Navy started helping Energy Focus develop and test the Intellitube in 2002, but for the most part it only installed them in small chunks.

That wasn’t good enough for James Tu, an investor who took over as Energy Focus’ executive chairman and CEO last year. He pushed Energy Focus to get rid of a few other lines of business and focus more on selling products to the Navy officials who are making purchasing decisions for each ship.

Thus, the company, which has more than 60 employees, started working with more than 40 new independent sales representatives tasked with selling to sailors.

The strategy worked: Today, Energy Focus’ products are used on more than 160 Navy ships, up from 20 at the start of the year.

The company’s work with the Navy also helped it land a spot on a so-called GSA

Schedule — which amounts to a contract negotiated in advance through the General Services Administration. So as of a few weeks ago, other government entities now can buy Energy Focus products through the GSA Schedule.

So it’s no wonder why Energy Focus just opened an office with three employees in the Washington, D.C., area.

“The past few months definitely has been a breakthrough for us,” Tu said.

The breakthrough could help Energy Focus break a losing streak that Tu says has gone on since 1999: During the current quarter, the publicly traded company projects that it will finally produce positive EBITDA (earnings calculated before interest, taxes, depreciation and amortization are taken into account).

The growth should keep going, according to Tu, who would not say when he expects the company to produce an actual profit.

Even after the two contracts are complete, the Navy will only be using Energy Focus products in 10% of its light sockets, which gives them room to buy more.

The Navy does like LEDs, judging from comments Navy secretary Ray Mabus made during an interview with the International Business Times this past May. “If you change the light bulbs on a ship to LEDs, it saves 2 percent or 3 percent of total energy on that ship,” Mabus was quoted as saying.

The Navy support also should help Energy Focus gain credibility and win more contracts — with other branches of the military, with federal agencies and with commercial clients.

Today, a lot of those companies buy LEDs from bigger companies such as Philips and Cree.

Seeing the Navy buy from Energy Focus will show other customers that the company and its products are reliable, according to Tu, who See LIGHTING, page 8

KATE LORD

James Tu, executive chairman and CEO of Energy Focus, holds a “frosted” LED tube.

Garfield Heights building goes for $5 million

By STAN BULLARD sbullard@crain.com

CONTRIBUTED PHOTO

There were “at least a half-dozen bidders” for Infinity Corporate Centre I, a Garfield Heights office building that was sold for $5 million.

Infinity Corporate Centre I, a blue-chip but nearly half-empty office building in Garfield Heights, is in the hands of a Middleburg Heightsbased investor group after it was sold for $5 million at an online auction conducted by Real Capital Analytics of New York.

The buyer, CUA Holdings LLC, on Oct. 20 acquired the building at 10500 Antenucci Blvd. from C-III Asset Management LLC, an Irving, Texasbased servicing agent handling disposition of a loan referred to as JPM 2007-CIBC20, according to Cuyahoga County land records.

CUA Holdings is an investor group that was attracted by the property’s growth potential, said Rico Pietro, a Cushman & Wakefield Cresco broker who represented CUA in its acquisition and will oversee re-leasing the building. Pietro declined to identify the investor group beyond its legal name.

The 93,000-square-foot building would cost four times what the buyer paid if it were constructed today, Pietro said. Cuyahoga County valued the

property at more than $7 million for property tax purposes.

Pietro said the building can accommodate a tenant of 30,000 square feet in size in a single office, which is valuable because the pace of office leasing picked up the past year.

Moreover, the purchase includes a site for construction of another building the same size, Pietro said, although the new owner’s first effort is to fill the empty office space. All told, 40,000 square feet of space is empty in the building.

Garfield Heights-based developer Snyder-Cannata Interests developed the building near the southeast corner of the I-480 interchange with Transportation Boulevard in 2002, according to CoStar, a real estate data service. The lender’s representatives obtained the building through a foreclosure proceeding in U.S. District Court for the Northern District of Ohio.

The auction for the property was competitive, according to Ira Krumholz, president of NAI Daus Management Co., who served as the receiver for the structure.

“There were at least a half-dozen bidders,” Krumholz said.

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Vermilion will be home base for company that is making a big move on the Great Lakes

By RACHEL ABBEY McCAFFERTY rmccafferty@crain.com

A new dealership in Vermilion is looking to bring faster, more fuel-efficient boats to the Great Lakes.

Lee Howley, a long-time boater, has been involved in business in Cleveland for decades. He built telecommunication companies, including North Coast Cable of Cleveland. He also founded real estate brokerage Howley & Co. and Howley Bread Group Ltd., which operates Panera Bakery-Cafes on the East Coast.

Now, he’s helping to bring MJM Yachts Vermilion, a dealership for Newport, R.I.-based MJM Yachts LLC, to the city. Howley said the Vermilion operation will be MJM Yachts’ only dealership on the Great Lakes. Howley, who’s a principal for MJM Yachts Vermilion, said he likes challenges and believes in the area.

Vermilion, which features both lake and riverfront property, is a great port for small boats, Howley said. It’s protected and not overrun with industry.

Howley said in an email that he is a 50/50 partner in MJM Yachts Vermilion with Mike Moes, president of Moes Marine Service Inc., which has been serving as a marina and boat repair shop in Vermilion since 1938.

Howley provided the capital for MJM Yachts Vermilion to buy a 50z model boat — MJM’s newest powerboat and its largest at 50 feet.

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Bob Johnstone, founder and CEO of MJM Yachts LLC, said the longstanding community ties of Moes Marine, plus Moes’ experience

MJM YACHTS

6

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working at Boston BoatWorks LLC, which builds the MJM boats, made for an “ideal combination.”

The family behind the longstanding Moes Marine Service is well-respected, said Vermilion mayor Eileen Bulan.

The announcement of a new company is “great news for Vermilion,” Bulan said.

While the city has companies that sell boats, the mayor couldn’t recall the addition of a new one in the past 10 years.

MJM Yachts Vermilion’s boat will arrive in spring 2015, Moes said. But the boat won’t be arriving on the back of a truck. Instead, it will leave Boston, where MJM’s boats are built, and take waterways like the Hudson River on its way to Vermilion. Howley said in the email that the boat will spend its time in harbors around the Great Lakes during the summer.

“We’re going to have a lot of fun,” Howley said of the dealership.

Howley has a 40z from MJM of his own — it’s fuel-efficient, strong and fun to drive, he said. (He’ll be selling it to focus on driving and promoting the dealership’s new 50z.)

Moes said he thinks MJM is doing

for boats what Tesla is doing for cars: “pushing the envelope.” The company is making yachts of its size more accessible with features like a joystick to dock with, and stabilizing technology, he said.

“I think it’s in a class of its own,” Moes said.

MJM’s new and pre-owned boats, which range from 29 to 50 feet, cost anywhere from $200,000 to $1.75 million, Moes said. He said they are hoping to bring five to 10 new and used MJM boats into the Great Lakes per year.

Gene Gooding, who was the manager of the Vermilion Yacht Club this year, said he was glad to see someone bringing boat retail back to the city. The 50-footer’s fuel efficiency is ahead of the curve, said Gooding, who had worked in wholesale boat sales for more than 40 years. He doesn’t see boat sales for the typical buyer coming back until the economic climate improves, but this is a high-end product with appeal in the market.

Overall, Gooding said he’s glad to see anything that draws attention to Vermilion. The city had been a hub for boat building in its early days.

“There’s a lot of history here,” he said.

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VOTERS continued from page 1

money won voter approval. “That’s about what it’s been for the last year, and that’s up a bit since 2010,� said William Burges, of Euclid’s Burges & Burges, a campaign consulting firm that ran tax issue campaigns across the state. “Things appear to be getting better.�

School issues in particular might have fared better if turnout had been higher, he said. Burges said that when turnout is as low as it was this year the median age of voters is higher and includes fewer voters with school-age children.

Shifting the message Increases had a particularly steep hill to climb this Election Day, since the state Legislature last year ended two programs, the result of which will be an increase in property taxes for many homeowners.

As part of Gov. John Kasich’s budget balancing strategy of ending state subsidies to local governments, two changes were made.

The first was what’s been called a tax rollback that had the state paying 12.5% of a taxpayer’s property tax. The state will continue its subsidy on existing tax levies or their renewal but will not extend it to new or added taxes.

The Legislature also put an income limit on homestead exemption.

No longer will the state pay the property tax on the first $25,000 of the value of the home of new senior or disabled citizens. No existing exemptions are affected.

Alan Melamed, whose Beachwood-based Melamed Communications managed three successful municipal tax increases this year in May and November, said it just

“Usually on a tax issue, you hope to start at 60% and hold on for dear life.� – Alan Melamed owner, Melamed Communications takes a little more work educating voters when you’re asking for more money. “If voters know what the levy is about and you can convince voters of the value, you can still get them passed,� he said, referring to work his firm did on successful levy increases in Shaker Heights in May and Sandusky last week. “In Shaker we did tele-town halls and we brought together coalitions of people together to talk about what residents would get for the increase,� Melamed said.

That effort, he said, raised voter approval, according to polling, from 46% at the start of the campaign to 61.3% on Election Day. “Usually on a tax issue, you hope to start at 60% and hold on for dear life,� Melamed said.

As for tax renewals, the “it’s not a new tax� mantra is important. It worked, Melamed said, when the county sought to raise the sin tax that pays for Cleveland’s sports palaces. “If you look at the sin tax, the conventional wisdom said that campaign wasn’t going that well until they shifted the messaging to, ‘It’s not a tax increase,’� Melamed said.

That tagline was used successfully this fall in Cleveland by the campaign to win approval by 63% of voters for a $200 million bond issue for new school buildings that will be paid for at the same rate as an expiring school construction levy.

They get it Burges said a key to a winning campaign, for a renewal or an increase, is that “you’ve got to make the case that a good school (or community) is good for most people in the community, in terms of quality of life and people’s personal economy. I think people can get that.�

Several countywide human services issues that sought increases were able to hurdle that higher bar.

There, five issues that pay for children’s, seniors and mental services all passed.

A tax increase for Cuyahoga Community College also passed, 57% to 43%, as did a Lorain County Metroparks levy that included a renewal and an increase. However, two countywide tax increases for law enforcement services — a drug lab in Lorain County and jail and police radio upgrades in Summit County — failed, each by margins of more than 12 percentage points.

The Summit tax issue would have raised the county’s portion of the sales tax from 0.5% to 0.75%. Even with the increase, the Summit County sales tax would have been among the lowest in Ohio at 6.75%. Cuyahoga County tacks 2.25% on to the state’s 5.75% state sales tax.

7

FitzGerald has ideas for casino tax revenue

By JAY MILLER jmiller@crain.com

Cuyahoga County Executive Ed FitzGerald wants to commit $8.8 million from the county’s share of casino tax revenue to loans for three downtown Cleveland projects that he believes would improve residential options.

On Monday, Nov. 10, he will recommend to Cuyahoga County Council that the county make three commitments: a $4 million loan to Landmark-May LLC to convert the May Co. building on Public Square to 350 apartments; a $3.3 million loan to Stark Enterprises for the first phase of its nuCLEus project near Quicken Loans Arena; and a $1.5 million loan to the Historic Gateway Neighborhood Corp. and the Downtown Cleveland Alliance to be put toward a $7 million makeover of the Gateway district.

The county last year announced it would use $7 million on three similar projects — the Flats East Bank apartment complex; the Residences at 1717 in the former East Ohio Gas Co. Building; and the

PlayhouseSquare streetscape. “Over the last four years, the Casino Revenue Fund has played a critical role in reinvigorating Downtown Cleveland and strengthening all of Cuyahoga County,� FitzGerald said in a written statement to Crain’s. “The three projects we’re announcing will allow us to build on our success and continue attracting new businesses and expanding our local economy for years to come.�

By law, the county is restricted in its use of tax money for economic development loans, said Nathan Kelly, deputy chief of staff to FitzGerald.

Fifty-one percent of the tax revenue generated by the state’s four casinos is divided up among the 88 counties, with shares based on each county’s population. While that revenue has not lived up to early estimates, Cuyahoga County is getting quarterly distributions of slightly less than $2 million. Counties have discretion in how they use the money, and FitzGerald and county council have agreed to use a large portion of the revenue on economic development.

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Food becomes art at MOCA

LIGHTING

By KATHY AMES CARR clbfreelancer@crain.com

said that he doesn’t know of one Intellitube that’s burned out.

“Nobody wants to lose their job because they changed the lighting,” he said.

Today, about 80% of the company’s sales come from the military, but that figure should go down as Energy Focus starts going harder after other markets.

To do so, it shouldn’t need an enormous sales team. It plans to sell most of its products through distributors and energy services companies, which help government agencies and other organizations upgrade their equipment to cut energy costs.

The Museum of Contemporary Art is featuring a chef’s work in its latest exhibit — a move that executive director Jill Snyder characterizes as a departure from the institution’s typical offering.

“Ferran Adrià: Notes on Creativity” displays the drawings of the eponymous Spanish-born chef, who is widely held as one of the world’s most influential culinary luminaries.

The museum exhibit will be featured through Jan. 18, 2015.

“Featuring the work of a chef is an unconventional move for the museum,” Snyder said. “The unconventionality is part of the appeal.”

Adrià uses art as a vehicle to understand creativity and to inspire innovation in the kitchen.

He is credited with bringing molecular gastronomy to the forefront of modernist cuisine through a deconstructivist approach that exposes each ingredient’s texture, form, and/or temperature — forming the basis of his “nothing is what it seems” philosophy.

He has filled hundreds of notebooks with drawings, ideas, collaged photographs and loose sketches that conceived his dishes at the shuttered elBulli in Spain, which has earned numerous times the designation as the world’s best restaurant by Restaurant magazine and will reopen in 2015 as the elBullifoundation.

continued from page 5

Rebuilding trust

CONTRIBUTED PHOTO

Ferran Adrià Adrià will visit Cleveland on Nov. 16 and 17 to connect with local movers and shakers, including award-winning author Michael Ruhlman and business leaders. He will be the keynote at a sold-out business innovation breakfast, which is followed by a symposium on the history, science and technology of food.Tickets are still available for the symposium.

“An important aspect of MOCA’s mission is to bring world-class creative leaders to Cleveland,” Snyder said.

“Ferran Adrià’s work pulls in Cleveland’s vibrant food scene, and affords growth opportunities for fields as various as design, technology and business.”

For more information, visit www.MOCAcleveland.org.

Energy Focus needed to be completely restructured, according to Tu. The company had good technology and a solid relationship with the Navy, but it was unfocused when he took over for CEO Joseph Kaveski in May 2013. Tu is the founder and former CEO of 5 Elements Global Advisors, an investment advisory and management firm in New York.

So he pushed the company to sell off its original line of business, which made lighting products for pools and spas, in late 2013 for about $5 million. And the company also recently closed its Nashville office, which it acquired when it bought its own energy services company. Though Energy Focus works with so-called “ESCO” companies, it’s a labor-in-

tensive industry that tends to be a better fit for mom-and-pop businesses, said Tu, who splits his time between Ohio and New York.

Tu said big changes were necessary, given how much money Energy Focus had lost.

“Investors didn’t trust the company anymore,” he said.

The company’s stock hovered mostly between $6 and $8 per share during 2007, but it fell off a cliff in 2008. It closed at 54 cents per share on July 14 of this year — two days before the company conducted a 1for-10 reverse stock split. Every investor got 1 share for every 10 they previously owned, which immediately pushed the price up to about $5. Shares were trading around $6.25 last Wednesday, Nov. 5.

The reverse stock split helped Energy Focus get back on the NASDAQ stock exchange. The company raised another $5 million from investors in August.

The company projects that sales will grow by 50% each year over the next few years. The company produced $11.6 million in sales during the first half of 2014, which wouldn’t include the new Navy contracts.

To get there, however, Energy Focus can’t just rely on the Navy.

Commercial sales will have to grow, Tu said.

But he thinks the company can get there.

“One thing we’re very careful of is to make sure we don’t over promise and under deliver,” he said.

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GOING PLACES

Send information for Going Places to dhillyer@crain.com M.C. REAL ESTATE: Anita Weaver, Linda Remington and Michele Filous to realtors; Paul Emerson to realtor and auctioneer.

JOB CHANGES ENGINEERING PARSONS BRINCKERHOFF: Nick Hendrix to construction engineer.

FINANCIAL SERVICE

SERVICE Hendrix

Quercioli

Ali

Payne

Turosky

McCarron

D’AMORE TATMANGROUP LLC: Nicholas R. Maderitz and Anthony C. Zingale to staff accountants.

HEALTH CARE UNIVERSITY HOSPITALS GEAUGA MEDICAL CENTER: Jacquelyn Quercioli to medical director, Wound Healing and Limb Preservation Program.

LEGAL

INSURANCE

BUCKLEY KING: Jeffrey Baddeley to partner.

Baddeley

Stewart

MANUFACTURING OLYMPIC STEEL INC.: Ty Deinema to general manager and Aaron Nichol to purchasing manager, Winder Division.

SMITHERS-OASIS CO.: Anne M. Stewart to general manager;

CRAIN’S BUSINESS DIVERSITY COUNCIL Earlier this year, Crain’s Cleveland Business formed an 11-member minority advisory board to provide objective, constructive input on minority-based issues for Crain’s.

The Crain’s Business Diversity Council has met regularly since April. Starting this week, we are profiling members of the council.

LUIS CARTAGENA Strategic planning business adviser: Minority Business Development Agency Business Center Luis Cartagena moved from Puerto Rico to Paterson, N.J., when he was 4.

“I basically entered kindergarten only knowing Spanish,” he said. “It was trial by fire. There was no bilingual class. You better learn.”

The 39-year-old Cartagena has done quite a bit of that. He’s one of the leaders for the Cleveland chapter of the Minority Business Development Agency, a program of the Commission on Economic Inclusion and an arm of the Greater Cleveland Partnership. And when he’s not spending time with his wife, Jessica, and three children, including a son, Emilio, who was born in September, he might be studying for a CPA license — part of his future dream of owning a tax practice.

Cartagena’s “skill set,” according to his boss, Raland Hatchett, executive director of the Cleveland MBDA, provides “great value” to an organization that assists minority-owned firms across the state that have annual revenues of at least $500,000. Hatchett also cited Cartagena’s ability to “listen to both sides” in any discussion.

“Because of that, he’s open to new relationships and he’s open to exploring new cultures,” the Cleveland MDBA executive director said.

Diversity is a source of great pride for Cartagena, who says Northeast Ohio still has “a long way to go to some extent.

“Let’s take the example of senior management,” he said. “When you’re trying to find diversity in senior management, it becomes difficult, especially among the Latino community.

We were trying to find Latinos in a senior management role two levels below the CEO. That was very difficult.”

FLEET RESPONSE: Allison Lanzilotta to executive vice president.

FOUNDATION MANAGEMENT SERVICES: Karen Thompson-Sheehan to associate/program officer.

GRANT THORNTON LLP: Karolyn Ladas to director, audit; Steve Srmag to director, tax.

MEDICAL MUTUAL OF OHIO: Wendy Payne to director of risk adjustment programs; Denise Ali to manager of diversity and inclusion programs; Meredith Turosky to manager of product and process implementation; Bill McCarron to sales and retention manager, Mutual Health Services.

9

He views his role on Crain’s Business Diversity Council as an opportunity, not yet another activity to divide his dwindling free time.

“As a member, our job is to make sure we’re making Crain’s staff aware of things going on in the minority community and let them decide which stories to follow up on,” he said.

“Sometimes it’s just an issue of not knowing what’s going on. We have an opportunity to raise awareness.”

Cartagena, who moved to Cleveland when he was 16, said he remembers “Ohio City before it was Ohio City.” It’s developments in neighborhoods such as Ohio City and Tremont that make him bullish on his adopted hometown, even if he thinks the region can do so much more.

“There are efforts to continue growing neighborhoods,” Cartagena said. “There’s a big effort around the West 25th Street Corridor.

There’s a big opportunity coming up through the lower East Side there with Opportunity Corridor.

It’s good to see developments also happening in the neighborhoods, instead of just downtown.”

He believes companies are “trying to do a better job” with diversity. But he thinks they often need an added push. “It has to come from the top,” Cartagena said. “The decisions have to come from the C-level suites and chief executive officers from these businesses.”

— Kevin Kleps

Williams

Shean

Hout

Lanzilotta

Robert M. Williams II to vice president, strategic business development.

NONPROFIT

MARKETING

KOINONIA HOMES INC.: Marty Bondy to chief business development officer.

EVOLVE CREATIVE GROUP: Malinda Shean to online marketing director.

POINT TO POINT: Jessica Endress and Jason Hoehnen to account directors and vice presidents.

CLEVELAND BALLET: Michael Krasnyansky to chairman.

REAL ESTATE ALLEGRO REALTY ADVISORS LTD.: Bradd A. Hout to associate, transaction advisory services.

SAFEGUARD PROPERTIES: Amitha Rao to assistant vice president, client systems and data analytics; Rick Moran to assistant vice president, application architecture.

STAFFING DIRECT RECRUITERS INC.: Kasey Fahey to payer practice director, Health Plan/Payer Practice.

AWARDS TOASTMASTERS INTERNATIONAL: Lisa Newburger (Beacon Financial Partners) received the District 10 Toastmaster of the Year Award.

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PUBLISHER:

John Campanelli (jcampanelli@crain.com) EDITOR:

Elizabeth McIntyre (emcintyre@crain.com) MANAGING EDITOR:

Scott Suttell (ssuttell@crain.com)

OPINION

Feeling blue Rivalries matter. Just ask Ohio State football coach Urban Meyer. He’s been motivating his players to train harder and play smarter all season so they are at peak performance come Nov. 29, when the Buckeyes take on That Team Up North in one of the college football’s most storied showdowns.

But what happens to rivalries when things get too one-sided? The Buckeyes will enter “the game” with nine wins in the last 10 years. That kind of dominance diminishes the rivalry, lowers the passion and makes it difficult to motivate the players to excellence.

It’s not much different in political rivalries. And right now, Ohio Democratic Party Chairman Chris Redfern is looking a lot like a clueless coach on the sidelines. He did nothing to adequately prepare — and in some cases vet — statewide Democratic candidates for the blood bath that was Election Day last week. It’s not that the Democrats didn’t win. They didn’t even show up, losing every statewide office by double digits. And that matters. Unlike OSU-Michigan football, this is not a game.

In the aftermath, what’s clear is that Republicans in Ohio need a challenge, the voters need a choice and the Democrats need a mirror — because party leaders need to see they have only themselves to blame for the embarrassing effort the party put forth on Nov. 4. Democrats were swept for the fifth time in the past six elections for statewide offices. Perhaps a wolverine should replace the donkey in Ohio.

The question Democrats need to ask themselves in the wake of this midterm election is pretty simple: What do we need to do to be competitive in statewide races?

Fortunately, the Dems are being spared the first step in moving forward. In a rare moment of self-reflection, Redfern announced his resignation as the state party boss. It’s not the only job Redfern will be leaving at the end of the year: He also lost his seat in the statehouse. He could not go quietly, though — blaming everyone but himself for the party’s pitiful performance — and taking credit for building “the strongest state party in the country.” He was serious.

The second step for the Democrats is to strengthen their lineup. When the only legitimate candidate your party can put forth for governor is a long-shot from the moment he announces his candidacy, you must realize your bench is thin.

It’s not healthy to have one-party rule on any level of government. Not at the state level, where Republicans go essentially unchallenged, or at the local level, where, in Cuyahoga County for example, it’s been 20 years and counting since a Republican won countywide office. Jack Schron, a Republican, was well-suited to become county executive. He lost to Democrat Armond Budish, 59% to 41%.

Sometimes, even with a strong lineup and a solid game plan, victory eludes, especially when competing on the opponent’s turf, as any Republican must do in Cuyahoga County. But at the statewide level, where the political arena is ringed with equal numbers of voters wearing red and blue, there’s no excuse for a shutout.

The Democrats had as their quarterback a gubernatorial candidate who fumbled early. Their head coach failed to have his team ready. For Ohio’s sake, let’s hope the party’s next leader brings a new playbook.

FROM THE PUBLISHER

Crowdfunding and the future (and there are lots of them), plenty of You probably remember Zack “Danpeople have their hands out online. Litger” Brown, and you probably still want erally thousands of people are, to punch him. right now, asking the world to Brown is from Columbus, fund their vacations, wedand on July 3, he posted a dings and rhinoplasty. modest crowdfunding request A recent request on GoGeton Kickstarter.com — $10 — Funding.com from a couple in to pay for a batch of potato salRochester, N.Y., asked for ad. money for a new septic system “Basically I’m just making (more than 60 people pledged potato salad,” he wrote in his $3,751 to the cause). ask. “It might not be that good.

The temptation might be to It’s my first potato salad.” laugh off crowdfunding as a By the end of September, af- JOHN fad or a tactic reserved for ter his request somehow went CAMPANELLI budding rock stars, documenviral, his project had received tary filmmakers or school marching an astonishing $55,492 in funding — bands raising cash for a trip to Cedar enough to supply potato salad for every Point. church picnic from now until the RapIn truth, crowdfunding is the future, ture. Nearly 7,000 people in more than the complete democratization of invest70 countries donated to his effort. ing.

Because of absurd stories like these

Over the summer, the Hard Rock Hotel in Palm Springs raised $1.5 million from 85 investors in what was believed to be a first-of-its-kind crowdfunding effort.

The backers each received a minority equity stake in a major hotel for an average investment of less than $18,000.

If Congress allows non-accredited investors to join in the fun (it’s in the works), anyone with an extra $1,000 or even $100 could invest in a promising startup and potentially see the sort of exponential returns that used to be reserved for entrepreneurs, early employees, venture capitalists and card counters.

And on the other side, startups would get to drink from an ocean of new capital.

The potential for our economy? Hardly small potatoes.

TALK ON THE WEB Re: Who to Watch in Education profilees

Re: Proposed hotel project for Akron’s Greystone Hall

Robert Aguilar of Western Reserve Academy is a great teacher and an even better guy. Smart move by Crain’s to feature him, and a well-deserved honor.

— Tom_RedRight88

This is an outstanding idea. I’ve known about this project for quite some time and am anxious to see this project come to life. The architectural renderings look rather promising. I look forward to them breaking ground soon on this proposed idea.

— Jon

I am so very proud of my son, Kent State University associate athletic director Randale Richmond, for what he has accomplished and what he’s about to accomplish. He was taught not to give up, and at least to try … and that you could do all things through Christ, who strengthens you. I’m a very proud mom.

— Oretha

Re: New partner-in-charge at Thompson Hine’s Cleveland office Hurrah for Robyn Minter Smyers, a proven leader in the legal and civic community.

— Sharon Milligan Robyn, you are an inspiration to all women in the Cleveland area.

— Joyce Walker

Re: Why don’t utilities embrace efficiency steps?

Dr. Vinola Vincent-Munion, a recent graduate from the Levin College of Urban Affairs, wrote a doctoral dissertation titled “Vehicle Fuel Economy and Vehicle Miles Traveled: An Investigation of Jevons Paradox.”

(Jevons Paradox is the idea that as technology progresses, improvements in efficiency with which a resource is used tend to increase, rather than decrease, the rate of consumption of the resource.)

She concluded, on the basis of records of nearly 100,000 vehicles from the National Household Travel Survey, that as vehicle gas mileage increases by one mile per gallon, all else equal, people dri-

ve cars an average of 1.2 miles further.

Having examined her research carefully, I would go to the bank that Jevons Paradox holds for automobiles in the U.S. today. Nobody to my knowledge has, however, thoroughly investigated whether or not (or to what extent) the paradox holds for electric utilities. Thus, the observation that it might hold is a very good one.

— Bill Bowen I don’t doubt that Jevons Paradox holds for electricity as well as for automobiles, even if FirstEnergy Corp. does not believe it. But more importantly, the issue is not about saving power or fuel. It is about eliminating waste and growing the economy.

More electricity use, like more automobile driving, is not necessarily a bad thing — not if it means an improvement in the quality of our lives.

And this is what Jevons Paradox really tells us: Each time we implement energy efficiency, we see an improvement in our economy and our quality of life. That is why consumption increases with efficiency.

— Andrew Thomas

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11

PERSONAL VIEW

Getting Ohio up to speed

By JACK KLEINHENZ

What will Ohioâ&#x20AC;&#x2122;s future look like?

We donâ&#x20AC;&#x2122;t need a crystal ball to answer this question.

Current facts and trends offer indications about what can be expected when it comes to the economy, jobs and opportunities, and private sector investment. This much has become clear: Broadband investment is key to Ohioâ&#x20AC;&#x2122;s economy, both now and in the future.

Further investment and deployment will make the economy more flexible, adaptable and more attractive for business investment and expansion. After all, access to highspeed Internet is increasingly essential to the people and businesses in our state.

According to the Ohio Telecom Association, 71% of Ohio households subscribe to high-speed Internet service. And increasingly, Ohio residents are using wireless phones, including smartphones, and changing out landlines in favor of advanced communications technologies that meet todayâ&#x20AC;&#x2122;s needs.

Ohioans know that they can achieve more, do more, learn more and enjoy more with these advanced devices and lightning-fast networks.

And in turn, this growing consumer demand is a market signal for more private sector investment into broadband.

To that end, Technology for Ohioâ&#x20AC;&#x2122;s Tomorrow commissioned my firm, Kleinhenz & Associates, to perform an in-depth study of this topic. Titled â&#x20AC;&#x153;Gauging the Value of Broadband Investment and its Benefits,â&#x20AC;? our study revealed that Ohioâ&#x20AC;&#x2122;s telecom companies are investing heavily into the stateâ&#x20AC;&#x2122;s network infrastructure, at a rate of $1 billion per year. Maintaining and

Kleinhenz is CEO of Kleinhenz & Associates in Cleveland and an adjunct professor of economics at Case Western Reserve University. even increasing this rate of investment is essential for Ohioâ&#x20AC;&#x2122;s future economic growth, particularly because this investment creates or supports 15,000 to 30,000 Ohio jobs per year.

Indeed, investment in broadband infrastructure impacts more than jobs. According to TechNetâ&#x20AC;&#x2122;s 2012 State Broadband Index, â&#x20AC;&#x153;states actively investing in and utilizing broadband networks are seeing stronger economic growth, better connected communities, and enhanced quality of life.â&#x20AC;?

Widespread access to cuttingedge network infrastructure offers benefits and possibilities for us all: access to higher education and educational enrichment for students of all ages, opportunities for telecommuting jobs and online job training, increased access to convenient health care via telemedicine initiatives, and better options for engaging our communities and keeping in touch with one another.

Unfortunately, the TechNet State Broadband Index ranked Ohio 39th when it comes to three key measures: broadband adoption, network quality and economic structure.

That puts the Buckeye State below the national average, which means our state is not currently positioned to take full advantage of the digital economy.

There is certainly room for improvement, and indeed, the economic outlook of Ohio is far from bleak. TechNet researchers stated that there is potential because of Ohioâ&#x20AC;&#x2122;s â&#x20AC;&#x153;stakeholder leadership and

investment.â&#x20AC;? Our study argues that Ohioâ&#x20AC;&#x2122;s progress can be encouraged by policies that ensure marketplace fairness and prioritize the goals of the new economy.

For example, currently in Ohio, both consumer demand for highspeed broadband services and private sector investment in such services are large. Our study contends that policymakers can encourage continued investment (and the resulting economic benefits) by removing obsolete regulations and by continuing to focus on policies that prioritize innovation and broadband capacity. Such broadband capacity impinges on other factors of growth.

The investment Ohio businesses are making in human capital, research and development and technology entrepreneurship is dependent on having the latest information and communications infrastructure.

Because our economic outlook is directly related to broadband infrastructure, our tech leaders and policymakers can work to place Ohio in a better position â&#x20AC;&#x201D; one that allows us all to reap the benefits of the digital age. This is excellent news, and it indicates we can pave the way for future success by making the right moves today.

Iâ&#x20AC;&#x2122;d like to rephrase my earlier question. Perhaps the better question to ask is â&#x20AC;&#x153;What could Ohioâ&#x20AC;&#x2122;s future look like?â&#x20AC;? The answer really depends on the willingness of our policymakers to incent and encourage key investments.

By working with telecommunications industry leaders and other stakeholders, Ohioâ&#x20AC;&#x2122;s policymakers can encourage private sector investment into this essential infrastructure, encouraging innovation while expanding access and meeting consumer demand.

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FAST 50 continued from page 1

BARON PHOTOGRAPHY

Clockwise from top left, representatives from nine of the 10 fastest-growing companies of 2014: Bernie Moreno of The Collection Auto Group, Neil Gloger of InterGroup International, Erin McGinty of Alliance Solutions Group, Ken Applebaum of COTSWORKS, Jonathan Jones of Go2IT Group, Jim Pshock of Bravo Wellness, Danny Spitz of EVERSTAFF, Jim Lupica of Stratos Wealth Partners and Jon Levoy of Alego Health.

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most significant growth shared common approaches to customer service and investment in personnel — strategies each said are imperative for achieving viability in the wake of the economic downturn.

Ridley Watts, president of Panel Master, a LaGrange company that specializes in electrical and pneumatic control engineering, said customer care drove their success.

His company, which placed 15th with 165% growth, has been focused on faster delivery of products, which was achieved through streamlined operations.

Justin Horton, a wealth adviser at Stratos Wealth Partners, which took second place with 941% growth, said its key to growth was investing in new talent as others downsized.

He noted the firm was launched in February 2009 at the back end of the recession, but that “volatility” worked in their favor.

“In our industry, there were lots of layoffs at wire houses or big shakeups at banks, so we provided an independent alternative for advisers to join our firm,” he said, noting that new advisers were incentivized by being able to run their own practice as well as own a piece of Stratos. “And I think that was the catalyst to really jumpstart us.”

“We wanted to create a firm where advisers are in complete control of their destiny,” he added.

“But the No. 2 reason (for success) is the culture of the firm, and that’s trickled down from our leadership.”

Scott Phillips Jr., CEO of Keller

Williams Realty Greater Cleveland, which placed 31st with 83% growth, said finding the right talent also was a key component of their overall success.

“It’s not only identifying top talent from yesterday, but also people who are willing to grow with the market going forward,” he said, noting their number of practitioners has doubled in two years. “If we identify people who have a hunger to grow their own individual businesses and utilize our own tools and resources, it’s a winning combination. And that’s what we’ve done.”

“Don’t do what’s convenient.

And don’t just take the people who are in arm’s length,” Phillips added. “Find the most talented people in your field and get into business with them, no matter what it takes.”

At Alego, a local investment and respect of employees has equally resulted in success as much as a “granular” level of customer understanding, Levoy said.

Forestall said Alego prides itself on local investment and applies the same strategy for work across the country, not just in Cleveland.

“We do our own training and can provide those local resources, so we’re able to reduce the expense to our clients,” Forestall said, noting she’s “proud” of investing in local talent pools.

But passion, Levoy added, is critical to any business flourishing.

“You have to be passionate about what you do,” he said.

“Put yourself in it, because it’s not just a job, it’s a part of who you are.”

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LEFT: Crain’s Fast 50 event was held at the Western Reserve Historical Society’s Crawford Auto Aviation Museum.

BOTTOM LEFT: Alego Health was deemed the fastest-growing company in Northeast Ohio.

From left to right: Mike Zavadil of Alego Health, emcee Kabir Bhatia of WKSU, Jacqueline Forestall of Alego Health, Jon Levoy of Alego Health and Sean Richardson of presenting sponsor FirstMerit.

BOTTOM RIGHT: Jessica Morris, Tiffany Leckrone, Laura Knaak, Karla Ferguson and Melissa Nye, all with Integrity Staffing Services.

PHOTOS BY BARON PHOTOGRAPHY

s a f e g u a rd p ro p e r t i e s. co m

Thank You Safeguard Properties is honored to be named to the inaugural class of Crain’s Fast 50 companies in Northeast Ohio. We attribute our success to our more than 1,700 dedicated employees and through partnerships with our clients and communities across the country.

We are privileged to be among such an esteemed group of local companies that share our passion and entrepreneurial spirit.

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The Risks of Change For CFOs, fast growth brings many new challenges

By James Ritchie s firms throughout the U.S. undertake growth initiatives such as introducing new products, entering new markets, and acquiring other companies, they’re looking to their CFOs for much more than financial leadership. They’re depending on John Masters them to oversee a wide range of new Managing Director Cleveland areas and play a key role in setting Bank of America corporate direction and identity.

Merrill Lynch “The CFO has evolved from this accounting function — the most senior accountant in a company — to being this strategic leader who, by the way, is also involved in finance,” says John Masters, Bank of America Merrill Lynch managing director for Cleveland.

One task in particular associated with an aggressive growth enterprise is managing risk. In modern high-growth companies, the concept of risk is broader than ever.

In addition to worrying about liquidity and other financial issues, the CFO must keep watch on areas such as data security, corporate reputation and, because of just-in-time sourcing and globalization, the supply chain.

“Risk used to be how much leverage you could take on,” says Masters. “Now it probably has 10 or more prongs that fall to the CFO.” Examples include interest rates, commodity prices, disruptive technology, and unanticipated labor costs, including health care. And there’s the ever-present risk of running afoul of changing government regulations.

What’s required is for the CFO to monitor and adjust for any problems that could throw the company’s growth strategy off track. A strong balance sheet is important, but it does little good if a data breach sinks public trust in the business.

REACHING THE INNER CIRCLE In a fast-growing company, the CFO role demands close alignment with the chief executive. “CFOs are being pulled up to the inner circle,” says Masters. “They’re traveling internationally with the CEO. They’re more involved with the board. If a task doesn’t involve growth, they’re delegating it to a qualified treasurer because of time constraints.”

At the same time, CFOs are picking up new skills — or finding people who have them. For example, insights mined from “big data” are crucial to many high-growth firms’ efforts, providing early notice of opportunities and threats.

“It really falls on the CFO and the CFO’s team to be able to collect, analyze and use that data,” Masters says.

The CFO’s job is to aim high but temper that ambition with a list of “what ifs,” scrutinizing whether the company has the financial, human and technological resources to reach its goals.

“There are going to be times that the right answer is, ‘No, we can’t do that right now,’” Masters says. “They have to be strong enough to voice their opinion. If they’re getting dragged along, they’re not doing their job.”

CFOs, especially if their companies source from abroad. To ensure greater stability in the supply chain, the bank works with clients to offer credit support to foreign suppliers.

Firms can also measure their performance against vast amounts of benchmarking data through a Bank of America Merrill Lynch tool called PeerProfiler®. A view into other companies’ approaches can be invaluable to executives creating risk-management strategies. That’s especially true in high-growth firms, where CFOs may not have the benefit of long years on the job and extensive mentoring.

“The evolution of the CFO role reflects a change of pace in corporate America,” Masters says. “And that pace isn’t likely to slow any time soon. We used to talk about how things were 10 years ago. Now we talk about last year as being the good old days.”

To help your Cleveland business manage the latest challenges associated with risk, contact john.masters@baml.com

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FILLING NECESSARY GAPS Since it’s impossible to be an expert in every area, one key to success is turning to outside help when necessary.

“For example, to alleviate risk Bank of America Merrill Lynch often provides guidance on the various challenges associated with entering deals with other businesses or expanding into new markets,” Masters says.

The risk of supply chain disruptions is a concern for many

“Bank of America Merrill Lynch” is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of SIPC, and, in other jurisdictions, by locally registered entities. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp. are registered as futures commission merchants with the CFTC and are members of the NFA. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured • May Lose Value • Are Not Bank Guaranteed. THE POWER OF GLOBAL CONNECTIONS is a trademark of Bank of America Corporation, registered in the U.S. Patent and Trademark Office. ©2014 Bank of America Corporation 10-14-0576

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15

These businesses have exhibited entrepreneurial spirit, innovative business tactics and, most importantly, increasing revenue.

Presenting -- in order, based on their five-year growth rates -the Crain’s Cleveland Business ...

THE PROCESS: To be eligible, Fast 50 companies could be either publicly traded or privately held, and they had to be at least five years old, have at least $5 million in 2013 revenues and be located in Northeast Ohio.

Crain’s Cleveland Business worked with Apple Growth Partners, an independent accounting and business advisory firm with offices in Akron and Cleveland, to verify revenue numbers and to compute the revenue growth from 2009 to 2013.

Apple Growth Partners collected additional financial information (tax returns or reviewed and compiled financial statements) for the purpose of verification and computation of revenue and revenue growth.

Percentage growth is based on revenue from 2009 to 2013.

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1 Alego Health Alego Health nearly closed its doors in 2009 when the need for temporary nurses dried up as many 24651 Center Ridge Road, Suite 400 part-time nurses returned to the Westlake 44145 work force full time to make extra 440-617-6516 money during the Great Recession. www.alegohealth.com However, determined to keep the CORPORATE EMAIL: pr@alegohealth.com business afloat, Alego’s leaders reYEAR FOUNDED: 2004 vamped the company from a sleepy NUMBER OF FTE LOCAL EMPLOYEES staffing firm into one that helps hosAS OF SEPT. 30, 2014: 72 pitals and other providers navigate NUMBER OF FTE EMPLOYEES the rapidly evolving world of health WORLDWIDE AS OF SEPT. 30, 2014: 107 care information technology.

TOP LOCAL EXECUTIVE: Today, the firm, which generated Jacqueline Forestall, president $8.7 million in revenue last year, BUSINESS DESCRIPTION: Alego Health is a specializes in providing clinical and solutions provider of health care IT services and technical resources for hospitals, consulting. Alego specializes in providing clinical physician offices and extended-care and technical resources to fulfill the health care facilities to meet their health care IT IT needs of hospitals, physician offices and extended care facilities. needs. Alego’s business model revolves around placing people with clinical backgrounds — RNs, LPNs and medical assistants, for instance — into IT settings to assist with electronic medical record launches. It seems as if Alego’s formula has worked. From 2009 to 2013, for one, the company’s revenue ballooned by 1,072% — putting it at the top of the list of the Crain’s Cleveland Business Fast 50.

The company is led by Jacqueline Forestall, who held several high-profile human resources gigs at local hospitals before launching Alego in 2004. Alego’s clients have included some of the region’s largest health care providers, such as the Cleveland Clinic, University Hospitals, Sisters of Charity Health System and Southwest General Health Center.

Alego employs 72 full-time equivalent employees locally and 107 worldwide. The company also is a founding partner of the HIMSS Innovation Center, the health care exhibition and education center housed within the Global Center for Health Innovation in downtown Cleveland.

— Timothy Magaw REVENUE 2013: $8.7 million PERCENTAGE CHANGE 2009-2013: 1,072%

2 Stratos Wealth Partners

NOVEMBER 10 - 16, 2014

3 Bravo Wellness

Revenue 2013: $41.6 million Percentage change: 941%

Revenue 2013: $20.3 million Percentage change: 652%

3750 Park East Drive, Suite 200 Beachwood 44122 440-519-2500 www.stratoswealthpartners.com Corporate email: email@stratoswp.com Twitter: @Stratos_Wealth

20445 Emerald Parkway Drive SW, Suite 400 Cleveland 44135, 877-662-7286 www.bravowell.com Corporate email: sales@bravowell.com Twitter: @BravoWell

Year founded: 2008 Number of FTE local employees as of Sept. 30, 2014: 136 Number of FTE employees worldwide as of Sept. 30, 2014: 384 Top local executive: Jeffrey Concepcion, founder, CEO; Nancy Andrefsky, CFO; Dan Jacoby, chief investment officer Business description: Stratos Wealth Partners is an independent, partner-owned and -operated financial services firm.

Year founded: 2008 Number of FTE local employees as of Sept. 30, 2014: 147 Number of FTE employees worldwide as of Sept. 30, 2014: 152 Top local executive: Jim Pshock, president, CEO Business description: Bravo Wellness’ efforts are focused in the wellness industry, specifically in the wellness incentive space. It carefully designs compliant incentives, for which case studies prove and demonstrate sustained health improvement and reduced claims spending.

4 COTSWORKS LLC Revenue 2013: $6.7 million Percentage change: 506% 749 Miner Road Highland Heights 44143 440-446-8800 www.cotsworks.com Year founded: 2006 Number of FTE local employees as of Sept. 30, 2014: 44 Top local executive: Ken Applebaum, CEO

Business description: COTSWORKS manufactures rugged fiber optic components, including transceivers, cables and integration services for companies in the commercial aerospace, military and other industrial markets. Its metal housings are designed to perform in extreme temperatures and noisy environments, such as aircraft flight decks, mobile ground radar links and underwater sonar systems.

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To learn how visit http://clevelandart.giftplans.org or contact Diane M. Strachan, CFRE Director of Development at 216-707-2585 or dstrachan@clevelandart.org.

Stay connected.

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5 InterGroup International Ltd. Revenue 2013: $17.4 million Percentage change: 447% 1111 E. 200th St., Euclid 44117 216-862-9289 www.intergroupinternational.com Year founded: 2006 Number of FTE local employees as of Sept. 30, 2014: 65

10 Alliance Solutions Group LLC Number of FTE employees worldwide as of Sept. 30, 2014: 95 Top local executive: Neil Gloger, CEO Business description: InterGroup buys, reprocesses and sells post-industrial scrap plastic, with a special concentration on flexible packaging scrap.

6 EVERSTAFF International Revenue 2013: $23.9 million Percentage change: 379% 6500 Rockside Road, Suite 385 Independence 44131 216-369-2566 www.everstaff.com Corporate email: info@everstaff.com Twitter: @EVERSTAFFIntl Year founded: 2001 Number of FTE local employees as of Sept. 30, 2014: 28

Number of FTE employees worldwide as of Sept. 30, 2014: 45 Top local executive: Danny Spitz, CEO Business description: EVERSTAFF specializes in the recruitment of professionals and is a resource for providing qualified and skilled individuals to organizations of all sizes. EVERSTAFF strives to optimize efforts and resources to exceed clients’ and candidates’ expectations.

CRAIN’S CLEVELAND BUSINESS 11 ON Search Partners LLC

Revenue 2013: $42.3 million Percentage change: 234%

Revenue 2013: $9 million Percentage change: 188%

4500 Rockside Road, Suite 210 Independence 44131 216-503-1690 www.alliancesolutionsgrp.com Corporate email: rsable@alliancesolutionsgrp.com Twitter: @AllianceSolGrp

6240 SOM Center Road, Suite 230 Solon 44139 440-318-1006 http://onpartners.com/ Corporate email: info@onpartners.com

Year founded: 2001 Number of FTE local employees as of Sept.

30, 2014: 75 Number of FTE employees worldwide as of Sept. 30, 2014: 85 Top local executive: Aaron Grossman, CEO

Business description: ON Search Partners is a global retained executive search firm that identifies and recruits C suite, board and senior executive talent, particularly in the technology, life sciences, industrial, clean tech and financial services sectors. A member of the global search network, Signium International, the firm also has offices in Silicon Valley, Dallas, Minneapolis and the Baltimore/D.C. area.

Business description: Alliance Solutions Group is a family of 10 specialized brands providing temporary and contract staffing, direct-hire recruitment and senior-level consultants. Its brands represent a variety of industries and fields, such as office and administrative, accounting and financial, health care, legal, scientific, skilled manufacturing, light industrial, engineering and supply chain operations.

Year founded: 2006

7 ProSource Solutions LLC Revenue 2013: $11.2 million Percentage change: 361%

Top local executive: Lowell Messner, CEO

4199 Kinross Lakes Parkway, Suite 150, Richfield 44286 330-800-5111 www.prosourcesolutionsllc.com Corporate email: info@prosource-corp.com Twitter: @ProSourceLLC

Business description: ProSource aims to help companies move quicker, grow faster, work more efficiently, thrive and prosper by leveraging technology in a wide variety of disciplines and applications to improve business processes, collaboration and revenuegenerating activities.

Year founded: 2009 Number of FTE local employees as of Sept. 30, 2014: 53

> PERSONALIZED SERVICE for you. > COMMERCIAL BANKING for your bottom line.

8 Collection Auto Group Revenue 2013: $477.8 million Percentage change: 344%

Top local executive: Bernie Moreno, president

28450 Lorain Road North Olmsted 44070 440-716-2700 www.thecag.com Twitter: @TheCollectionAG

Business description: The Collection Auto Group was established in 2005

by Bernie Moreno. Today, it says it is the largest-volume dealer of luxury cars in the central United States comprised of 30 brands, 800 team members and an ever-expanding territory including Ohio, Kentucky, and soon, Massachusetts and Florida.

Year founded: 2005 Number of FTE local employees as of Sept. 30, 2014: 665 Number of FTE employees worldwide as of Sept. 30, 2014: 800

We believe that banking is about more than expert financial guidance and proven banking products.

9 Go2IT Group Revenue 2013: $9.2 million Percentage change: 260% 26260 Center Ridge Road Westlake 44145 440-471-8210 www.go2itgroup.com Corporate email: info@go2itgroup.com Twitter: @Go2ITGroup Year founded: 1995

Number of FTE local employees as of Sept. 30, 2014: 17 Number of FTE employees worldwide as of Sept. 30, 2014: 65 Top local executive: Beverly Sandvick, president Business description: The Go2IT Group is a provider of cutting-edge technology and technical staffing solutions.

17

It’s also about collaboration, individualized service, and fostering economic growth in our community.

We’re committed to it. And nearly 80 years of community banking expertise supports it.

LET OU R T E A M HELP YOU R S T HR I V E .

Contact Kurt Raicevich at (216) 239-5908.

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12 MFS Supply LLC

NOVEMBER 10 - 16, 2014

14 Magnus International Group

Revenue 2013: $37.3 million Percentage change: 184%

Revenue 2013: $46.9 million Percentage change: 168%

31100 Solon Road, Solon 44139 800-607-0541, www.mfssupply.com Corporate email: sales@mfssupply.com Twitter: @mfssupply

16533 Chillicothe Road Chagrin Falls 44023 216-592-8355 www.magnusig.com Corporate email: sforster@magnusig.com

Year founded: 2006 Number of full-time equivalent local employees as of Sept 30, 2014: 55 Number of full-time equivalent worldwide employees as of Sept 30, 2014: 65 Top local executive: Mike Hajec

Year founded: 2007 Number of FTE local employees as of Sept. 30, 2014: 56

Business description: MFS Supply is a source for security and property management products. Founded in 2006 by professionals with more than 20 years of experience in the mortgage field servicing industry, the company says it understands the needs of real estate agents, REO and preservation contractors, and commercial and private property managers.

13 PIRHL

Top local executive: Eric Lofquist, president, CEO, owner; Scott Forster, vice president, COO, owner Business description: Magnus manufactures and distributes natural animal feed ingredients and oleochemicals, including natural waxes and glycerin. It makes these renewable products by rescuing and converting reusable food industry raw materials such as vegetable oils, cooking greases and animal fats that may otherwise be landfillbound.

15 Panel Master LLC

Revenue 2013: $21.3 million Percentage change: 175%

Revenue 2013: $6.2 million Percentage change: 165%

4949 Galaxy Parkway, Suite S, Warrensville Heights 44128 216-378-9690, www.pirhl.com Corporate email: info@pirhl.com Year founded: 2004 Top local executive: John Tarnowski, chief operating officer/chief financial officer; David Uram, principal; David Burg, principal

191 Commerce Drive LaGrange 44050 440-355-4442 www.panelmaster.com Corporate email: sales@panelmaster.com

Year founded: 1985 Number of FTE local employees as of Sept. 30, 2014: 39 Top local executive: Ridley Watts, CEO Business description: Designers and manufacturers of industrial controls.

Business description: PIRHL is a developer, contractor and owner of real estate committed to developing thoughtful, sustainable communities. With a presence in seven states, the company’s process is built on thorough analysis, transparency and strong public-private partnerships.

16 KLN Logistics Corp.

HzW Environmental Consultants, LLC Our staff includes geologists, biologists, chemists, industrial hygienists, environmental specialists, safety specialists and support staff with the technical expertise and experience to address a wide range of environmental needs: • environmental compliance • geological services • industrial hygiene services • voluntary action program • wetlands/ecological services

Revenue 2013: $7.3 million Percentage change: 165%

Top local executive: Kim Martinez-Giering

6749 Eastland Road, Suite C Middleburg Heights 44130 440-816-1505 www.klnlogistics.com Corporate email: info@klnlogistics.com Twitter: @KLNlogistics

Business description: KLN is a full-service freight forwarder also specializing in cartage, warehousing and logistics consulting. It serves multiple industries including but not limited to manufacturing, medical equipment, pharmaceuticals, perishables, energy, government, home deliveries, electronics and retail.

Year founded: 2005 Number of FTE local employees as of Sept 30, 2014: 35

17 Integrity Staffing Services Revenue 2013: $11.7 million Percentage change: 145%

Top local executive: Dan Barnett, president, owner

2132 Case Parkway North, Unit J Twinsburg 44087 330-963-3700 www.integritystaff.com

Business description: Since 1992, Integrity Staffing Services has worked to help businesses navigate staffing and human resource needs.

Year founded: 1992 Number of FTE local employees as of Sept. 30, 2014: 13

www.hzwenv.com ph 440.357.1260 • fx 440.357.1510 6105 Heisley Road • Mentor, Ohio 44060

18 Katherine’s Collection Revenue 2013: $11.4 million Percentage change: 144%

A proud member of Crain's 2014 Fast 50 Class!

AKRON ∙ CANTON ∙ MENTOR ∙ EUCLID

370 Falls Commerce Parkway Cuyahoga Falls 44224 330-572-2780 www.katherinescollection.com Corporate email: ggiller@kcgift.com Year founded: 1991 Number of FTE local employees as of Sept. 30, 2014: 28 Number of FTE employees worldwide as of Sept. 30, 2014: 170

Top local executive: Gary Giller, CEO Business description: Katherine’s Collection designs, manufactures and sells branded and private label seasonal giftware and decorative items for luxury department stores and retail gift stores worldwide.

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19 Olympic Steel Inc.

20 Olympic Forest Products Co.

21 BackTrack Inc.

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

22 Safeguard Properties LLC

Revenue 2013: $1.3 billion Percentage change: 141%

Revenue 2013: $83.5 million Percentage change: 138%

Revenue 2013: $7.9 million Percentage change: 128%

Revenue 2013: $1.3 billion Percentage change: 123%

22901 Millcreek Blvd.

Highland Hills 44122 216-292-3800 www.olysteel.com Corporate email: ir@olysteel.com Twitter: @Olympic_Steel

2200 Carnegie Ave. Cleveland 44115 216-421-2775 www.olyforest.com Corporate email: info@olyforest.com Twitter: @askolympic

8850 Tyler Blvd Mentor 44060 440-205-2035 www.backtracker.com

7887 Safeguard Circle Valley View 44125 216-739-2900 www.safeguardproperties.com Twitter: @safeguardprop

Year founded: 1954 Number of FTE local employees as of Sept. 30, 2014: 270 Number of FTE employees worldwide as of Sept. 30, 2014: 1,790 Top local executive: Michael D. Siegal, chairman, CEO

Year founded: 1981 Number of FTE local employees as of Sept. 30, 2014: 15 Number of FTE employees worldwide as of Sept. 30, 2014: 20 Top local executive: Daniel John Andrews, president

Business description: Founded in 1954, Olympic Steel is a U.S. metals service center focused on the direct sale and distribution of large volumes of processed carbon, coated and stainless flat-rolled sheet, coil and plate steel and aluminum products. The companyâ&#x20AC;&#x2122;s CTI subsidiary is a distributor of steel tubing, bar, pipe, valves and fittings, and it fabricates pressure parts for the electric utility industry.

Headquartered in Cleveland, Olympic Steel operates from 34 facilities in North America.

Business description: Olympic provides pallets and pallet management services.

With local roots and national coverage, it serves single and multi-plant operations in diverse industries. Olympic can deliver tailored programs that are innovative, cost-effective and sustainable.

23 Fathom Revenue 2013: $15.4 million Percentage change: 123% 8200 Sweet Valley Drive Suite 100, Valley View 44125 216-369-2220 www.fathomdelivers.com Corporate email: slowry@fathomdelivers.com Twitter: @FathomOnline Year founded: 1997 Number of FTE local employees as of Sept. 30, 2014: 123

Number of FTE employees worldwide as of Sept. 30, 2014: 150 Top local executive: Scot Lowry, president, CEO Business description: Fathom is a fullservice digital marketing and analytics firm that delivers revenue for its clients across multiple digital touch points. The company works across multiple industries including manufacturing, technology, education, health care and retail.

24 Hyland, creator of OnBase Revenue 2013: $274.8 million Percentage change: 106% 28500 Clemens Road Westlake 44145 1-888-495-2638 www.onbase.com Twitter: @OnBase Year founded: 1991 Number of FTE local employees as of Sept. 30, 2014: 1,330 (Westlake) Number of FTE employees worldwide as of Sept. 30, 2014: 1,755

Top local executive: Bill Priemer, president and CEO, Hyland, creator of OnBase Business description: For more than 20 years, Hyland, creator of OnBase, has helped more than 13,000 lifetime customers by providing real-world solutions to everyday business challenges. Hyland aims to develop the most flexible and comprehensive enterprise content management solutions available.

25 ThenDesign Architecture Ltd. Revenue 2013: $5.9 million Percentage change: 106%

Top local executive: Robert A. Fiala, managing partner

4135 Erie St., Willoughby 44094 440-269-2266 www.thendesign.com Corporate email: janderle@thendesign.com Twitter: @ThenDesignArch

Business description: With offices in Cleveland and Pittsburgh, ThenDesign Architecture is celebrating its 25th year of providing planning, architecture and interior design services. In addition to recognition for its educational buildings and sports/recreation facility designs, TDA supports the hospitality, senior living and commercial markets.

Year founded: 1989 Number of FTE local employees as of Sept. 30, 2014: 31 Number of FTE employees worldwide as of Sept. 30, 2014: 35

Year founded: 1994 Number of FTE local employees as of Sept. 30, 2014: 81 Top local executive: Robert Gandee, president/CEO Business description: BackTrack provides background screening and executive search services to companies worldwide.

19

Year founded: 1990 Number of FTE local employees as of Sept. 30, 2014: 1,565 Number of FTE employees worldwide as of Sept. 30, 2014: 1,750 Top local executive: Alan Jaffa, CEO Business description: Safeguard Properties is a mortgage field services company, providing services in all 50 states, the Virgin Islands, Guam and Puerto Rico. Headquartered in Valley View, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders and financial institutions.

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26 Chart Industries Inc. and subsidiaries

WWW.CRAINSCLEVELAND.COM

NOVEMBER 10 - 16, 2014

27 WTWH Media LLC (Design World LLC)

28 National Interstate Corp.

Revenue 2013: $1.2 billion Percentage change: 97%

Revenue 2013: $6.7 million Percentage change: 90%

Revenue 2013: $569 million Percentage change: 87%

One Infinity Corporate Centre Drive, Suite 300 Garfield Heights 44125-5370 440-753-1490 www.chartindustries.com Corporate email: investorrelations@chartindustries.com Twitter: @ChartInd

6555 Carnegie Ave., Suite 300 Cleveland 44103 888-543-2447 www.wtwhmedia.com Twitter: @wtwh_media

3250 Interstate Drive Richfield 44286-9000 800-929-1500 www.natl.com Corporate email: gayle.bentkowski@natl.com Twitter: @NATLCareers

Year founded: 1986 Number of FTE local employees as of Sept. 30, 2014: 74 Number of FTE employees worldwide as of Sept. 30, 2014: 5,293 Top local executive: Samuel F. Thomas, chairman, president, CEO

Year founded: 2006 Number of FTE local employees as of Sept. 30, 2014: 25 Number of FTE employees worldwide as of Sept. 30, 2014: 39 Top local executive: Scott McCafferty, managing partner, co-founder

Business description: Independent global manufacturer of highly engineered equipment and systems for the energy, industrial gas and biomedical industries. Chart’s equipment is used in the production, storage, distribution and end-use of industrial and hydrocarbon gases, including natural gas.

Business description: WTWH Media LLC is a business-tobusiness media company serving the design engineering and renewable energy markets with more than 40 technology web sites, four print publications, events and social media services.

Year founded: 1989 Number of FTE local employees as of Sept. 30, 2014: 455 Number of FTE employees worldwide as of Sept. 30, 2014: 628 Top local executive: David W. Michelson, president, CEO Business description: Provider of specialty property and casualty insurance with a focus on the transportation industry.

30 PolyOne Corp.

29 GMS Revenue 2013: $37.3 million Percentage change: 83%

Revenue 2013: $3.8 billion Percentage change: 83%

3296 Columbia Road Richfield 44286 330-659-0100 www.groupmgmt.com

33587 Walker Road, Avon Lake 44012 440-930-1000, www.polyone.com, Twitter: @PolyOne

Year founded: 1996 Top local executive: Mike Kahoe, president

Year founded: 2000 Number of FTE local employees as of Dec. 31, 2013: 760 (approximately) Number of FTE employees worldwide as of Dec. 31, 2013: 7,000 (approximately) Top local executive: Robert M. Patterson, president, CEO

Business description: GMS is a professional employer organization that works with small- to midsize employers managing administrative functions that include payroll, human resources, risk management and benefits administration.

Business description: PolyOne Corp. is a provider of specialized polymer materials, services and solutions. The company serves global customers in diverse industries, working to create value through collaboration, innovation and a commitment to excellence.

Congratulations BackTrack/RSI for winning awards, Crain’s Fast 50, Weatherhead 100 and Lake-Geauga Fast Track 50 As the founders of BackTrack/Recruiter Solutions International, we want to thank Crain's Cleveland Business for the Crain's Fast 50 Award, Weatherhead School of Management for the Weatherhead 100 Award, and Fast Track 50 for the Lake-Geauga Fast Track 50 Award -- all exceptional, prestigious awards in our industry.

We are immensely proud of our employees, who deserve the credit for these awards, for their extraordinary work and the dedication they continually exhibit. The results of their solid work ethic have brought honor to BackTrack and RSI through these premier awards recognizing innovative business tactics, our rapid business growth in Northeast Ohio, and an outstanding entrepreneurial spirit.

These awards also would not be possible without our loyal customers, with whom we share this great distinction.

Many thanks, Bob Gandee President/CEO

Linda Gandee Executive VP

Employment Screening Specialists 800-991-9694 • www.backtracker.com

RSI Recruiter Solutions International Executive Search Consultants 800-992-3875 • www.rsipeople.com

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31 Keller Williams Realty of Greater Cleveland

32 Foundation Software

CRAINâ&#x20AC;&#x2122;S CLEVELAND BUSINESS 33 Park-Ohio Holdings Corp.

Revenue 2013: $6.3 million Percentage change: 83%

Revenue 2013: $12.4 million Percentage change: 72%

Revenue 2013: $1.2 billion Percentage change: 72%

29225 Chagrin Blvd #105 Cleveland 44122 216-839-5500 www.KWCleveland.com Corporate email: KLRW297@kw.com Twitter: @KWGreaterCLE

17999 Foltz Industrial Parkway Strongsville 44149 800-246-0800 www.foundationsoft.com Corporate email: info@foundationsoft.com Twitter: @foundationsoft

6065 Parkland Blvd.

Cleveland 44124 440-947-2000 http://pkoh.com

Year founded: 2002 (locally) Number of FTE local employees as of Sept. 30, 2014: 223 in Pepper Pike, Rocky River and Cleveland Heights only Top local executive: Scott Phillips Jr., CEO

Year founded: 1985 Number of FTE local employees as of Sept. 30, 2014: 121 Number of FTE employees worldwide as of Sept. 30, 2014: 126 Top local executive: Fred J. Ode, founder, CEO, chairman

Business description: Keller Williams Realty of Greater Cleveland (Murwood Real Estate Group LLC) specializes in residential real estate sales.

With a focus on being the best business environment for real estate agents to grow their businesses, KW has grown by over 600% locally in the past 10 years.

Business description: Foundation Software is the author/developer of FOUNDATION construction accounting software.

34 MCPc Revenue 2013: $286.8 million Percentage change: 70% 1801 Superior Ave., Suite 300 Cleveland 44114 800-777-7178 www.mcpc.com Corporate email: contact@mcpc.com Twitter: @mcpcinc Year founded: 1965 Number of FTE local employees as of Sept. 30, 2014: 460 Number of FTE employees worldwide as of Sept. 30, 2014: 275

21

Year founded: 1902 Number of FTE employees worldwide as of Sept. 30, 2014: 5,359 Top local executive: Edward Francis Crawford, chairman, CEO Business description: Global, diversified industrial holding company providing integrated supply chain management services and highly engineered products.

35 The Reserves Network Top local executive: Mike Trebilcock, CEO Business description: MCPc delivers an anyplace workspace â&#x20AC;&#x201D; helping clients empower employees to work from anywhere and on any device. MCPc is partnered with leading technology manufacturers.

Headquartered in Cleveland, with locations across the United States, MCPc maintains practices in data center, virtualization, networks, collaboration, personal systems and professional services.

Revenue 2013: $97.1 million Percentage change: 67% 22021 Brookpark Road Fairview Park 44126 866-876-2020 www.trnstaffing.com Corporate email: moreinfo@trnstaffing.com Twitter: @trnstaffing Year founded: 1984 Number of FTE local employees as of Sept. 30, 2014: 75 Number of FTE employees worldwide as of Sept. 30, 2014: 200

Top local executive: Neil Stallard, CEO Business description: The Reserves Network offers flexible staffing services, including temporary, temp-to-hire and direct hire placements within the office, industrial, professional and technical markets. TRN is a veteran- and family-owned, privately held staffing company, which strives to meet specific needs for thousands of clients and job seekers.

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36 Briteskies

NOVEMBER 10 - 16, 2014

37 Thorson Baker & Associates Inc.

38 SecureState Consulting LLC

Revenue 2013: $5.9 million Percentage change: 66%

Revenue 2013: $15.6 million Percentage change: 62%

Revenue 2013: $7.8 million Percentage change: 61%

6155 Rockside Road, Suite 110 Independence 44131 216-369-3600 www.briteskies.com Corporate email: info@briteskies.com Twitter: @nobrowncow

3030 W. Streetsboro Road Richfield 44286 330-659-6688 www.thorsonbaker.com

23340 Miles Road, Bedford Heights 44128 216-927-8225 www.securestate.com Corporate email: csatink@securestate.com Twitter: @SecureState

Year founded: 1993 Number of FTE local employees as of Sept. 30, 2014: 12 Number of FTE employees worldwide as of Sept. 30, 2014: 134 Top local executive: Michael G. Thorson

Year founded: 2000 Number of FTE local employees as of Sept. 30, 2014: 25 Top local executive: William Onion, Michael Berlin Business description: Briteskies is a full-service solution company for ecommerce, enterprise software and the integration of these systems. It helps customers bring brands, products and services to the online marketplace. Briteskies is a Magento Silver Solution Partner, an Oracle/JD Edwards Gold Partner and an IBM Premier Business Partner with expertise in both the WebSphere family of products and iSeries-based applications.

Business description: Thorson Baker & Associates provides engineering services for the building construction industry and offers structural, mechanical, commissioning, electrical and technology engineering services nationwide, and professional registration in 49 states, the District of Columbia, Puerto Rico, British Columbia and Alberta, Canada. Civil engineering and landscape architecture services are offered throughout the Midwest.

Year founded: 2001 Number of FTE local employees as of Sept. 30, 2014: 50 Number of FTE employees worldwide as of Sept. 30, 2014: 51 Top local executive: Ken Stasiak, CEO Business description: SecureState is a management consulting company specializing in information security. It partners with clients to solve complex business problems by using technical security and risk services to facilitate strategic thinking and improve an organization’s overall security risk posture.

40 Turning Technologies LLC

39 Corrigan Krause CPAs Revenue 2013: $5.3 million Percentage change: 60%

Revenue 2013: $48.9 million Percentage change: 45%

2055 Crocker Road, Suite 300 Westlake 44145 440-471-0800 www.corrigankrause.com

255 W. Federal St., Youngstown 44503 866-746-3015 www.turningtechnologies.com Corporate email: pr@turningtechnologies.com Twitter: @TurningTech

Year founded: 1989 Number of FTE local employees as of Sept. 30, 2014: 42 Top local executive: Thomas L. Harrison, managing director

Year founded: 2002 Number of FTE local employees as of Sept. 30, 2014: 158 Number of FTE employees worldwide as of Sept. 30, 2014: 287 Top local executive: Michael Broderick, CEO

Business description: Corrigan Krause is a midsize CPA firm in Westlake, specializing in closely-held businesses. It provides various accounting, tax and consulting functions to companies and their owners, as well as value-added services beyond the typical compliance services most businesses need.

THANKS

Business description: Turning Technologies is a global partner for learning engagement and assessment services focused on improving teaching and learner success. Its solutions, including student response technology, manage, enhance and deliver instructional and assessment content to improve educational outcomes while collecting critical data for use in meaningful ways.

TO EVERYONE AT

NATIONAL INTERSTATE

FOR MAKING US A

FAST 50 WINNER.

We’re honored to be recognized as one of Crain’s Fast 50 for the entrepreneurial spirit, innovative business tactics, and revenue growth that have made us successful. And we’re just as excited to offer careers with huge growth potential – from running your own specialty product to unique opportunities in accounting, IT, marketing, and more. Plus, we’re close to home, headquartered in Northeast Ohio. Visit us at natl.com/careers.

SOMEBODY owns the COMMERCIAL PROPERTY you occupy.

Why Couldn’t It Be YOU? Contact The Middlefield Banking Company for: • Commercial Real Estate Lending • Commercial Lines of Credit • Capital Improvement Loans • Cash Management Tools • Full Service Commercial Banking

The Middlefield Banking Company middlefieldbank.com 888.801.1666 Northeast Ohio Region Offices in: Middlefield 440.632.1666 • Middlefield-West 440.632.8113 Chardon 440.286.1222 • Newbury 440.564.7000 Orwell 440.437.7200 • Mantua 330.274.0881 Garrettsville 330.527.2121 • Cortland 330.637.3208

3250 Interstate Drive | Richfield, Ohio 44286 | 800-929-1500 | www.natl.com

Central Ohio Region Offices in: Dublin • Westerville

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41 Alpha Imaging Revenue 2013: $66.0 million Percentage change: 43% 4455 Glenbrook Road Willoughby 44094 440-953-3800 www.alpha-imaging.com Corporate email: info@alpha-imaging.com Year founded: 1986 Number of FTE local employees as of Sept. 30, 2014: 15

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

46 Kamanâ&#x20AC;&#x2122;s Art Shoppes Inc. Number of FTE employees worldwide as of Sept. 30, 2014: 85 Top local executive: Michael Perrico, CEO Business description: An independent sales and service provider of advanced medical imaging equipment.

With 28 years in the imaging industry, Alpha Imaging partners with global manufacturers to deliver products and services that meet the clinical, operational and economic needs of the U.S. health care market.

Revenue 2013: $35.3 million Percentage change: 29% 16838 Park Circle Drive Chagrin Falls 44023 440-708-1909 www.kamansart.com Corporate email: benk@kamansart.com Year founded: 1971 Number of FTE local employees as of Sept. 30, 2014: 30 Number of FTE employees worldwide as of Sept. 30, 2014: 1,200 Top local executive: Tricia Kaman, president, co-founder Business description: Art and photo retail concessions for amusement parks and zoos.

42 Osborn Engineering Revenue 2013: $9.1 million Percentage change: 42%

Top local executive: Lee V. Hooper, CEO

1100 Superior Ave., Suite 300 Cleveland 44114 216-861-2020 www.osborn-eng.com Corporate email: info@osborn-eng.com Twitter: @Osborn_Eng

Business description: Osborn, an employee-owned firm, is a fully integrated, multidisciplined design firm that uses a specialized team approach to engineering projects. With specialists in civil, structural, electrical, mechanical and technology engineering, it aims to provide a turnkey design solution.

Year founded: 1892 Number of FTE local employees as of Sept. 30, 2014: 90

43 PartnerShip LLC Revenue 2013: $23.7 million Percentage change: 33%

Top local executive: John J. Finucane, president, chief operating officer

29077 Clemens Road Cleveland 44145 800-599-2902 www.partnership.com Corporate email: sales@partnership.com

Business description: PartnerShip LLC is a shipping solutions provider to more than 17,000 businesses across North America. It aims to help customers save time and money in all facets of shipping and logistics, including LTL freight, truckload, tradeshow, expedited and small package shipping.

Year founded: 1989 Number of FTE local employees as of Sept. 30, 2014: 45

44 Farmers National Bank Revenue 2013: $48.5 million Percentage change: 33% 20 S. Broad St. Canfield 44406 888-988-3276 www.farmersbankgroup.com Corporate email: customersupport@farmersbankgroup.com Twitter: @farmersbnkgroup Year founded: 1887

Number of FTE local employees as of Sept. 30, 2014: 327 Top local executive: Kevin Helmick, president, CEO Business description: Based in Canfield, Farmers offers 19 locations and two trust offices throughout Columbiana, Mahoning, Trumbull, Stark and Cuyahoga counties. Farmers also offers an array of wealth management services, including investments, insurance and private client services.

45 Talan Products Inc. Revenue 2013: $24.3 million Percentage change: 32% 18800 Cochran Ave., Cleveland 44110 216-458-0170 www.talanproducts.com Corporate email: sales@talanproducts.com Twitter: @TalanProducts Year founded: 1986

Number of FTE local employees as of Sept. 30, 2014: 70 Top local executive: Steve Peplin, CEO Business description: Talan is a provider of contract manufacturing services, specializing in progressive die metal stamping, aluminum extrusions supply and fab and assembly.

23

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47 e2b teknologies Inc.

NOVEMBER 10 - 16, 2014

48 Herschman Architects Inc.

Revenue 2013: $5.9 million Percentage change: 29% 521 Fifth Ave., Chardon 44024 440-352-4700 www.e2btek.com Corporate email: sales@e2btek.com Twitter: @e2bteknologies Year founded: 2001 Number of FTE local employees as of Sept. 30, 2014: 44 Top local executive: Bill Henslee, CEO

Revenue 2013: $11.1 million Percentage change: 24%

Business description: e2b teknologies is a Microsoft-managed partner providing cloudbased business software applications and services. The company develops custom cloud-based business applications and is the publisher of Anytime Collect A/R management software, Anytime Supply Chain, Anytime Commerce and related products. e2b teknologies also resells leading ERP & CRM software including Sage 100, Sage 500, Sage ERP X3, Epicor ERP, Sage CRM and SugarCRM.

Top local executive: Mike Crislip, president

25001 Emery Road, Suite 400, Cleveland 44128 216-223-3200, www.herschmanarchitects.com Corporate email: mailbox@herschmanarchitects.com Year founded: 1974 Number of FTE local employees as of Sept. 30, 2014: 66 Number of FTE employees worldwide as of Sept. 30, 2014: 75

49 The Millcraft Paper Co. Revenue 2013: $140 million Percentage change: 23% 6800 Grant Ave., Cleveland 44105 216-441-5500, www.millcraft.com Corporate email: morgans@millcraft.com Twitter: @MillcraftPaper Year founded: 1920 Number of FTE local employees as of Sept. 30, 2014: 71 Number of FTE employees worldwide as of Sept. 30, 2014: 224 Top local executive: Travis M. Mlakar, president

& Sell

Business description Founded in 1920, The Millcraft Paper Company is an independent, fourth-generation distributor of printing and office papers, envelopes, packaging, and graphic design products. The Millcraft service platform has 17 sales and retail distribution locations in 14 Midwest cities in Ohio, Kentucky, Indianapolis, Michigan, New York and Pennsylvania. Millcraft is nationally and locally certified as a woman-owned diversity business. Millcraft paper and product lines are environmentally certified by the Forest Stewardship Council and the Sustainable Forestry Initiative.

50 HzW Environmental Consultants LLC

EVERYTHING! T

Business description: Herschman Architects specializes in architecture, engineering and interior design. Project types include: retail stores, shopping centers, salons/spas, restaurants, industrial/warehouse, office buildings, corporate and medical offices, religious facilities and residential. The firm celebrates its 40th anniversary in 2014; offices are located in Tucson, Los Angeles and Cleveland.

Revenue 2013: $5.1 million Percentage change: 18% 6105 Heisley Road, Mentor 44060, 440-357-1260 www.hzwenv.com, Corporate email: zwenv@hzwenv.com

Tools

Year founded: 1987 Number of FTE local employees as of Sept. 30, 2014: 28 Top local executive: Barbara L. Knecht, CEO

HGR Industrial Surplus, 20001 Euclid Ave., Euclid (216) 200-4110

www.hgrinc.com

Exposure

•

Expertise

•

Results

Business description: HzW is a provider of environmental consulting services in Ohio. HzW is recognized as a DBE

by ODOT, an Ohio EDGE firm, a FBE by Cleveland and a DBE and SBE with Cuyahoga County. HzW has been in continuous operation since 1987. It has offices in Mentor, Akron, Canton and Euclid. HzW’s professional services include: geological services, including brownfield investigations and environmental site assessment services; industrial hygiene and safety services, including asbestos services, lead-based paint investigations and safety services; wetlands and ecological services; industrial environmental compliance services, (air permitting, SARA reporting, hazardous waste compliance).

CRAIN’S CLEVELAND BUSINESS’

Our Strength is Your Market Advantage

WOULD LIKE TO THANK OUR EVENT SPONSORS

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E-2

NOVEMBER 10-16, 2014

ESTATE PLANNING

TABLEOFCONTENTS Business climate Whether you’re contemplating your estate portfolio, or looking to fine-tune your existing plan, there are a variety of resources available to help you achieve your goals. E-3 to E-4

Gifts to family, Asset protection From conversions to Roth IRAs, inherited IRAs and family philanthropy, these subsets of estate planning warrant careful consideration. E-4 to E-10

Charitable giving

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PRESIDENT’S LETTER

Trusts

Make sure your trustee is someone who will carry out your wishes. E-12 to E-15

Arts and collectibles

Legitimate appraisals will help you determine value and whether it’s appropriate to sell or keep these coveted items. E-15 to E-16

Insurance

Different products protect you and your assets. E-24 to E-27

Business Planning

Your business is a key part of your long-term goals. E-28

Now is the time to tackle estate planning those who are members of the Estate Planning Council, can help you evaluate how your personal n concert with Crain’s Clevefinancial goals have been affected land Business, the Estate by market and legislative changes Planning Council of Cleveland in the United States as is pleased to present our well as events on the annual Estate Planning world stage. If necessary, section. they can assist you in The purpose of this the establishment of new section is to provide the goals in order to enhance community with valuable the effectiveness of your information and resources financial plan. Specifically, regarding financial, insurthey are equipped to help ance, business succession, you with the methods, and estate and charitable SAVAGE techniques and planning matdocuments that ters. The articles will enable you to that follow — attain your goals, written by some whether they of the region’s include taking most experienced care of a loved professionals in one with special these fields — needs, transimay answer some tioning a familyof your questions owned business, or, perhaps, help fulfilling a you to formulate commitment to a questions that charitable organiyou may wish to address with your zation, planning for retirement, or financial advisor. establishing a legacy.

Estate planning is an often overFounded in the 1930s, the Estate looked aspect of personal financial Planning Council of Cleveland, with management. Millions of Americans more than 430 members, has grown do not have an up-to-date estate to become the sixth largest such orplan and/or medical directives, leavganization in the country. Among its ing them vulnerable in the event of members are attorneys, accountants, illness, accident or untimely death. financial planners, investment adviEach year, this results in the exsors, bankers and trust officers, inpenditure of wasted dollars and the surance representatives, appraisers creation of unnecessary hardship for and people engaged in the operation families, loved ones and businesses, of charitable organizations. From all of which could be avoided or at personal experience, I can assure you least softened with the foresight of that our members are committed to advance planning. their clients and their community We have entered a more stable and are here to provide you with the period, at least in the transfer tax assistance you will need to safeguard arena. This relative certainty presyour financial future. Our website, ents us with some tools and opporwww.epccleveland.org, is a valuable tunities to plan for and capitalize resource that can help you to identify on the economic, financial, other the professionals you will need to tax, and political changes that we handle your unique situation. do continue to face both at home On behalf of the Estate Planning and abroad. Lower interest rates Council, I am pleased to provide you and volatile markets can provide with this special section in Crain’s opportunities to leverage transfer Cleveland Business, which contains tax benefits. It remains imperative important insights and commentary that people preserve and protect on a variety of estate planning isthe assets that they have built over sues. We hope that you will find it to the years — not only for thembe an indispensable resource as you selves, but also for their family work with your advisors to plan a members, heirs and favorite charisound financial future. table organizations. In order to do this, it is wise to rely upon the Jennifer Savage is a partner in the services of experienced professionTax & Wealth Management Secals who are familiar with income, tion at Walter Haverfield LLP and gift and estate tax laws and who president of the Estate Planning are current in their knowledge of the financial and investment world. Council. Contact her at 216-9282971 or jsavage@walterhav.com.

These professionals, such as JENNIFER SAVAGE

I

We hope that you will find (this section) to be an indispensable resource as you work with your advisors to plan a sound financial future.

Philanthropic contributions offer financial benefits, and perhaps more importantly, enhance your legacy. E-11, E-16 to E-23

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The material presented in this special section is of a general nature and does not constitute investment, legal, tax or accounting advice to any person, or a recommendation to buy or sell any security or adopt any investment strategy. Opinions expressed herein are subject to change without notice.

Seek the advice of an investment professional to tailor an estate plan to your needs.

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BUSINESS CLIMATE

ESTATE PLANNING

BY JOHN P. MICKLITSCH

L

ike a trip to the doctor’s office, a productive personal investment checkup requires pre-planning and focus.

In the days and weeks leading up to your investment checkup, it is important for you to establish your goals for the meeting and to communicate them with your advisor in advance so that MICKLITSCH he or she can prepare accordingly. You might, for example, want to communicate what personal circumstances have changed in your life since your last checkup or email specific questions you have about your portfolio.

On the day of your meeting you should arrive on time, fed and well rested so that you can communicate and process what you are hearing at your highest potential level. During the meeting, it is important to review your personal goals and objectives and have your financial advisor reinforce why the portfolio you own is a reflection of those needs. In addition, you might want to ask what investment opportunities exist that you are not currently taking advantage of and then weigh their applicability to your personal situation.

Lastly, the time is yours and you should not feel rushed in any way during your investment checkup.

An experienced financial advisor will take the time to answer all of your questions and explain the ones he or she will have to research in order to answer properly. You should leave the checkup feeling reassured that your investments are reflective of your goals and objectives and that you understand what you own in the portfolio and why you own it. You might even leave feeling a little tired because an investment portfolio checkup can be hard work.

Like most things in life, you will get out of it what you put into it.

John P. Micklitsch, CFA, CAIA, is Chief Investment Officer for Ancora Advisors, LLC. Contact him at 216-825-4000 or johnmick@ ancora.net.

E-3

Estate planning? It’s all about control

BY HOWARD J. KASS

Preparation, focus key to productive investment portfolio checkup

NOVEMBER 10-16, 2014

S

ince 2010, when Congress allowed the repeal of the estate tax to briefly take effect and then reinstated it with a combination of unheard-of exemption amounts and spousal portability, we have been functioning in a very low-tax or, in many cases, a no-tax estate planning environment. The result? Many people believe that estate planning is no longer necessary, but nothing could be further from the truth.

Are you concerned about any of

the following people getting your money? n Your spouse’s next love interest n Your children’s exes n Your family’s creditors Do you worry about your family’s ability to manage their money?

KASS If you do no estate planning, you make all these outcomes possible, yet they are preventable.

By creating a comprehensive estate plan, you can put safeguards in place to prevent all these outcomes.

Through the judicious use of differ-

ent types of trusts, you can control not only what your heirs may receive from your estate but also how quickly or slowly they receive it, and you can prevent unintended parties from receiving benefits from your estate.

Where to begin

The first step is to sit down with your estate planning advisors to identify and write down your goals for your estate. Who should get what, and when? Are all of your children to be treated equally or

HOW CAN SOMEONE HAVE ALL YOUR ANSWERS BEFORE THEY ASK ANY QUESTIONS? Clairvoyance isn’t one of our skills.

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fairly? They may not mean the same thing. Once you know who is getting what, your advisor can begin to craft a strategy to protect and control your assets well beyond your grave.

Still not convinced? Don’t worry.

If you don’t create an estate plan, the state of Ohio has one for you.

You just won’t like it!

Howard Kass, CPA, AEP, is a Tax Partner with Zinner & Co. LLP. Contact him at 216-831-0733 or hkass@zinnerco.com. Learn more about the company’s financial and consulting services at zinnerco.com.

E-4

NOVEMBER 10-16, 2014

ESTATE PLANNING

Estate planning is not just about the tax bill.

Itâ&#x20AC;&#x2122;s About Control.

Estate planning is more than tax planning; it ensures that you control what happens to your assets after youâ&#x20AC;&#x2122;re gone.

The estate planning experts at Zinner & Co. can help you to identify specific needs and then craft strategic plans.

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Jackpot! Contending with sudden wealth Seeking the advice of a financial planner to help you quantify your goals and quarterback the team ongratulations! Youâ&#x20AC;&#x2122;ve just of service providers you now need had the good fortune should be your first step. of coming into a large From there, the planner windfall of money. Maybe will be able to help you you won the lottery or sold evaluate the immediate the family business. Maybe tax implications of the a long-lost relative passed wealth event and help you away and named you as the formulate a sound strategy beneficiary of his or her esfor preserving the money tate, or you received a lump throughout your lifetime â&#x20AC;&#x201C; sum payout after working at AVARELLO if that is your goal. your company for 30 years.

Whatever the cause of the windfall, the inevitable question that Review your estate plan comes next is: â&#x20AC;&#x153;What do I do now?â&#x20AC;?

Most peopleâ&#x20AC;&#x2122;s kneejerk reaction Part of that strategy discussion is figuring out how to spend their should include bringing in an attornewfound wealth. Letâ&#x20AC;&#x2122;s take that ney to update your current estate expensive vacation. Letâ&#x20AC;&#x2122;s pay off the plan, ensuring that the money house or maybe look at upgrading to passes on according to your wishes. a bigger home. Letâ&#x20AC;&#x2122;s buy a fancy new Contrary to popular belief, now car or jewelry. What often gets lost in that you have significant wealth the shuffle is how to protect this new doesnâ&#x20AC;&#x2122;t necessarily mean that your asset and make it last. estate plan has to be complicated.

BY CHARLES J. AVARELLO

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The right ideas The right results Achieved with the right firm 3201 Enterprise Parkway, Suite 410 Beachwood, OH 44122 216.831.0733 hkass@zinnerco.com

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Establishing a revocable trust while you are alive is the easiest way to control how assets should be distributed after you are gone.

Do you have enough liability insurance if someone falls on your property or if you are in an accident? Do you now have too much (or not enough) life insurance?

Protecting this asset also means evaluating with your planner whether you have the appropriate levels of insurance coverage.

Finally, salesmen will be coming out of the woodwork looking to convince you that you need their financial products. An experienced planner will help you put on the brakes, navigate through the noise, and enable you to be an informed buyer making rational decisions.

Charles J. Avarello, CPA, CFP, is a senior manager for Fairway Wealth Management. Contact him at 216573-7200 or cja@fairwaywealth.com.

GIFTS TO FAMILY | ASSET PROTECTION

Strategic thinking around giving as funding needs increase

BY HEIDI JARK

O

Equities

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ur jobs as donors, grant makers or â&#x20AC;&#x153;philanthropistsâ&#x20AC;? have never been as simple as we make the description sound.

We make decisions that impact lives every day. Our job seems to be getting tougher though as we move forward in the days ahead.

We have always stood ready for the challenges before us, but it seems that leaders at the local, state, and national level are looking to the not-for-profit world, and foundations and wealthy families in particular, to carry more weight than our shoulders can possibly handle. We can do our best to fill the gap, but we know it wonâ&#x20AC;&#x2122;t likely be enough.

So what can we do to prepare ourselves for these uncertain days ahead? Are there steps we can take to make the path of giving clearer now and in the future? Here are four recommendations weâ&#x20AC;&#x2122;ve put into practice in our work that have helped to make our giving more impactful: Budgeting. Instead of thinking of whatâ&#x20AC;&#x2122;s ahead for the year, start to think in terms of a two- to threeyear window. Many organizations plan capital campaigns a year or two before they start. Encourage organizations to talk with you in the early stages of ideas rather than at the end. You still may decide to wait until the end of the campaign to

fund, but at least you made the decision knowing what lies ahead. There will still be surprises and unplanned needs along the way, but there will be less of them and youâ&#x20AC;&#x2122;ll feel more in control.

Mission statement. Have you taken the time to think about your mission? If not, take some time as a group and put it down on paper.

It may take some time but it is well worth the effort.

A mission statement tells the world who you are and JARK what your focus areas will be, even if it just tells them the geographic area youâ&#x20AC;&#x2122;ll serve. It helps you to be laser focused in your work and, when communicated on a regular basis, will alert charities as to whether you are a viable prospect for funding.

Investment Strategy. Itâ&#x20AC;&#x2122;s important to review your investments with advisors regularly and make sure that board members understand whatâ&#x20AC;&#x2122;s in the portfolio and why itâ&#x20AC;&#x2122;s there. If you donâ&#x20AC;&#x2122;t have a written investment policy, put it at the top of the agenda for your next meeting. This will not only help your money manager do their job, but it helps the board focus on their jobs as fiduciaries and good stewards of those funds.

Learning to Say â&#x20AC;&#x153;No.â&#x20AC;? The hardest part of our jobs is saying â&#x20AC;&#x153;noâ&#x20AC;? to a request; but itâ&#x20AC;&#x2122;s an absolute necessity if we want to have real impact in

Opinions are provided by Fifth Third Bank and may not actually come to pass. This information is current as of the date of this commentary and is subject to change at any time, based on market conditions and other events. This commentary is intended for educational purposes only and does not constitute the rendering of tax or legal advice or a specific recommendation on estate or financial planning activities.

Fifth Third does not provide tax or legal advice. Please contact your

Crainâ&#x20AC;&#x2122;s Cleveland Business Custom Publishing

our giving. Many people are afraid of saying â&#x20AC;&#x153;noâ&#x20AC;? and fear that the organization will be disappointed in them or will think less of them because of the decline. The truth of the matter is that charities appreciate knowing a decision has been made one way or the other, because it allows them to move forward with other avenues of support. Instead of just saying â&#x20AC;&#x153;no,â&#x20AC;? add clarity to the decision by letting the organization know what led you to that decision. If the organization can come back at a later date, be clear in the timing of that future request. No matter what decision you make, the charity should respect your decision.

If they donâ&#x20AC;&#x2122;t, that sends a message to you about your future involvement with them.

Sometimes we are overwhelmed with requests and become frustrated that we canâ&#x20AC;&#x2122;t do more. Bringing focus and structure to your gifting can help relieve some of that stress. In the end, sometimes all we can do is believe in the words that the songstress Catie Curtis sings so eloquently, â&#x20AC;&#x153;If I canâ&#x20AC;&#x2122;t change the world, Iâ&#x20AC;&#x2122;ll change the world within my reach.â&#x20AC;? Hopefully that will be enough.

Heidi B. Jark is Managing Director, Foundation Office, Fifth Third Bank. Contact her at 513-5344397 or heidi.jark@53.com.

accountant, tax advisor or attorney for advice pertinent to your personal situation.  Fifth Third Bancorp provides access to investments and investment services through various subsidiaries. Investments and Investment Services: Are Not FDIC Insured, Offer No Bank Guarantee, May Lose Value, Are Not Insured By Any Federal Government Agency, Are Not A Deposit. Insurance products made available through Fifth Third Insurance Agency, Inc.

THE ESTATE PLANNING COUNCIL OF CLEVELAND PRESIDENT Jennifer A. Savage Tanzie D. Adams Charles F. Adler, III Thomas D. Anderson Graham T. Andrews Gordon A. Anhold Gary S. Archdeacon Kemper D. Arnold James S. Aussem P. Thomas Austin Charles J. Avarello Molly Balunek Peter Balunek Kimberly J. Baranovich Albert J. Barnabei Lawrence C. Barrett Ronald E. Bates Stephen Baumgarten Maureen K. Beaver Edward J. Bell Steven Berman H. William Beseth, III Gina Marie Bevack-Ciani Mohammed J. Bidar Gary B. Bilchik Michelle M. Bizily Alane Boffa Tami M. Bolder Daniel L. Bonder Aileen P. Bost Christ Boukis Jill A. Branthoover Herbert L. Braverman Christopher Paul Bray James R. Bright Don P. Brown Kenneth B. Brown C. Richard Brubaker Robert M. Brucken Bethany J. Bryant Martin J. Burke, Jr. Eileen M. Burkhart J. Donald Cairns Carl Camillo William G. Caster Jennifer Chess James R. Chriszt Trevor R. Chuna Mark A. Ciulla R. Michael Cole Warren Coleman Katherine E. Collin Jeffrey P. Consolo James I. W. Corcoran Heather A. Cornell Barbara J. Cottrell Greg S. Cowan Steven Cox Thomas H. Craft M. Patricia Culler Cheryl A. D’Amico William T. Davis Dana Marie DeCapite Thomas A. DeWerth Carina S. Diamond David S. Dickenson, II James G. Dickinson Nick DiSanto Mary Ann Doherty Lynda Doland Terry Ann Donner Timothy Doyle Emily A. Drake Therese Sweeney Drake Jill Dugovics William A. Duncan Carl J. Dyczek

VICE-PRESIDENT Michael T. Novak

SECRETARY Michael W. Matile

Howard B. Edelstein Elaine B. Eisner Michael E. Ernewein Heather R. Ettinger Christina D. Evans Susan M. Evans Darren A. Ewaska Frank Fantozzi Charles E. Federanich Timothy Allan Ferris J. Paul Fidler Julie E. Firestone Mary Kay Flaherty Linda Fousek Kenneth J. Francis-Sable Maryann C. Fremion Patricia L. Fries 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 Catherine Klima Gletherow Ronald J. Gogul Scott A. Gohn James A. Goldsmith Susan S. Goldstein Tom S. Goodman Laura Joyce Gorretta Lawrence I. Gould David A. Grano Alexandra G. Gray Karen L. Greco Sally Gries Anne Marie Griffith Alan M. Gross James P. Gruber Ellen E. Halfon Jennifer R. Hallos Patrick A. Hammer Sarah Hannibal Ronald F. Hanson Dana G. Hastings Douglas R. Hastings Lawrence H. Hatch Thomas I. Hausman Janet W. Havener Albert G. Hehr, III Jennifer Heimlich Theodore N. Hellmuth James M. Henretta Mark W. Hicks Jean M. Hillman Mark L. Hoffman Doris Hogan 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

TREASURER Emily Shacklett

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 Lesley Keller Veena Khanna William J. Kimball Woods King, III Amy I. Kinkaid Richard B. Kiplinger Andrew W. Kirkpatrick Paul S. Klug Victor G. Kmetich Daniel R. Kohler James R. Komos Harvey Kotler Roy A. Krall Frank C. Krasovec, Jr. Thomas W. Krause James B. Krost Deviani Kuhar Craig A. Kukla Anthony C. Kure Louis D. LaJoe Gary E. Lanzen Steven P. Larson Donald Laubacher Daniel J. Lauletta Paul J. Lehman David M. Lenz Herbert B. Levine Wendy S. Lewis Keith M. Lichtcsien Miranda C. Licursi Dennis A. Linden James Lineweaver David F. Long Ted S. Lorenzen Amy R. Lorius Janet Lowder Edward C. Lowe Robert M. Lustig James M. Mackey Stanley J. Majkrzak Chad Makuch Laura J. Malone Karen T. Manning Wentworth J. Marshall, Jr. Donald C. May Nancy McCann Karen M. McCarthy Larry E. McCoy Robert F. McDowell, Jr. Erica E. McGregor Daniel J. McGuire Joseph M. Mentrek Lisa H. Michel Mark A. Mihalik Lawrence Mihevic Charles M. Miller William M. Mills Daniel F. Miltner Wayne D. Minich Ginger F. Mlakar Marie L. Monago M. Elizabeth Monihan Michael J. Monroe Robert C. Moore Philip G. Moshier Joseph L. Motta Susan C. Murphy

PROGRAM CHAIR Julie A. Fischer Hoyt C. Murray Norman T. Musial Christine A. Myers Raymond C. Nash Jodi Marie Nead Lisa Wheeler Neely Chad J. Neifer Robert Nemeth Michael H. Novak Anthony J. Nuccio Eric A. Nye Kevin J. O’Brien Michael J. O’Brien Lacie L. O’Daire Linda M. Olejko Matthew S. Olver Leslie A. O’Malley Charles J. O’Toole Richard M. Packer Donesha L. Peak Jodi L. Penwell Michael D. Pepe Dominic V. Perry Craig S. Petti Marla K. Petti Thomas Pillari Timothy J. 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 Jeffrey H. Reitzes Linda M. Rich R. Andrew Richner Radd L. Riebe Elton H. Riemer Kathleen K. Riley Frank M. Rizzo Lisa Roberts-Mamone David A. Robertson Kenneth L. Rogat Carrie A. Rosko Philip B. Rosplock Debbie Rothschild Larry Rothstein Rennie C. Rutman Patrick J. Saccogna Elizabeth W. Salisbury Fran Mitchell Schaul Ronald S. Schickler Bradley Schlang Mark C. Schulman Dennis F. Schwartz June A. Seech John S. Seich Doris A. Seifert-Day Marc J. Servodio Andrea M. Shea Stanley E. Shearer John F. Shelley Lea R. Sheptak Nick Shofar Douglas E. Shostek Roger L. Shumaker Gary M. Sigman Matthew J. Silla Judith C. Singer Mary Jean Skutt Mark A. Skvoretz John M. Slivka

IMMEDIATE PAST PRESIDENT Beth M. Korth 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 Timothy H. Stallings M. Randal Stancik Stacey Staub Kimberly Stein Laurie G. Steiner Saul Stephens E. Roger Stewart Beverly A. Stiegele Diane M. Strachan Thomas B. Strauchon John E. Sullivan, III Linda DelaCourt Summers Scott E. Swartz Joseph N. Swiderski Yeshwant K. Tamaskar Susan P. Taylor Mark M. Tepper Barbara Theofilos Donna Thrane Eric Tolbert G. Maxwell Toole Floyd A. Trouten, III Mark A. Trubiano Patrick J. Tulley Thomas M. Turner Diann Vajskop Robert A. Valente Jaclyn L.M. Vary Missia H. Vaselaney Joseph Frank Verciglio Catherine Veres Anthony Viola Mary Eileen Vitale Michael A. Walczak Kimberly A. K. Walrod Kittie Warshawsky 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 Katherine E. Wensink Elizabeth Wettach-Ganocy Marcia J. Wexberg Terrence B. Whalen Andrew Whitehair Frederick N. Widen Erica K. Williams Geoffrey B.C. Williams Scott A. Williams J. Mark Wipper Teresa M. Wisniewski Nelson J. Wittenmyer Matthew D. Wojtowicz Carol F. Wolf Brenda L. Wolff Alan E. Yanowitz James D. Yurman Jeffrey M. Zabor David M. Zolt Jack Zugay Gary A. Zwick Donald F. Zwilling

E-6

NOVEMBER 10-16, 2014

ESTATE PLANNING

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GIFTS TO FAMILY | ASSET PROTECTION

Ohio Legacy Trust protects part of charity’s unrestricted endowment

BY FRAN MITCHELL SCHAUL, MARCIA J. WEXBERG AND CHERYL A. D’AMICO

T

he Ohio Legacy Trust statute went into effect 18 months ago. Since then, individuals have been able to transfer some of their assets to an Ohio Legacy Trust, name themselves as a trust beneficiary and protect the trust assets from their own future creditors. This represents a significant change in Ohio law and an exciting opportunity for those who are seeking ways to protect some of their assets from judgment creditors, divorcing spouses and others in this era of runaway juries and “jackpot justice.”

Though relatively new, the Ohio Legacy Trust is considered one of the nation’s best statutes of its kind. The Ohio draftspersons took the best of what other states had enacted and improved upon it.

This article focuses upon a lesser-known but equally valuable use for the Ohio Legacy Trust: the protection of some portion of a charitable endowment.

It is a given that the members of the board of a charitable organization have a fiduciary duty to protect the organization’s endowment and to manage foreseeable risks. This is a task that charitable boards take very seriously, and it is often addressed by the

WEXBERG

SCHAUL

purchase of significant amounts of liability insurance. Yet certain types of risks may not be able to be covered by liability insurance, and those that are may have limits or exclusions, including limits imposed by the kind of shared coverage arrangement employed by many charitable organizations.

Moreover, at some point the purchase of additional liability insurance may become quite costly. All of these factors contribute to the risk profile and exposure of the organization.

We have all heard stories about charitable (including educational) institutions that have lost a significant portion of their endowment as a result of large, unexpected judgments. Significantly, a charitable organization’s endowment funds are not protected from the claims of the organization’s creditors unless the use of those funds has been permanently restricted by the organization’s donors. Unrestricted (sometimes referred to as “board

D’AMICO

restricted”) endowment funds, which can comprise a significant portion of an organization’s endowment — and which are generally preferred by a charity because of the programming flexibility they afford — do not have this protection.

As a result, an uninsured or underinsured claim or judgment may expose the charity to the risk of a catastrophic loss that may necessitate a reduction or even cessation of services provided by the organization.

Protection from future claims

The good news is that by transferring some of its unrestricted endowment funds to an Ohio Legacy Trust a charitable organization should be able to protect those assets from the claims of future creditors. The provisions of such a trust might look something like the following:

One law firm for all estate planning solutions

The charity would name an independent trustee — preferably an institutional trustee, but in any event not the organization or members of its board — to administer the trust.

The trust instrument would authorize the trustee to make distributions to the organization for purposes that further its charitable mission. These purposes are typically spelled out in the charity’s articles of incorporation or other governing instrument(s). The timing and amount of these distributions would be at the discretion of the trustee (or an independent Distributions Committee named by the board).

In addition, the organization could retain the right to receive some or all of the trust income each year, and/or the right to withdraw up to 5% of the trust principal each year. This may be appropriate if the organization wants to be sure that it will receive distributions equal to the annual spending policy established by the board. The decision to retain these rights would need to be weighed against the consideration that mandatory distributions and assets the organization is permitted to withdraw will generally be available to the organization’s creditors.

The trustee could be authorized

to permit the organization to use property owned by the trust — a useful provision for an organization with creditor challenges.

The organization can — and probably should — retain control of the trust investments, either directly or by the appointment of an Investment Committee comprised of members selected by the organization.

The trust instrument is required to be in writing and irrevocable, the organization must remain “solvent” after transferring assets to the trust, and the transfer of assets to the trust must be made by the organization without any intent to defraud existing or reasonably foreseeable creditors.

In addition, the organization would follow certain technical procedures designed to assure the retention of its exempt status and the tax-exempt nature of the Trust’s income.

This is a valuable tool that should be of interest to everyone involved with a charitable board.

Fran Mitchell Schaul, Marcia J. Wexberg and Cheryl A. D’Amico are members of the Estate and Succession Planning practice group at Calfee, Halter & Griswold LLP. For more information, please visit Calfee.com.

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ESTATE PLANNING

NOVEMBER 10-16, 2014

GIFTS TO FAMILY | ASSET PROTECTION

Roth IRA benefits may be worth tax hit Carefully weigh your options before initiating a conversion

BY CHRISTOPHER P. BRAY

R

oth IRAs have become increasingly popular because of the twofold benefit of tax-free compounding of investment income combined with tax-free distributions. The quickest way to establish a sizable Roth IRA is to “convert” a regular IRA into a Roth IRA. Large IRAs usually arise when someone “rolls” BRAY an employer retirement savings into a regular IRA upon leaving an employer. Most people, however, haven’t converted their regular IRA to a Roth IRA. Why not? Because the cost of conversion is current payment of income tax that would have otherwise been deferred without

conversion.

Conventional planning wisdom tells us that it’s better to pay tax tomorrow than today. However, conversion often has significant advantages for individuals who have non-IRA funds to pay taxes related to conversion, who won’t need the funds to provide for living expenses in retirement, and who will be subject to the federal estate tax. In this case it may make more financial sense to pay taxes now related to converting a regular IRA to a Roth IRA.

Benefits of Roth IRAs Deferred distribution until death. Unlike regular IRAs, distributions from Roth IRAs can

be deferred until death. Distributions are required from a regular IRA to an individual upon reaching age 70½. The distribution is taxed when made and the funds leave the very valuable IRA environment where they were formerly growing tax-free. No distributions are required from a Roth IRA while the owner is living. Why not keep the funds growing tax-free if they aren’t needed to fund living expenses?

Tax-free distributions to beneficiaries. If structured properly, the Roth IRA can continue building tax-free for the benefit of the owner’s family after the owner dies. Although Roth IRA distributions are required after the owner’s death, they can be stretched over many years and the distributions are tax-free.

Taxable estate reductions.

When the owner pays income taxes upon conversion, the tax payment

reduces the owner’s taxable estate. This might not seem like the best way to reduce estate taxes, but with a regular IRA not only is the value of the IRA subject to estate tax, but the inheritors also get stuck with the income tax liability related to the IRA. This is not the case with a Roth IRA. The decision to convert requires consideration of multiple variables and should not be undertaken lightly.

Consider seeking help from a qualified planning professional.

Christopher P. Bray, JD, CPA, is managing director for Ariel Capital Advisors, LLC. Contact him at 239-451-6008 or CPBray@ArielCapitalAdvisors.com.

INSIGHT FROM CRAIN’S BLOGGERS Editor’s Choice: Managing editor Scott Suttell rounds up news and views about business, and stories of interest in Northeast Ohio. Weekdays Sports Biz: Assistant editor Kevin Kleps writes about the Browns, Cavaliers, Indians and much more. Weekdays

Health Care: Reporter Timothy Magaw breaks down the latest news about the region’s hospitals. Tuesdays What’s Cooking: Twice per month, freelance reporter Kathy Ames Carr has morsels on the local restaurant scene.

Your legacy helps create a healthier community.

ACCESS BEGINS WITH A CAPITAL “G”.

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

At Glenmede, we believe the best way to serve our clients is to give them direct access to our experts and best thinking — with no barriers or bureaucracy. Our low client-to-staff ratio means you’ll always have our full attention.

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 nearly 150 years.

Join the many who are making a difference. To learn more, contact our gift planning team at 216-983-2200 or visit UHGiving.org.

www.glenmede.com Glenmede’s services are best suited for those with $3 million or more to invest.

To learn more, please contact Linda Olejko at 216-514-7876 or linda.olejko@glenmede.com CLEVELAND • MORRISTOWN • NEW YORK PHILADELPHIA • PRINCETON • WASHINGTON, DC • WILMINGTON

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E-7

E-8

NOVEMBER 10-16, 2014

ESTATE PLANNING

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GIFTS TO FAMILY | ASSET PROTECTION

How to plan for, preserve your legacy

BY RAY LAMPNER AND DOUG MATHEY

O

ften, looming retirement can feel like standing on the high-dive board at the pool.

You’ve just exerted everything you have climbing the ladder to reach the board. Your knees wobble a bit on your approach to the edge. When you look down, your destination seems far away and indefinite. You have to time it right so that you feel ready, and when you finally make your move, you need to be positioned correctly when you hit the water — or else, you will feel the strain. And, right before you leap, you take your last, big breath of fresh air … hoping it won’t be too long before you can breathe freely once more.

So what will happen when you resurface? Did you time it right?

Timing and positioning are critical to success in legacy planning and retirement.

Doug Mathey, president of BCG

Wealth Advisors and a partner with BCG Legacy Advisors, says, “It’s much more complicated than adding up account balances to see if clients have reached a magic number. To begin with, there are many factors that may be trickier to quantify.”

The top three legacy planning factors from our clients are: n How much is my business worth? n How much will I have after taxes? n Will I have enough to take care of my family and myself?

Defining a legacy is as simple as stating what you envision for the long term. How you foresee your retirement, things you wish your family to have, and the ability to plan for potential health care problems or other unforeseen emergencies that won’t burden anyone.

Achieving a desired level of a legacy plan is more complex. The company’s objectives, strategy and capabilities must be measured and aligned with the business owner’s

How to protect inherited IRAs

BY SUSAN RACEY AND PETER IGEL

T

Federal exemption

The Bankruptcy Code allows debtors to retain certain property to help start over. Most retirement assets, including traditional IRAs, are protected.

Until recently, it was unclear whether an IRA inherited by a beneficiary would be protected. The Court concluded that bankruptcy law does not exempt inherited IRAs. In Clark v. Rameker, a woman established a traditional IRA. Upon her death, her daughter inherited the IRA. When the daughter later filed for bankruptcy, she attempted to exempt the IRA. The court denied the exemption due to differences between traditional IRAs, which are funded for retirement, and inherited IRAs, which are received as a result of the IRA owner’s death.

These differences persuaded the court that inherited IRAs should not receive the bankruptcy protection intended for assets set aside for retirement.

State exemption

Because bankrupt debtors may opt to apply state exemptions instead of the federal exemption addressed in Clark v. Rameker,

RACEY

MATHEY

objectives. Intricate business valuations, strategies and diversified planning are going to be critical to a legacy’s success.

Understanding the value of your business

The business valuation in legacy planning is not as easy as giving you a number based on assets. The worth of your business is dependent upon knowing exactly how, when and to whom ownership will be transferred. This is the simplest way to maximize returns.

Creating a business legacy, as well as planning for your personal legacy, is a complex, yet critical task.

“The majority of business owners put it off thinking that they have time. But it’s important to create a long-term plan and incorporate your legacy plan into part of your overall business strategy. Positioning your business and making the right moves now can drastically increase the value of your business and legacy in the long term,” states Ray Lampner, partner with

Protecting your wealth … after taxes When the tax man cometh, it can be quite a hit on your legacy plan. For many, income taxes are the single greatest expenditure on an individual’s personal income statement.

It’s very important to enlist a trusted advisor that can tap your assets in the right order to minimize your tax bill.

A good advisor will be able to: n Manage investments to maximize after-tax returns. n Work within a multi-dimensional tax system and coordinate a strategy to contemplate for regular tax, alternative minimum. n Create a strategy for fund withdrawal to keep taxes low, projecting income and bracket management, and use investment vehicles that minimize income taxes (i.e., taxmanaged mutual funds).

While investors can’t control the direction and returns of the market, they should be able to control for risk, expenses and taxes to a

certain degree. Through strategic tax planning in conjunction with asset protection strategies, wealth can be preserved and protected for the benefit of heirs and possibly even a charitable legacy if you desire.

Preserving your legacy

A vast majority of clients are concerned first and foremost with preserving the wealth they accumulate so that their families may benefit. Ensuring that there are enough assets to reach personal and financial goals is the critical first step in retirement planning.

But don’t undermine the assessment of business and personal risks. You will need to implement strategies to avoid these risks. An advisor that has experience in the diversified steps of legacy planning with businesses can help execute strategies that can secure a safe financial retirement.

So, the cautionary tale has always been to look before you leap.

Time is ticking. The water is warm. It’s never too early to create a legacy plan so that one day you will be able to dive head-first into retirement knowing that everything is going to be alright.

Ray Lampner is a Partner with BCG Legacy Advisors. Contact him at 330-572-8014 or Raymond.lampner@ bcgcompany.com. Doug Mathey is President of BCG Wealth Advisors.

Contact him at 330-572-8050 or Doug. mathey@bcgwealthadvisors.com.

IGEL

many debtors will look to state law for protection. Fortunately for debtors, Ohio offers protection for inherited IRAs. Still, reliance on state exemptions for planning purposes is not always dependable in our mobile society. For example, if a person funding an IRA lived in Ohio but one or more of the beneficiaries reside in another state that does not protect inherited IRAs, the IRA would not be protected in bankruptcy.

Protecting Your Company.

Preserving Your Vision.

Trust alternative

Instead of relying on Ohio’s exemption, IRA owners may protect the IRA by naming a trust as the beneficiary. In the event of the beneficiary’s bankruptcy, the trust can protect the inherited IRA regardless of the individual’s state of residence.

Also, the same trust can protect the IRA against other creditors outside of bankruptcy and in the event of a divorce.

Susan Racey is a Partner of the Tucker Ellis Estates, Trusts & Probate Group. Contact her at 216-696-3651 or susan.racey @tuckerellis.com. Peter Igel is a Partner in the Tax Group. Contact him at 216-696-5084 or peter.igel@tuckerellis.com.

Estate planning, life insurance and business solutions.

www.oswaldcompanies.com Jeffrey Wasserman | 216.367.5990 | jwasserman@oswaldcompanies.com

Crain’s Cleveland Business Custom Publishing

© 2014. Oswald Companies. All rights reserved. OC2014_AD003

he U.S. Supreme Court’s recent decision in Clark v.

Rameker has given individuals with IRAs a new reason to consider the use of trusts as IRA beneficiaries. The decision made clear that inherited IRAs do not receive bankruptcy protection under federal law.

LAMPNER

BCG Legacy Advisors.

According to statistics, there is a 70% chance that a company will transition ownership in the next 10-15 years. If you are a key stakeholder, or business owner, your concern for this circumstance will be even greater.

Yet, when the majority of business owners are asked, only about 14% have a succession plan in place.

www.ClevelandFoundation.org/Purpose

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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 R O B E R T P. M A D I S O N

Establishing a legacy of giving today and tomorrow Giving is a deeply personal decision inspired by a lifetime of experiences, passions and motivation to help solve community problems.

For one iconic Cleveland native, giving to present priorities and investing in the future has been a purposeful and rewarding blend of philanthropy.

Through careful design and exemplary generosity, Robert P. Madison, founder of the Cleveland architecWXUDO Ă&#x20AC;UP 5REHUW 3 0DGLVRQ ,QWHUnational, aims to help generations RI &OHYHODQGHUV DQG WKXV GHĂ&#x20AC;QH his legacy. ´, KDYH DOZD\V EHHQ FRQFHUQHG IRU those who do not have the same opportunities as others,â&#x20AC;? Madison said. â&#x20AC;&#x153;All of our lives are checkered ZLWK WULDOV DQG WULEXODWLRQV EXW , believe that we have the ability to overcome them and see beyond.â&#x20AC;?

Madison selected the Cleveland Foundation as his philanthropic partner more than a decade ago, and he has worked with the foundationâ&#x20AC;&#x2122;s Advancement team of professionals to ensure that his passion for archiWHFWXUH DQG VRFLDO MXVWLFH Ă&#x20AC;QGV D philanthropic outlet close to home. â&#x20AC;&#x153;The people there are wonderful and sensitive, and they understand the intention of those who want to participate in the foundation,â&#x20AC;? said Madison, who jokes that he is just nine years younger than the Cleveland Foundation, which is celebrating its centennial year.

Madisonâ&#x20AC;&#x2122;s primary philanthropy has been a scholarship fund that

he established with his late wife, Leatrice, to help African-American DUFKLWHFWXUH VWXGHQWV Ă&#x20AC;QDQFH WKHLU postsecondary education. â&#x20AC;&#x153;My concern is helping a person who wants to study architecture, but may not have the money to attend a XQLYHUVLW\ WR HQWHU WKLV Ă&#x20AC;HOG LI KH RU she chooses,â&#x20AC;? Madison said. â&#x20AC;&#x153;Being VHOHFWHG LV DOVR D EHQHĂ&#x20AC;W WR VWXGHQWV¡ egos: They can see that someone believes in them.â&#x20AC;?

For most of his early life, Madison found success by believing in himself. He grew up in Cleveland and VWXGLHG EULHĂ \ DW +RZDUG 8QLYHUVLty before leaving to serve in World :DU ,, DQG HDUQLQJ WKH 3XUSOH Heart, three combat ribbons and the combat infantry badge.

8SRQ KLV UHWXUQ KH UHFHLYHG D EDFKelorâ&#x20AC;&#x2122;s degree from Western Reserve 8QLYHUVLW\ LQ ² WKH Ă&#x20AC;UVW $IULcan-American student to graduate from the School of Architecture.

He went on to attain a Master of $UFKLWHFWXUH IURP WKH +DUYDUG 8QLversity Graduate School of Design, where he studied under Bauhaus IRXQGHU :DOWHU *URSLXV ,Q KH went abroad as a Fulbright Scholar to the Paris Ă&#x2030;cole des Beaux-Arts. :KHQ KH UHWXUQHG WR WKH 8QLWHG States, however, he experienced a much different set of â&#x20AC;&#x153;trials and WULEXODWLRQV Âľ ,Q WKH FRORU RI his skin precluded him from securing job interviews and bank loans, so Madison set out on his own and EHFDPH WKH Ă&#x20AC;UVW $IULFDQ $PHULFDQ WR UHJLVWHU DQ DUFKLWHFWXUDO Ă&#x20AC;UP LQ

WKH VWDWH RI 2KLR ,W ZDV /HDWULFH working as a school teacher, who proYLGHG WKH VHHG PRQH\ IRU WKH Ă&#x20AC;UP The company Madison founded has SDUWLFLSDWHG LQ D QXPEHU RI GHĂ&#x20AC;Qing Cleveland projects, including the Rock and Roll Hall of Fame and Museum, Quicken Loans Arena, FirstEnergy Stadium and the Great Lakes Science Center, as well as ofĂ&#x20AC;FH EXLOGLQJV DQG FROOHJH FDPSXV SURMHFWV 0RUH UHFHQWO\ WKH Ă&#x20AC;UP GHsigned the stations on the Regional Transit Authority HealthLine and worked on the Cleveland Convention Center and the Global Center IRU +HDOWK ,QQRYDWLRQ â&#x20AC;&#x153;Success in a profession is one thing, but when you couple that success with the ability to be helpful to others, it becomes far more meaningful,â&#x20AC;? Madison said.

7R GDWH VWXGHQWV KDYH EHQHĂ&#x20AC;WHG from his scholarship fund, which KDV DZDUGHG VFKRODUVKLSV RYHU WKH ODVW \HDUV Madison is already part of Cleveland history, but he knows that one of his biggest contributions to the community is yet to come. Madison is securing his legacy through a planned estate gift with the Cleveland Foundation that will leave a lasting impact, benefiting the causes he cares about most after he passes away. ´,W ZDV LPSRUWDQW IRU PH WR SODQ now so that others wonâ&#x20AC;&#x2122;t have to GR LW DIWHU , DP JRQH Âľ KH VDLG ´, feel very safe and secure with the IRXQGDWLRQ DQG , NQRZ P\ ZLVKHV

Robert P. Madison: architect, pioneer and philanthropist. The company Madison founded has participated in the development of many Cleveland landmarks including the Rock and Roll Hall of Fame and Museum and Great Lakes Science Center, but his philanthropic partnership with the Cleveland Foundation will leave its mark in the next century and beyond.

will be carried out to the full extent.â&#x20AC;? )RU WKHLU VHOĂ HVV GRQDWLRQV WR WKH FRPPXQLW\ ² SDVW SUHVHQW DQG IXWXUH ² WKH &OHYHODQG )RXQGDWLRQ presented the Madisons with the Frederick Harris Goff Philanthropic Service Award, named for the orgaQL]DWLRQ¡V IRXQGHU LQ â&#x20AC;&#x153;Bob Madison has generously embraced lifetime giving and planned JLYLQJ Âľ VDLG .D\H 5LGROĂ&#x20AC; VHQLRU vice president for Advancement at the Cleveland Foundation. â&#x20AC;&#x153;His philanthropy has been an encore to his groundbreaking architectural

career, and we are honored to have been his partner on this journey.â&#x20AC;?

Madison also gives his time, serving the community as an honorary cochair of the Cleveland Foundationâ&#x20AC;&#x2122;s African-American Philanthropy Committee. ´%\ JLYLQJ LQ P\ OLIHWLPH ,¡YH EHHQ able to see and enjoy how the contributions are helping the commuQLW\ Âľ KH VDLG ´, IHHO UHVSRQVLEOH to help build a better society now ZKLOH , DP DOLYH DQG WR FRQWLQXH WKDW DIWHU , DP JRQH Âľ

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

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E-10 NOVEMBER 10-16, 2014

ESTATE PLANNING

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GIFTS TO FAMILY | ASSET PROTECTION

Family philanthropy preserves your values for the next generation

BY PATRICIA FRIES

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mart financial and estate planning ensures that your assets will be handled and protected in accordance with your wishes. But how do you preserve and grow the family values that you hold so dear? How can you ensure that future generations of your family will continue to be guided by these values?

One of the best ways to FRIES pass on your values is to engage in philanthropy as a family. At charitable organizations, development professionals are available to help achieve your philanthropic goals and suggest various creative ways to involve your family.

Family philanthropy is an opportunity to live and breathe your family values while establishing a legacy for the next generation. It starts with a conversation about what causes are important to you and what this has meant for your family. Engaging the younger generation can be as simple as holiday gift shopping for sick children or volunteering as a family at chari-

table activities. Older children and young adults enjoy impacting social causes through social media.

As time goes on, you may want to encourage and enhance the impact of financial support from the younger generation by offering to match their gifts with gifts of your own. Involving the next generation in philanthropy exposes them to the amazing feeling of helping others and making a difference in the world. This is the power of philanthropy to transform lives. Family philanthropy can also provide a forum for talking about money management, which is not considered nearly enough in today’s world.

Strategic giving vehicles can be an important part of your family philanthropy and provide income, gift and estate tax benefits. Establishing a current use or endowed fund at a particular charitable organization is one of the most straightforward options for family philanthropy. Many charitable organizations provide engagement opportunities for families and bring the family together to learn more about the use and impact of

You may want to encourage and enhance the impact of financial support from the younger generation. the family philanthropy.

Donor-advised funds, private foundations, supporting organizations or perpetual trusts are alternative vehicles for supporting charitable causes. Contact your attorney to discuss these options. These giving vehicles vary in complexity and flexibility and your advisors can help ensure alignment with your financial and philanthropic goals.

Engaging with your family in philanthropy helps preserve your values for the next generation.

It all begins with a conversation.

Talk with your family today.

Patricia Fries, Esq., MBA, is the Director of Gift Planning at University Hospitals. Contact her at 216-844-0430 or Patricia.Fries @UHhospitals.org.

Private foundation considerations

BY MARY EILEEN VITALE AND MICHAEL G. DUFFY

C

onsidering starting a private foundation? Establishing one allows the most control of your philanthropic assets, versus donating to a supporting organization or a donor advised fund. The choice will be influenced by future family involvement and cost. Once instituted, administration and continuation are key.

Management can be by either professionals or family members, or a combination. Many begin with the founders doing all. They may also involve their children and grandchildren. Professionals can be hired; however, this can be costly. Professionals are recommended to manage the foundation’s assets, legal, tax and accounting issues.

At the outset, the founders need to determine its focus. These can be diverse or narrow, providing financial assistance alone or broad support.

Two critical areas include financial and administrative management.

VITALE

DUFFY

Financial management. How will the assets be invested and distributed? These functions can be handled by hired professionals or family members, depending on skill and interest. Private foundations have minimum distribution requirements based on asset values each year per the IRS Tax Code. Additionally, there is an excise tax ranging from 1% to 2% of the net investment income. Both are recorded and tested on the annual tax filing.

Administrative management.

Who will make decisions? What processes will be used? Will the foundation accept grant applications or will funding decisions

Crain’s Cleveland Business Custom Publishing

solely be internal? This may change over time. Continuation is generally a concern of founders.

Early on, the private foundation is typically run by the founder’s family. Who will be involved after their passing? Planning and thought are important to this question. Early involvement of new family members is important in order to allow those that follow to be the decision makers. To keep family involved as time passes, allowing for limited and/or higher time commitment at different periods may be a solution. Participating individuals may be able to donate more or less time as their situations permit. The foundation should allow for this. Foundation bylaws are important to provide guidance to future generations.

Mary Eileen Vitale, CPA, CFP, AEP is Principal with HW&Co. Contact her at 216-378-7210 or vitale@ hwco.com. Michael G. Duffy, CPA, is Senior Tax Manager. Contact him at 216-378-7291 or duffy@ hwco.com.

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ESTATE PLANNING

NOVEMBER 10-16, 2014 E-11

CHARITABLE GIVING

Supporting organizations: family philanthropy at its best

BY ANN GARSON

A

supporting organization, often called a supporting foundation, is a wonderful philanthropic vehicle that combines thoughtful philanthropic planning with family engagement, taking into account financial objectives and donor values. Many families choose the supporting foundation as GARSON the preferred vehicle for their participatory philanthropy. Participatory philanthropy vehicles are those that allow for engagement of donors with each other in grantmaking. Other examples of participatory vehicles are donor advised funds and private foundations.

The supporting foundation may be the recipient of lifetime and testamentary charitable gifts designed to achieve tax reduction objectives. The family may then work together across generations with non-family trustees to support causes that benefit the community by making grants consistent with the familyâ&#x20AC;&#x2122;s values and charitable interests.

A supporting foundation is a charitable organization that qualifies as a public charity because of its control by a public charity. It is administered by its own board of trustees with a majority of the trustees appointed by the controlling public charity and a minority of the trustees, generally family members, appointed by the family.

In some cases, only individuals from the older generation serve as family-appointed trustees. In other cases, there may be a multigenerational board. The Jewish Federation of Cleveland has 50 affiliated supporting foundations, which collectively made grants last year of more than $90 million. Trustees meet at least once per year to decide on grantmaking and investment matters, as well as other issues of policy and operations.

Supporting foundation differences

The supporting foundation is different from a private foundation in several ways.

There are no excise taxes on investment income and there is no

Can I protect my assets without paying premiums every year?

Charitable gifts offer tax benefits and invaluable impact minimum distribution requirement of 5% of the investment assets as there are for private foundations.

For purposes of deductibility, gifts to the supporting foundation are treated more favorably than those to the private foundation.

Because a private foundation is an independent entity, it must engage its own attorneys and investment managers, tax specialists to make IRS and state filings and administrators to keep grant, payment, and corporate records.

Someone must conduct due diligence on grantees. The family that establishes a supporting foundation does not have to address any of these concerns because the Federation assumes responsibility for all of these functions.

Another benefit that a supporting foundation has compared to a private foundation is the participation of the non-family appointed trustees. The family-appointed trustees and the non-family appointed trustees work together.

The non-family appointed trustees are not strangers to the family and they are all very involved in the community.

These trustees contribute to the family discussion by sharing inspiration, experience, and insights about philanthropy and grantees.

They validate the impact that the family is having with grantmaking as well as reinforce and encourage the transfer of philanthropic values across generations where there is a multigenerational board. This kind of multigenerational involvement is a fulfilling family endeavor where each member honors the other and a shared vision can be made a reality.

foundation manager may facilitate these conversations and help a family to articulate philanthropic goals based on shared values.

Then, the foundation manager may help the family tackle the

actualization of those values through the supporting foundationâ&#x20AC;&#x2122;s grantmaking.

Additionally, the foundation manager may be responsive to requests for research from the family

or trustees into a particular field of interest or about a particular grantee. Causes may be researched and proposals may be anonymously solicited with conditions. Best due diligence practices are used with all proposed grantees. The foundation manager prepares all of the minutes and agendas for meetings and keeps track of grant payments, reporting, and records.

A family establishing a supporting foundation may focus all of their attention on the change they want to make in the world without bearing the burden of day-to-day operational responsibilities.

A supporting foundation provides a vehicle for financial and tax planning as well as a meaningful vehicle for family members to actively engage with each other in a collaborative philanthropic enterprise.

Ann Garson is Assistant Managing Director of Funds and Foundations for the Jewish Federation of Cleveland. Contact her at 216-593-2814 or agarson@jcfcleve.org.

Foundation manager assistance

Each supporting foundation has a staff member who acts as the foundation manager and whose focus is on facilitating the familyâ&#x20AC;&#x2122;s philanthropy. The foundation manager adds value in several ways.

The foundation manager helps the family develop a mission statement for the supporting foundation, reflecting the familyâ&#x20AC;&#x2122;s values and history.

Families of wealth often have not been offered an emotional â&#x20AC;&#x153;safeâ&#x20AC;? space or meaningful process in which to tackle the complex family dynamics that emerge in the context of grantmaking. The

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Š 2014

E-12 NOVEMBER 10-16, 2014

ESTATE PLANNING

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TRUSTS

Weigh all your options when selecting a trustee

as your trustee sees fit is a lot of responsibility and can create challenges especially when there are aming a trustee to be responmultiple beneficiaries. Complex assible for protecting your legacy sets, like closely held business indemands thoughtful considerterests or real estate, may require ation and an open-minded examinaa trustee with specialized business tion of available options. Should and financial skills. you choose an individual trustee When considering an individual or corporate trustee as part of your to serve as trustee, such as a famwealth transfer strategy? What ily member or trusted advisor, ask questions should you ask when yourself essential questions: Does seeking the ideal candidate? Where he or she have the time, expertise, do you begin? experience and desire to take on this Before you start, recognize that responsibility? Will changes in the your situation is unique. What trustee’s life, such as retireproved a successful stratment or a move to another egy for your neighbor may location, affect his or her not be a suitable approach ability to continue serving based on your needs. Sein this capacity? Will he or lecting a trustee is an imshe be comfortable putting portant decision that could personal assets at risk for significantly impact your decisions made regarding family and estate plan, so the trust? do your research to make If you have reservations an informed choice.

REBER about naming an indiTake the time to grasp vidual as trustee, you may what you will be asking want to explore naming a corporate your trustee to do. Specific respontrustee. Corporate trustees have sibilities include taking custody of extensive experience handling and safeguarding assets, making ordinary and complex fiduciary appropriate investment decitasks. Knowing that many years of sions, understanding and reactexperience have been drawn on to ing to changes in applicable laws, develop consistent approaches to making discretionary distribution decisions, communicating with ben- decision-making may provide you a certain level of comfort. Families eficiaries, preparing trust accountcan also benefit from having the ings, and handling tax matters. same corporate trustee provide unThe complexity of your plan and interrupted service for successive assets also factor into what you are generations, eliminating mortality asking your trustee to do. Absolute issues that come with opting for an discretion to make distributions

BY AARON REBER

N

Selecting a trustee is an important decision that could significantly impact your family and estate plan. individual trustee.

Keep in mind that selecting a corporate trustee does not exclude your family from being involved: n You can appoint a family member as co-trustee to serve with a corporate trustee. n You can give your beneficiaries the power to remove and replace the corporate trustee. n You can name a family member as a trust advisor for the trust, to be consulted on investment decisions, distributions to beneficiaries, or both.

Whatever path is ultimately taken, many people find that consulting an experienced trust advisor puts the selection process on solid footing.

I invite you to visit with a FirstMerit PrivateBank trust advisor to learn how we can provide you with an objective perspective on your circumstances and help you select a trustee that will achieve the objectives of your legacy plan.

Aaron Reber is Head of Trust, Senior Vice President for FirstMerit PrivateBank. Contact him at aaron.reber@firstmerit.com.

LEADING THE WAY TO A

Minimizing taxes through discretionary trust distributions for 2014). As a practical matter, most trusts will have adjusted gross income comprised entirely discretionary distribution of net investment income, and of income (and, potentially, thus all undistributed income capital gains) from a non(including capital gains) in excess grantor irrevocable trust to one or of the threshold generally more of its beneficiaries would be subject to the can minimize taxes — spesurtax. cifically the 3.8% Medicare For individuals, the surtax on net investment applicable threshold income, and the tax on is based on modified long-term capital gains and adjusted gross income, qualified dividends. which includes an A non-grantor irrevoindividual’s salary, and cable trust reaches the is $250,000 for a marthreshold levels of income VERCIGLIO ried couple filing jointly, that result in the imposi$200,000 for a single filer, tion of the surtax and the or $125,000 for a married person highest tax rate for long-term filing separately. capital gains and qualified diviWith respect to the tax on longdends at much lower levels than term capital gains and qualified individuals. The trustee of such dividends, the maximum tax rate a trust should consider making of 20% applies to a trust’s longdiscretionary distributions to the term capital gains and qualified trust’s beneficiaries to carry out dividends when a trust’s taxable the trust income (and, potentially, income (which includes capital capital gains) to them (which such gains) exceeds $12,150 (for 2014). beneficiaries would report on their Whereas, for individuals, in 2014 personal income tax returns) if the maximum tax rate of 20% the higher individual thresholds applies when an individual has would reduce the overall surtax more than $406,750 of taxable and tax on long-term capital income or a married couple filing gains and qualified dividends. An jointly has more than $457,600 of overarching consideration for the taxable income. trustee is that any such distribuTrustees should, therefore, tion must be consistent with the consider the potential tax savings terms of the trust. associated with permissible disFor such a trust, the surtax is cretionary distributions of income imposed on the lesser of (i) undis(and, possibly, capital gains) to the tributed net investment income, trust’s beneficiaries. which includes capital gains, and (ii) the excess of adjusted gross income over the applicable thresh- Joseph Verciglio is a Partner with old (i.e., the amount at which BakerHostetler. Contact him at the highest trust/estate income 216-861-7713 or jverciglio@ bracket begins, which is $12,150 bakerlaw.com.

BY JOSEPH VERCIGLIO

A

HEALTHIER COMMUNITY ONE GIFT AT A TIME

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ESTATE PLANNING

NOVEMBER 10-16, 2014 E-13

TRUSTS

You’re the named trustee – now what?

New responsibility requires careful consideration of several factors

BY ANDY WHITEHAIR AND DON LAUBACHER “My brother passed away a few weeks ago. He had created three trusts —one for each of his young adult children — and named me as his successor trustee. I know a bit about investing and taxes, but what are my duties and responsibilities as trustee? Can I delegate some of my tasks?”

WHITEHAIR

LAUBACHER

liabilities, receipts and disbursements — including the source and amount of the trustee’s compensa-

tion, and a listing of trust assets and their respective market values.

Investment Duties: While Ohio law gives a trustee broad latitude concerning investments, it also requires prudent diversification in most cases. A trustee must exercise reasonable care, skill and caution when managing the trust assets, and must consider its purposes, terms and distribution requirements.

Delegation of Duties: Ohio law provides that a trustee may

delegate his duties, as long as he exercises reasonable care, skill and caution in: 1) selecting an agent to manage the trust; 2) establishing the scope and terms of the delegation; and 3) periodically reviewing the agent’s performance.

The above list merely scratches the surface of a trustee’s role.

Many feel they can, or should, take on the responsibilities by themselves. While it’s certainly possible in some situations,

adding an experienced advisor to your team can help manage the complexities that may arise along the way.

Andrew Whitehair, CPA/PFS, is Director, Tax at Cohen & Co. Contact him at 216-774-1121 or awhitehair@cohencpa.com. Don Laubacher, CFP, CPA, is Executive Vice President, Wealth Planning for Sequoia Financial Group.

Contact him at 330-225-2130 or dlaubacher@sequoia-financial.com.

I

t’s common for newly tapped trustees, many of whom have little experience in trust matters, to feel an overwhelming sense of anxiety regarding the uncertainty of their new role. And rightfully so, since there are potential risks and liabilities that must be handled appropriately to protect both themselves and the trust.

The good news for new trustees?

You’re not alone. Below are some initial considerations to help you get started.

Basic Understanding: Begin with the understanding that a trustee’s duties are to administer the trust in good faith, pursuant to the terms and purposes of the trust, and according to applicable state law.

Duty of Loyalty: The trustee must manage the trust solely in the interests of the beneficiaries and remain impartial between each. This can become complicated when there are multiple beneficiaries, mixed marriages and feuding family members.

Recordkeeping Duties: Trustees often fall short in this area. Proper recordkeeping means that: 1) trust assets are not commingled with the trustee’s assets; 2) beneficiary requests for information are promptly responded to; 3) trust tax returns are accurate and timely; and 4) reports to beneficiaries are provided at least annually and include a report of trust property,

Legacy William

*

Family is a top priority for us. Which is why we want to know that the decisions we make now will ensure a bright future for us, our children and our grandchildren. Our FirstMerit Client Advisor understands our aspirations and helped us develop a long-term investment plan. He also helps us manage our day-to-day banking needs so we can focus on what’s important. We have peace of mind knowing our legacy will live on.

Though related entities, Sequoia Financial Group, LLC and its affiliates, and Cohen & Company, Ltd. are separate companies with common, but not identical ownership. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Certain third–party money management offered through ValMark Advisers. Inc., an SEC Registered Investment Advisor. Securities offered through ValMark Securities, Inc. Member FINRA, SIPC. 3500 Embassy Parkway, Akron, OH 44333, 330-375-9480.

Certain insurance products offered though Sequoia Financial Insurance Agency, LLC. Sequoia Financial Group, LLC and related entities are separate entities from ValMark Securities, Inc. and ValMark Advisers, Inc. Cohen & Company, Ltd and related entities are separate entities from ValMark Securities, Inc. and ValMark Advisers, Inc.

TO L E A R N MOR E A B O U T F I R S T M E R I T P R I VA T E B A N K , C O N T A C T :

Tom Anderson, Senior Vice President, at 216-694-5678 or tom.anderson@firstmerit.com.

Follow the latest market trends @firstmerit_mkt *William reflects a composite of clients with whom we’ve worked; he does not represent any one person.

Non-deposit trust products are not insured by the FDIC; are not deposits or obligations of FirstMerit Bank, N.A, or any of its affiliates; are not guaranteed by FirstMerit Bank, N.A or any of its affiliates; and are subject to investment risk, including possible loss of principal invested.

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E-14 NOVEMBER 10-16, 2014

ESTATE PLANNING

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TRUSTS

Is AB Trust planning a notion of the past?

Trust, and incorporating the ability to achieve a second step-up in tax basis upon the death of the surviving rior to the American Tax Payer spouse. An OBIT is similar to an AB Relief Act of 2012 (ATRA), the Trust in that the surviving spouse’s use of a Marital Trust (Trust A) access to the assets is limited — howand a Credit Shelter Trust (Trust B), ever, these limitations exist for asset commonly referred to collectively as protection purposes instead of estate an “AB Trust” was considered stantax planning purposes. dard procedure in estate planning Based on current tax law, an for wealthy married couples.

OBIT functions as follows: ATRA established changes that Upon the death of the first spouse, brought a much-desired federal estate $5.34 million in assets (less tax permanence by setting the amount of any unified the unified credit amount at credit used during lifetime) $5 million indexed for inflais directed to the Credit tion ($5.34 million in 2014) Shelter Trust (Trust B) for and introduced the concept the benefit of the surviving of portability. Prior to the spouse. Similar to an AB concept of portability, if a Trust, this amount will pass spouse’s unified credit was tax-free pursuant to the use not used at death, the unified DECAPITE of the deceased spouse’s $5.34 credit was lost. After portamillion exemption. bility, the surviving spouse In an OBIT, Trust B is is able to use a deceased spouse’s uncarefully drafted to include a testaused exemption amount by electing mentary general power to appoint portability on the federal estate tax appreciated trust assets, thereby return. As a result of this decrease in allowing for the appointed assets estate tax exposure, the use of an AB to be includable in the surviving Trust has become much less useful in spouse’s estate for federal estate tax planning, as a bypass trust is not tax purposes. The general power necessary to preserve the deceased of appointment is granted only if it spouse’s exemption amount. While will not cause the appreciated the AB Trust remains functional in assets to incur estate tax liability. the estate planning arena, there are Upon the surviving spouse’s death, other forms of trust planning that can this arrangement provides for an be used to achieve complex income additional step-up on assets that have tax planning strategies. appreciated in value from the date of death of the first spouse to the date OBIT as an option of death of the surviving spouse, and prevents a step-down on assets that The Optimal Basis Increase Trust have decreased in value. Without the (OBIT) allows for income tax planning OBIT provisions, a traditional AB strategies that are notably absent in Trust would only guarantee a step-up the traditional AB Trust structure. in basis upon the first spouse’s death.

The OBIT takes a hybrid approach Another drafting approach used to by combining the benefits of an AB

BY DANA DECAPITE

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accomplish an OBIT involves the use of a Delaware Tax Trap technique, under which a limited power of appointment is granted to the surviving spouse. The surviving spouse can then appoint appreciated assets into an additional trust that allows for an exercisable general power of appointment. This technique creates the same tax advantage wherein appreciated assets are stepped up, depreciated assets are not stepped down and asset protection is achieved. However, there are a number of complex planning considerations in determining which technique is best, such as: gift tax considerations, access by the powerholder’s estate creditors, ease of disclaiming/decanting and the hassle of future documentation and upkeep upon the death of the first spouse.

Regardless of the drafting approach, it is clear that the planning techniques have taken a dramatic shift since the implementation of ATRA. While the necessity for estate planning has not diminished, tax incentives have shifted clients from traditional estate tax planning to a new focus on income tax planning. These techniques are particularly attractive to high-income taxpayers who wish to utilize strategies to minimize income tax liability while also preserving asset protection for beneficiaries. As a result, the traditional AB Trust has become less useful in certain contexts, and complex trusts similar to the OBIT are now being used to maximize income tax savings at death.

Dana DeCapite is an Associate in the firm’s Business Succession Planning/ Wealth Management Practice Group.

Contact her at 216-383-4443 or ddecapite@beneschlaw.com.

The non-tax benefits of trusts

The planner should follow up that concept with many associated questions. For example, do you have minor children or any chiln the past, the estate planning dren from a first marriage? Is there discussion between attorney a possibility that a child might get and client regarding the use divorced or declare bankruptcy? Is of trusts was often centered on getting a large lump sum of money the way a trust may be able to in the best interests of your child, help save on estate taxes. Howor might that deter them from findever, with the federal exemption ing their professional and economic for estate taxes currently being way on their own? What if your $5,340,000 per person and the surviving spouse remarries and, if repeal of the Ohio estate tax, planthey do, would you care if your asners are often asked by clients “Do sets are available for that I really need a trust?” The new spouse and family? answer generally is that Generally few, if any, while you may not need clients can answer no to a trust to save on estate all of the questions raised taxes, you might want a above. If he or she can, trust for a variety of other then trusts may not be reasons. for them. If any of the A funded trust provides answers are yes, then the privacy and avoids the options of how a trust can DELACOURT probate process. A funded assist them in their situaSUMMERS trust streamlines asset tion should be explored. management and distribuA trust still might not tions upon the incompebe the correct, or only, estate tency and/or death of the creator of planning vehicle for that client, the trust and names a succession but at least the option should be of trustees, presumably, ready to discussed and the planner and cliserve. Most notably, however, is ent can delve into the client’s own that a funded trust allows you to unique personal situation – instead maintain control of your assets while you are alive and dictate how of just discussing tax savings.

The non-tax benefits of trusts they are to be used and for whom have always been there, they just after your death. were not in the spotlight as they Many times, when a planner are now. asks a client what should happen with their assets upon their death, Linda DelaCourt Summers is the client replies that their assets counsel for Ulmer & Berne LLP. should be distributed to their Contact her at 216-583-7212 or spouse, if there is one; otherwise, ldelacourt@ulmer.com in equal shares to their children.

BY LINDA DELACOURT SUMMERS

I

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ESTATE PLANNING

TRUSTS

Using charitable trusts in your retirement planning

BY LINCOLN FINANCIAL ADVISORS/ SAGEMARK CONSULTING

J

im and Angela are land “rich” and cash “poor.” They live comfortably on their professional incomes, but as they near retirement age, they are looking for ways to supplement the income expected from their retirement plans.

The largest asset they own is a tract of land inherited from Angela’s parents, which has increased in value over the years, but provides no current income.

Angela could sell the land and invest the proceeds in incomeproducing investments. But, a substantial portion of the property’s appreciation would be lost to capital gains tax.

A better strategy might be establishing a charitable remainder trust (CRT), where Angela transfers the land to an irrevocable trust created to provide lifetime payments to her and Jim. At the death of the surviving spouse, the trust property transfers to the charitable organization of Angela’s choice.

With a CRT, the trustee can sell the property and reinvest the proceeds without paying any immediate tax on the gain and can claim a current income-tax charitable deduction

for the value of the trust property, which the charity will eventually receive (within tax law limits).

A CRT can be structured either as an annuity trust or a unitrust. If Angela chooses a charitable remainder annuity trust (CRAT), she and Jim receive annual payments of a set percentage of the trust’s initial fair market value (between 5% and 50%).

A charitable remainder unitrust (CRUT) would pay Jim and Angela an annual income based on the fair market value of the trust property, revalued each year. Again, the percentage must be between 5% and 50%. If the trust investments perform well, the income increases.

Some prefer CRUTs because they can provide a hedge against inflation and can accept additional gifts.

CRUTs also limit the annual payments to the trust’s income when it is less than the fixed percentage amount (a net-income CRUT or NICRUT) and includes a “makeup” provision (a net-income makeup CRUT or NIMCRUT) requiring the trustee to make higher payments in years the trust income exceeds the fixed percentage amount, to the extent that payments in prior years were less than the fixed percentage.

With a CRUT, Angela could transfer the land and Jim could

Marcia Wexberg Cheryl D’Amico 216.622.8858 216.622.8555 mwexberg@calfee.com cdamico@calfee.com

transfer a small amount of incomeproducing investments or cash to be invested. The trust could hold the land, paying them income from their investments until Jim and Angela are ready to retire. Then, the trustee could sell the appreciated land and invest in securities that would produce income for their retirement.

If the investment income exceeds the fixed percentage for their CRUT, the makeup provision would require the trustee to pay the excess to Jim and Angela to compensate for the earlier years of low income.

Complex legal requirements must be met to secure many of a CRTs benefits. So, you’ll want to consult with your advisor before deciding to use one and consider using an experienced professional trustee (bank or charity) to administer your trust.

For more information, contact 216-765-7400.

Securities offered through Lincoln Financial Advisors Corp., a broker/dealer (member SIPC). Investment advisory service through Lincoln Financial Advisors Corp. or Sagemark Consulting, a division of Lincoln Financial Advisors Corp., a registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. It is not our position to offer legal or tax advice. CRN1028833-100614

James A. Singler 513.693.4875 jsingler@calfee.com

NOVEMBER 10-16, 2014 E-15

ARTS AND COLLECTIBLES

A primer to the proper appraisal of art, collectibles

BY LORIE HART

D

o you or your clients own high value art or collectibles? If so, then you have probably been through the art appraisal process. However, if you or your clients are new to collecting or have just inherited a significant piece of artwork, this process can be mystifying. Following are the basics of appraising artwork and collectibles. n A personal property appraisal is a formal written document that provides a value for an item based on research, past sales and HART current market trends in the market where the item is typically sold. A formal appraisal is also written according to the Uniform Standards of Professional Appraisal Practice (USPAP). This assures that your appraisal is written properly and meets IRS guidelines. n The value used in an appraisal depends on the client’s needs. The most common value is for insurance coverage. High value art and collectibles, including wine collections, often require a special rider on a homeowner’s policy. An appraisal will be required to determine the replacement cost value of the items. This value is usually the highest value an item will have. Other reasons to have

Jean Hillman 216.622.8298 jhillman@calfee.com

Fran Mitchell Schaul 216.622.8351 fschaul@calfee.com

an appraisal are for resale, charitable donation and equitable distribution.

Values used could be resale, liquidation or fair market value. n The appraisal process itself is painless. The appraiser will typically inspect the items where they are located. The inspection includes taking photographs and measurements and assessing the condition. Any receipts, documentation and past appraisals will assist the appraiser in determining value. It is important to remember that appraisers are not authenticators and a specialist may need to be consulted to determine the authenticity of an item. n Finally, be aware that personal property appraisers are not licensed.

A qualified appraiser is a member in good standing of one of the three U.S. appraisal societies — the International Society of Appraisers, the Appraisers Association of America and the American Society of Appraisers.

Membership in these organizations requires formal testing and education along with USPAP compliance.

Lorie Hart, ISA AM, is co-owner of L&L Estate Liquidation & Appraisal Services, LLC in Solon. Contact her at 216-470-7002 or lorie@llestateliquidation.com.

Maureen Beaver 216.622.8322 mbeaver@calfee.com

The attorneys of Calfee’s Estate and Succession Planning practice can help you make some of the most important decisions of your life.

We provide experienced counsel for high net worth individuals and families:

Calfee, Halter & Griswold LLP

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The Calfee Building 1405 East Sixth Street, Cleveland, Ohio 44114 Calfee.com

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E-16 NOVEMBER 10-16, 2014

ESTATE PLANNING

ARTS AND COLLECTIBLES

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CHARITABLE GIVING

How estate planning can help you reach philanthropic goals

To Sell or Not to Sell?

Art and collectibles in the estate planning process houses are required to preserve valuations, which conform to Uniform Standards of Professional ersonal collections of fine art, Appraisal Practice (USPAP), on file for a minimum of seven years. antiques and decorative art Another added bonus is that when comprise a vitally important it comes to deciding whether or but often overlooked asset in a not to sell the advice of a client’s total asset makeup. trusted, licensed auctionAs the estate plan is eer is invaluable. formulated, an up-to-date The decision to sell is valuation of the collection predicated on a number of is critical in identifying different circumstances, the correct fair market but most usually the death values, followed by a plan of the collector. However, for the eventual dispersal any change of circumstancof the collection either by es — the decision to downbequest, donation or by HARRAGIN size, the desire to liquidate sale. Valuations need to funds, the need to resolve be updated at least every a dispute as to the disposition of five years to make sure they are as an item or the whole collection, or accurate as they can be. the desire to take advantage of an Using a reputable, licensed upturn in market conditions — can auction house for the initial valulead to a desire to sell. There are ation will ensure the accuracy of significant advantages to using a values assigned, together with a licensed and globally recognized full explanation of current compaauctioneer for the sale of a collecrables, and will allow values to be tion, or even a single item. Namely updated quickly with a minimum to achieve the collection’s maxiof expenditure. Licensed auction

BY SERENA HARRAGIN AND ALEX BUDDEN

P

mum value by reaching the most number of potential buyers globally, to have it insured throughout the selling process, and to receive the settlement within an agreed time period, all of which are assured when an auctioneer licensed by a state authority is engaged.

Just like the financial markets for equities and fixed income instruments, the selling of fine art and collectibles requires detailed planning informed by trusted, licensed professionals from the fine art and collectibles auction industry. Knowing the value of what you or your client has and understanding the market trends is critical in planning how, where and when to sell.

Serena Harragin is CEO of Gray’s Auctioneers & Appraisers, LLC. Contact her at 216-458-7695 or email serena@graysauctioneers. com. Alex Budden is Director of Trusts & Estates. Contact him at 216-458-7695 or appraisals @graysauctioneers.com.

Making a Difference in Students Lives Takes More Than Quality Education

BY STELLA DILIK

W

hat kind of donor are you?

One who wants to see your assets put to good use during the course of your lifetime? Or one who wants to make an impact with your estate?

Leaving a legacy defined by charitable giving is an important life goal. An estate that is not properly structured can be stressful and expensive for beneficiaries. For philanthropic individuals and their heirs, there are several unique ways to leave a charitable legacy as part of an estate plan.

Planned gifts provide creative and flexible strategies for donors to pursue both charitable and financial goals.

Estate planning is a tremendous benefit to benDILIK eficiaries as well as to charitable organizations. Oftentimes, fees and taxes can be avoided with some simple planning and many people don’t realize the tremendous income tax benefits available now against current income for their future commitment to charity.

By arranging a donation now, your charity of choice benefits from your kindness immediately and also after you have passed away. Planned gifts can include bequests, gifts of life insurance policies, donations of charitable gift annuities, charitable lead trusts, charitable remainder trusts and numerous other estate planning vehicles.

Some of these gifts provide lifetime income for you, a family member or friend; some allow you to enjoy the benefits of an immedi-

By arranging a donation now, your charity of choice benefits from your kindness immediately and also after you have passed away. ate charitable income tax deduction, eliminate long-term capital gains tax on appreciated securities, remove assets from your estate, pass assets to your grandchildren free of estate taxes or use real estate or other tangible assets to create a stream of income for you or your family.

Through creative planned giving you can secure your own financial future as well as the charity’s future of your choice. In fact planned gifts can provide the resources for extraordinary opportunities and transformational giving.

If you find yourself thinking about your future a lot more than you used to — along with the future of your children, your grandchildren and your favorite charity — then it’s time to assess your personal budget and your longterm legacy goals to determine an appropriate amount for giving and the estate plan that will fulfill your wishes.

Best of all, estate planning allows you to make a gift that is likely far larger than you could have anticipated with an outright cash donation.

Stella Dilik is Executive Director of Foundation and System Philanthropy for the MetroHealth System. Contact her at 216-778-5004 or sdilik@metrohealth.org.

Wealth Management and Estate Planning Group

Through a unique partnership with OhioGuidestone, Stepstone Academy students and families have immediate access to a full spectrum of treatment, skill building and prevention services that can meet the needs of the entire family. No wait list or being sent all around town – just high-quality education and support provided in one location, by caring and trustworthy professionals.

Want to learn more? Contact Dana Ness at 440.263.2874 or dana.ness@ohioguidestone.org to support us today! www.StepstoneAcademy.org

Through meaningful client relationship, we provide comprehensive and strategic estate planning, business and tax services uniquely tailored to individuals, businesses and fiduciaries. With decades of combined experience, we counsel clients in navigating current circumstances, accomplishing personal, business and charitable goals, optimizing wealth transfer against tax impact, and in anticipating and preparing for future circumstances.

For more information, please contact our Wealth Management and Estate Planning Group.

Thomas M. Turner, Esq. Julie A. Fischer, Esq.

Sandra J. Brantley, Esq. Julie E. Firestone, Esq.

Cleveland Office ǀ North Point Tower ǀ 1001 Lakeside Ave., Suite 1400 ǀ Cleveland, Ohio 44114 Chagrin Office ǀ 100 Park Place, Suite 150 ǀ 527 East Washington Street ǀ Chagrin Falls, Ohio 44022 p. 216.523.1500 f. 216.523.1705 w. mggmlpa.com

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ESTATE PLANNING

NOVEMBER 10-16, 2014 E-17

CHARITABLE GIVING

Charitable giving strategies for women Be prepared to be inundated with myriad requests

BY ANNE-MARIE E. CONNORS

A

ccording to the Women’s Philanthropy Institute at Indiana University, women in the Boomer generation and older are significantly more likely to give to charitable causes than their male counterparts.

Fund-raisers know this and are likely to reach out to women, especially women of means, as potential donors, volunteers and board members.

Women can avoid being overwhelmed by solicitations and invitations by developing a strategy for charitable giving.

Benjamin Rose Institute on Aging Board Member Emily Drake, Partner with Fairport Asset Management, offers several tips for her peers.

She suggests setting up criteria for charitable giving that parallels personal priorities and values. Some things to consider include the mission of the organization, the percentage of funding that goes directly to the targeted population, transparency in the use of the funds, and clearly stated short- and long-term organizational goals.

Women should set a strategy at the beginning of each year, she says. “How much will you give this year and to what types of organizations? You might think about giving more to fewer organizations, rather than many small gifts to different organizations.

This will make you feel much better about the impact you are having to affect change in your key areas of interest.”

With a strategy in place, donors should evaluate the list of donations they have made in the past and develop a “quit list.” “As you review your gifts, what made you feel good and what did not?”

Drake says. “Quit giving out of guilt and give because you care.”

Having a clear strategy for charitable giving also makes it easier to say no to well-meaning friends and colleagues who solicit donations for their causes.

“If an organization does not meet the profile you’ve developed, turn them down in a courteous way by telling them quite simply what your priorities are,” Drake suggests.

After deciding which organizations or causes make the cut, women should consider how they want to maximize their giving potential.

Using highly appreciated stock or investments can prove to be a successful strategy. A donor can achieve tax savings on these appreciated securities by not having to pay capital gains tax, while at the same time enabling a larger gift because it reflects the before-tax dollar amount.

Setting a target of investment returns to give away each year is another successful strategy.

Women should determine what percentage falls within their comfort level.

“For example, if your investment portfolio is achieving a return

CONNORS

Setting a target of investment returns to give away each year is another successful strategy.

Women should determine what percentage falls within their comfort level.

of $10,000 per year,” Drake says, “would you feel comfortable giving away 50% or $5,000 to charities in any given year? You will still have $5,000 to reinvest in your portfolio and increase its value. The key is deciding in advance the percentage

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with which you are comfortable.”

Anne-Marie E. Connors is Vice President of Development, Benjamin Rose Institute on Aging.

Contact her at 216-373-1608 or aconnors@benrose.org.

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E-18 NOVEMBER 10-16, 2014

ESTATE PLANNING

CHARITABLE GIVING

Evaluating charities using the Internet

Beyond the pledge drive … leaving a meaningful legacy

BY ALEX PETRUS

H

Considerations involved in making appropriate planned giving decision

generation of tax-wise, financially savvy donors whose giving practices are based on business acumen lanned giving is simply as well as philanthropic concern. finding the best method of making a gift. The distinction The financial needs, interest, and expectations of the 75-yearbetween planned gifts and old are not the same as other giving is that most those of the 45- or 50-yearcharitable giving is incomeold donors that are forming oriented while planned the new donor prospect giving is asset-oriented. pool. In a nutshell, donors Planned gifts can be are looking for ease, choice, considered once-in-aand expertise. lifetime gifts. Most often A frequent “go-to” list planned gifts are made by individuals who have given HERRINGTON includes the following ways to give a planned gift: regularly every year to n Prepare a will. Withan organization’s annual out a will, you lose control of the operating fund. The size of the anpossessions you worked a lifetime nual gift is less important than the to acquire. constancy of the commitment. n Leave a gift in your will for As organizations compete for the charitable organizations that available dollars, planning and made a difference in your life. broad fundraising efforts assume Consider simple language such as I greater importance. Today’s legacy give _____ [the sum, percentage, or donors are more sophisticated, they request more information, and description of property] to [charity name] in [city, state] to be used for they are younger. Their interests, its general tax-exempt purposes, but needs, and expectations reflect the without other restriction as to use. motivations and values of their n Consider using assets for your generations. Similarly, emerging charitable gift. These can include, demographic and economic circumbut aren’t limited to, stocks, bonds, stances are giving rise to a new

BY MARY GRACE HERRINGTON

P

certificate of deposits, real estate, vehicles, art and jewelry. Such gifts may even provide tax savings. n Name your favorite charitable organization as the beneficiary of your IRA or pension plan. n Buy a new life insurance policy naming your favorite charity as the beneficiary. n Name your favorite charity as the beneficiary of an existing life insurance policy. n Remember deceased loved ones with memorial gifts to charities. n Encourage family members and friends to leave gifts to charities in their wills.

As with any significant financial decision, it is recommended that donors seek counsel from their trusted advisors on timing, amounts, and type of asset to donate to maximize their charitable giving deductions and philanthropic impact.

Mary Grace Herrington is chief development officer at WVIZ/PBS, 90.3 WCPN, and WCLV 104.9 ideastream. Contact her at 216916-6270 or marygrace.herrington @ideastream.org.

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ow can you make sure that the nonprofit charity you want to support will use your gift wisely and is a well-run organization?

Here are a few things to consider, as well as Internet resources that may be helpful: What percentage of your gift will go directly to the programs and services of the non-profit organizaPETRUS tion? You should expect at least 75% of their budget to go toward programs and services. The nonprofit charity should be upfront and transparent in providing this percentage for you.

Does the nonprofit charity have an active and engaged board of directors overseeing its management?

Does the nonprofit charity have a current independent audit with a clean opinion and no qualifications? An independent audit will confirm that controls and safeguards are in place in the handling of money, to follow the donor’s designation of gifts, and to ensure the financial statements accurately represent the operation of the nonprofit organization.

The Better Business Bureau has developed a rigorous voluntary program in which nonprofit organizations can be rated on 20 best practice standards. If a nonprofit organization meets these standards, they are listed as an accredited BBB charity and are able to use the BBB Accredited Charity Seal on its materials to provide confidence to donors that they are a high-performing nonprofit organization.

The following websites can be helpful in evaluating whether a nonprofit charity is worthy of your charitable contribution:

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BBB Wise Giving Alliance www.give.org Collects and distributes information on nonprofit organizations that solicit nationally or have national or international program services.

BBB Wise Giving Northeast Ohio www.bbb.org/ cleveland Collects and distributes information on Northeast Ohio nonprofit organizations that solicit charitable support. If the nonprofit is accredited by the BBB it receives the BBB Accredited Charity Seal.

Ohio Attorney General www.ohioattorneygeneral. gov All nonprofit organizations soliciting charitable support in Ohio are required to register and be in good standing with the Ohio Attorney General’s Office.

Guidestar www.guidestar.org This site allows you to access a database evaluating more than 620,000 nonprofit organizations in the United States.

Charity Navigator www.charitynavigator.org This site provides ratings of more than 5,000 charities based on their financial performance. Charity summaries provide such information as overall rating, organizational efficiency, revenue, expenses, and mission statement.

Alex Petrus, CFRE is Vice President of Advancement with OhioGuidestone, a BBB Accredited charity. He has been with the charity for 20 of his 30 years of fundraising in Northeast Ohio.

Contact him at 440-260-8341 or Alex.Petrus@ohioguidestone.org.

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ESTATE PLANNING

NOVEMBER 10-16, 2014 E-19

CHARITABLE GIVING

Tips to selecting right donor advised fund

2

BY LAURA MALONE

O

Contributions

What types of assets are eligible for contribution (e.g. cash, marketable securities, closely held securities, real estate, and life insurance)? How quickly do these assets have to be sold or rebalanced?

ver the last decade, the growth of donor advised funds (DAFs) has been increasing at a rapid rate. Their simplicity to set up, flexibility and tax-saving capabilities have proven to be an excellent tool in estate planning and business exit strategies.

However, choosing the best DAF for a donor’s circumstances can be as varied as the different charities that they choose to support.

3

Investments

What investment choices are available? Are contributions pooled (i.e. dollars donated are pooled with other donors for investment MALONE The following is a list of purposes) or can the dollars questions that a potential be separately managed in donor and their advisor their own investment account by the need to consider when determining donor’s existing financial advisor? which DAF may be best for them and their interests:

1

Affiliations

Is the organization that sponsors a DAF affiliated with another entity (for-profit or non-profit)? How might these affiliations help or hinder the donor’s use of a fund now or in the future?

4

Grant distributions

Are there restrictions on grant distributions (e.g. geographic, religious, etc.)?

Is there a minimum annual distribution requirement that the donor must give, or a maximum annual limit that restricts how much can be given away?

5

Succession

How flexible are the provisions for succession upon the donor’s death? Is involvement limited to the donor and their spouse or can unlimited successor advisors be named?

6 7

Online access

Does the program offer the ease of secure online access to your account?

Costs

Are there set-up or termination fees? What is the annual administrative fee? Are there minimum account level charges? Does the organization require a certain portion of the fund to be set aside for its own purposes? Most importantly, will the organization allow you to transfer the fund in the future to another DAF administrator, or are

your funds held permanently by the initial administrator?

Thinking through these seven tips before opening a DAF will give the insight needed to make charitable giving as tax-smart, flexible,

and enjoyable as possible.

Laura J. Malone, CAP®, CEPA®, is director of gift planning at American Endowment Foundation.

Contact her at 877-599-8903 or email lauramalone@aefonline.org.

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from

THE ESTATE PLANNING COUNCIL OF CLEVELAND

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ESTATE PLANNING

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CHARITABLE GIVING

Designating contributions for a personal cause

in carrying out its mission.

I encourage everyone, regardless f you have a passion for a cause, of his or her age or family situation, to have an estate plan (which you are more likely to support could be just a will but may also that cause financially. You may include one or more trusts if approattend fundraising events, drop a priate), and to consider a philandonation in the mail, or purchase thropic gift as part of that will or goods that contribute a percentage trust. Inclusion of a philanthropic of the purchase price back to the gift in your will or trust is organization. And if you easy to do and offers these have a personal connection main benefits: to a cause, you are much Simplicity: Just a more likely to want to consentence in your will is all tinue to support that cause that is needed. For examfar into the future. ple: “I give and bequeath For example, as an atthe (sum or description) of torney, I am keenly aware my estate to (charity name, of the importance of comlocation) a not-for-profit munication. Having dealt GOLER corporation, for its general with stuttering since third charitable purposes.” grade, I found my way Flexibility: Because the gift to Cleveland Hearing & Speech is not received until the end of Center (CHSC) soon after my son your lifetime, you can change it as was born. many times as you wish. You can I worked for many months with increase or decrease the gift a speech therapist and learned according to changes in your techniques I still use today to situation. manage my stutter. In the process, Versatility: You can structure I gained a passion for a very speyour will to leave a certain amount cial organization — CHSC. or a percentage of your estate.

I have turned that passion into Tax relief: If your estate is service and support so that others subject to estate taxes, your gift could benefit from various services may be entitled to an estate tax offered by the same wonderful charitable deduction for the gift’s agency that helped me. Over time full value.

I realized I wanted to make certain that support would also continue Michael D. Goler is a corporate, long after I’m gone. Therefore, I real estate, finance and probate made a personal commitment in attorney at Miller Goler Faeges the form of a planned gift. The gift Lapine. Contact him at 216-696is unrestricted and is to be used to 3666 or goler@mgfl-law.com. support and strengthen the agency

BY MICHAEL D. GOLER

I

Turning passion into impact giving. The best choice will depend on the client’s objectives, resources, ike entrepreneurs who trans- tax planning needs and desire for family involvement. late a passion into a One couple spoke to successful business, us about wanting to pass great philanthropists take their values from generainspiration from their life tion to generation, but was experiences and apply it uncertain what form their to their giving. Today’s efforts should take. After philanthropists want to considering their financial channel their desire “to do and nonfinancial objecsomething” into purposetives, we recommended a OLEJKO ful and strategic action. private foundation. Once More than writing a check, their attorney established donors frequently want to the legal structure, we facilitated invest in the people and programs educational sessions with the that can make a measurable differfamily to help them develop their ence. We believe effective philanmission and establish grant guidethropy begins with a sound plan lines and procedures. Importantly, that clearly defines objectives and areas of focus. From there, the plan we remain available to guide the family as new issues arise and builds with relevant procedures needs evolve. When donors feel and guidelines that are structured secure that all the right pieces are and sustainable, yet flexible for in place, they can focus on fulfilling changing times. their philanthropic intentions.

One of the most challenging Like an investment portfolio, steps is selecting an appropriphilanthropic plans can benefit ate giving vehicle for the desired from diverse strategies. In addition outcome. Some of the many posto financial support, many philansibilities we recommend to clients thropists wish to donate their time include private foundations, and professional resources. Others charitable trusts, giving circles, may leverage connections among donor-advised funds and personal

BY LINDA M. OLEJKO

L

individuals and organizations with complementary missions.

Clients can further diversify their giving by incorporating philanthropic goals into their portfolios. A growing trend is to employ impact investing, an investment style that blends financial performance with a measurable social benefit. These vehicles allow investors to align market participation with their philanthropic mission and objectives, often without sacrificing returns.

Those with the resources and inclinations to pursue a hands-on approach to philanthropy undertake a deeply personal journey. Putting philanthropic intentions into effective practice is best navigated with the help of an experienced advisor, implemented through a team of specialists and supported by family members. By turning vision into action, donors can make a significant impact and leave the world a better place.

Linda M. Olejko, CFP® is a Managing Director of Glenmede.

Please contact her at 216-5147876 or Linda.Olejko@glenmede. com.

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ESTATE PLANNING

NOVEMBER 10-16, 2014 E-21

CHARITABLE GIVING

The power and simplicity of endowed giving

BY BRIAN FREDERICK

I

magine making one gift to your favorite charity or cause that keeps on giving forever. Imagine having an everlasting impact on your community. Now, imagine that you can make a gift during your lifetime that would allow you and your family to bear witness to the change in the community you helped make.

This is the power of endowed giving, and it’s within reach for everyone.

To get started, donors FREDERICK simply make a permanent, tax-deductible donation to a community foundation or charity. The amount varies, but it can be as little as $10,000 deposited over a five-year period, as is the case at the Community Foundation of Lorain County. The principal is invested wisely and the income is used to provide ongoing, sustainable funding for causes or organizations. Because only a percentage of the investment earnings are

distributed as grants, an endowment allows you to give more over time, far more than a one-time gift would be worth.

An endowment can be personalized to fulfill any charitable goal or passion. An endowment can also be created in your name or your family’s name, in memory or honor of a loved one, or to benefit a specific charitable organization.

The endowment can be established now or at the time of passing. All funds held at a community foundation are public funds; anyone can donate to any fund at any time. By starting your fund before your passing you can encourage friends and family to support its growth. With a donor advised fund, donors are involved in recommending what grants their fund makes.

An endowment is unlike any other gift because it has permanence. Your gift will continue to grow, make grants annually in your name, and have a lasting impact on your community forever.

Brian Frederick is President and CEO of the Community Foundation of Lorain County. Contact him at 440-984-7390 or bfrederick@ peoplewhocare.org.

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E-22 NOVEMBER 10-16, 2014

ESTATE PLANNING

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CHARITABLE GIVING

Why do people donate to charity?

Individuals motivated by variety of reasons, incentives

BY JOSEPH P. KOVALCHECK JR. There are numerous reasons why people donate to charitable organizations:

Religion

Many religions advocate that people should give to charity as a spiritual requirement. Major religions emphasize that giving to charity is a main virtue. In many religious worship services, some type of offering is collected for the church or for the KOVALCHECK poor. Religions also promote tithing, which comes from an ancient word for tenth (as in 10%).

Feeling good

Research has shown that people donate because it provides them with a good feeling. Scientific research results showed that the pleasure centers of the brain were activated by the process of giving.

Charitable giving greatly enhances personal happiness and improves the world.

Image Another research study determined one of the main reasons people give to charity is to enhance

their image; people want to be viewed as charitable.

Research discovered that gifts given anonymously tended to be smaller, but gifts that were publicized were much bigger.

Thus, a main incentive for giving is positive personal publicity.

Personal experience

Donors often give to charity when there is a personal experience connected to medical or health issues. For example, people who have cancer or know someone who has cancer often participate in Cancer Society fundraising activities. Through donating, people are able to contribute to a cause that has affected them personally.

Good example for children

Parents may choose to donate to charities to teach their children the concept of giving. By involving their children in the process of giving, children experience the joys of philanthropy at a young age. Parents who pass down these positive values to their children are encouraging them to continue demonstrating this generosity through their lives.

Tax Deductions

Individuals who donate to charity may deduct contributions on their federal tax return (with certain limitations). In addition, these donations reduce their taxable estate, thus reducing their federal estate tax. Also, decedents who donate to charity at death reduce their taxable estate.

Choosing the charity

Finally, choosing the proper charity is most important. Experts have advised not to impulsively respond to “crisis” or “emergency” appeals. Instead, if you are sympathetic with a cause, research the charity and discover how your donation impacts the social problem the charity seeks to solve.

Remember that legitimate charities provide transparency in their financial undertaking and accountability online.

Joseph P. Kovalcheck Jr., CPA, CFP, is Chief Operating Officer & Account Manager for M+N Advisory Services (a subsidiary of Maloney + Novotny LLC).

Contact him at 216-363-6489 or j.kovalcheck@advsrv.com.

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Building our bank one quality relationship at a time

Before giving, investigate the organization’s donor stewardship effort non-ask events are great communication avenues.

Donors tend to stay connected t its core, donor stewardship with organizations that engage is about progressively buildtheir minds, hearts and bodies in ing deeper relationships addition to their walwith those who provide lets. Does the organization financial contributions to encourage its donors to charitable organizations. volunteer, serve on comThat means having a mittees or even join the plan for thanking, comboard? municating and interacting Do they ask what you with donors in ways that think? Solid organizations solidify their support over engage their donors and time. A major survey shed ask for suggestions on how light on the donor retention MCCANN it could be doing better. problem for nonprofits: It There are no “one-sized showed that for every 100 donors fits all” solutions for effective donor that were acquired, about 107 were stewardship. I’ve listed some of the lost. basics that you certainly need to For far too many busy nonprofkeep in mind, but beyond that it’s its, donor stewardship is an afterreally up to you. thought. As you build your estate And that’s a good thing, because plan, look carefully at the organizayou know best which organizations you are considering supporttions will not only take care of your ing to ensure they are working to contribution but also care for its build a relationship beyond simply lasting relationship with you. cashing your checks.

Communication is the essential ingredient of donor stewardship.

Nancy McCann is Chief DevelopHow well does the organizament Officer for the Western Retion communicate? Newsletters, serve Land Conservancy. Contact emails, videos, podcasts, websites, her at 440-528-4153 or nmccann Facebook, Twitter, Pinterest and @wrlandconservancy.org.

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A

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ESTATE PLANNING

NOVEMBER 10-16, 2014 E-23

CHARITABLE GIVING

Flexible deferred charitable gift annuities: you decide when the time is right

BY DONESHA PEAK

D

uring National Estate Planning Awareness week in October, Americans were encouraged to update their estate plans. As a result, many individuals are beginning to think more broadly about including their favorite charities as part of their long-term financial planning.

Establishing a flexible deferred charitable gift annuity is a good option for those who want to PEAK make a charitable impact since it allows one to make a contribution to charity, receive the highest income in return when needed, and obtain a larger charitable deduction to save taxes now.

A traditional charitable gift annuity is an agreement in which a charity, in exchange for an irrevocable gift of an asset, promises to pay a fixed income to one or two donors for their lifetime. The payout rate of the fixed annuity income is determined by the age of the donor(s) at the time the gift is made, and most charities follow the rates suggested by the American Council on Gift Annuities.

The older the donor at the time of the gift, the higher the payout rate will be. With a traditional gift annuity, payments begin as soon as the agreement is established.

A flexible deferred charitable gift annuity builds upon the benefits of a traditional annuity. An annuity of this type rewards the donor for waiting to begin payments by offering a larger charitable deduction and annuity payments when income is deferred for a period of years.

A flexible deferred gift annuity is especially beneficial when a donor would like to secure a larger amount of income in the future but isn’t sure of the exact date. Payments can be “turned on” during a range of elective start dates chosen by the donor,

which are included in the annuity agreement. The longer the payments are deferred, the higher the annuity payment, charitable deduction, and charitable contribution.

For example, Tom wants to make a gift of $250,000 to his favorite charity to establish a flexible deferred gift annuity. He is currently 65 years old and runs his family business. He is considering retirement in the next five years but is unsure of the exact date. If Tom establishes a flexible deferred charitable gift annuity, with payments

set to begin during a range of dates between five and seven years from now, he will receive a charitable deduction based on the earliest start date of year five. By making a gift today and allowing additional time for growth, Tom can secure a larger charitable income tax deduction for use now when his salary may be at its highest and later decide when his annuity payments will begin.

Taxation of annuity income depends on the type of asset contributed. When cash is used to fund an annuity, a portion of the payment is return of principal, and the rest is taxed as ordinary income. When an appreciated asset like stock is used, payments will consist of three parts: ordinary income, capital gain income as a result of appreciation, and return of principal. Furthermore, removing the funding asset from one’s estate may help to reduce estate taxes and probate costs in the future.

In addition to planning for retirement, the annuity income may also be a good fall-back option should market investments not perform as anticipated, or if the donor has unexpected costs or expenses. No matter what the circumstance, establishing a flexible deferred gift annuity is the right choice as it affords the comfort of income when the time is right while maximizing charitable impact.

Donesha Peak, JD, MBA, is Assistant Director of Gift Planning at Cleveland Clinic. Contact her at 216-442-5358 or peakd@ccf.org.

P R E S E R V E P R O T E C T R E S O L V E Angela G. Carlin

Karen A. Davey

Samuel J. Lauricia III

Jerrold L. Goldstein

Shawn W. Maestle

Gary W. Johnson

Teresa G. Santin

Eugene A. Kratus

Joseph B. Swartz

ADVISORS TO INDIVIDUALS AND BUSINESSES ON MATTERS INVOLVING: Estate and Trust Administration Estate Planning Succession Planning

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ESTATE PLANNING

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INSURANCE

The disappearing agent and the reappearing premium

BY RICHARD TANNER

L

ife insurance is a complex financial asset that many affluent families own as part of a comprehensive family wealth plan. Whether held personally, in trust or by their companies, life insurance is often a misunderstood asset. Advisors who serve the very affluent are often concerned about the disappearing agent and the reappearing premium. Over the past 10 years there have been three important trends that have contributed to this problem: n Seasoned agents are retiring and dying n Young talented professionals are moving toward wealth management and investment banking and away from the insurance industry n Historically low interest rates have negatively impacted the returns earned by life insurance companies, leading to a vast pool of underperforming policies.

As seasoned agents retire, die or leave the business, most do not have a succession plan that ensures quality service after the policy has been sold i.e. , the disappearing agent. If the agent is gone, the insurance company places the policies into the “orphan” category

TOGETHER,

and assigns them to a new agent with a sales quota to meet. After three years the chance of this agent remaining in the business is about 11%. In other words, it’s likely that the only time someone calls is when a rookie is trying to sell a new policy. Since world class service requires specialized experience and staff support, we rarely see it done consistently well.

When evaluating insurance needs for the very affluent, it’s important to seek advisors with the ability to analyze complex insurance strategies through a consultative process. Find an agent who specializes in large, messy insurance placements with an independent business model and unbiased product capacity. Look for a proven history of great service and ask for a sample of their annual review process and references from other advisors. We find most clients appreciate including their trusted advisors in an annual insurance review process where new planning opportunities are often uncovered.

Richard Tanner is President of Insurance Design Group, a division of Ownership Advisors Inc. Contact him at 216-328-5534.

Through the generosity of our donors, the Jewish Federation of Cleveland is one of Ohio’s largest grantmaking organizations. Last year, through its funds, foundations, and annual Campaign, the Federation granted close to $150 million to social service, educational, and humanitarian organizations. Grants support Cleveland’s Jewish and general communities, as well as those in more than 70 countries around the world.

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ESTATE PLANNING

Families must determine what changes they can make to satisfy their overall goals and objectives.

INSURANCE

taxes, whereas, if you donate the whole life policy you may deduct the premium and the cash value of the policy. By choosing this option, you purchase a policy with the intent of naming the charity as the owner and beneficiary after the purchase, making a larger impact for the organization than imagined.

For example, a healthy 50-yearold purchases a policy in her name then subsequently names the charity as the owner at the time of transfer. The donor commits to giving $5,000 annually toward the premium payments for 10 years, allowing the total $50,000 gift to grow in excess of $300,000 toward the benefit of the organization.

BY DIANE TOMER Once the charity is named the proprietor of the policy, the donor agrees ou are passionate about to make the annual donation to the helping an ororganization to cover the ganization grow premium. The organization and increase its uses this to pay the premium programs, services, and so that it is not a burden on care. You donate annuthe operational budget and ally with gifts of various the donor is allowed to use sizes and have a desire to the annual tax-deductible make a greater impact to donation to achieve their the organization’s mission charitable desires. than what your current TOMER Life insurance can be a capacity allows. When self-completing gift. For a considering multiple donor committed to making annual gifting vehicles and your personal gifts, a portion of the annual gift can portfolio, you may want to consider be directed to this giving vehicle, your own insurability. guaranteeing the continuation of As a donor, you may use an existimpact in perpetuity. ing policy that is no longer needed, name the charity as the beneficiary Diane Tomer is Director of Develand owner, and deduct the premium opment for Recovery Resources. for tax purposes. If you should deContact her at 216-431-4131, cide to donate a term life policy you ext. 2501 or dtomer@recres.org. may deduct the premium from your

Your greatest asset: you

Y

NOVEMBER 10-16, 2014 E-25

Estate tax reform may force life insurance reassessment

BY LARRY ROTHSTEIN

P

rior to recent estate tax reform measures, many families secured life insurance to provide liquidity for estate taxes.

With the estate exemption now at $5,340,000 per person ($10,680,000 per married couple), many estates fall below this threshold. Families must consider whether they wish to continue making annual premium gifts, or determine what changes they can make to satisfy their overall goals and objectives.

Annual Premium Gifting. If a policy is owned by an irrevocable life insurance trust (ILIT), the grantor does not have access to policy cash values. Policy surrender or a life settlement will only serve to leave cash values in the ILIT with the loss of the future death benefit.

Suspending annual gifts may likely be problematic since many life insurance policies are “underfunded” due to the long-term decline in general interest rates. There may be opportunities to reduce the face

amount, but this may be restricted depending on the type of policy and the insurance carrier.

agreement. There also may be other sources of premium dollars available that had not been previously considered. For example, Restructuring the Policy. taking annual distributions Although estate tax liquidfrom an IRA may produce ity may no longer be a prifunding for the insurance mary goal, the policy may that will ultimately pay the ROTHSTEIN be restructured to provide IRD tax due. Secondly, a a different type of benefit Split Dollar arrangement configuration. Many newer life between the insured’s business insurance policies offer Long-Term- and an ILIT may provide premium Care (LTC) riders, which can profunding to maintain the coverage vide coverage for LTC expenses as with little out-of-pocket funding from well as provide life insurance. Most the insured directly. older policies do not contain these The key is to redefine the family’s provisions. The cash values of an goals and objectives to see how the older policy may be transferred to life insurance now fits into their a new policy with LTC benefits on overall plan. An experienced life a tax-free basis (Section 1035) as insurance professional can provide long as the insured can qualify in the technical support and guidance underwriting and an ILIT can do necessary to review various options this by loaning the LTC benefit and make an informed decision. payments to the insured.

New Uses and Premium Sources.

The policy may be used for other purposes such as funding for estate equalization, IRD taxes, or a buy/sell

Together we can make a difference.

Today we honor our prestigious Allied Partners in Philanthropy society.

Your support helps maintain Cleveland Clinic as a world leader in healthcare. wittenn@ccf.org | 216.444.1275

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Larry Rothstein, CLU, AEP, is a Senior Advisor with Cornerstone Consulting Group, LLC. Contact him at 330-665-2376 or lrothstein @cornerstoneconsultinggroup.net.

E-26 NOVEMBER 10-16, 2014

ESTATE PLANNING

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INSURANCE

Plan for final years now with long-term care insurance and a discount is given. Inflation riders are available at a high cost.

Universal Life Insurance Policy very American has heard with a Long-Term Nursing Care about The Affordable Care Rider. This provides a pool of Act. But did you know that money for long-term care your highest cost expense in lieu of a death benefit if might be in the final years you meet two of six activiof your life? Today, the ties of daily living. high cost of long-term Single Premium Whole nursing care ranges from Life. A new option where $200 to $350 per day dea pool of dollars already pending on where you live. invested at low rates can be Based on 3% to 5% inflatransferred to a single-premition, the expected costs in KLUCHIN um whole life policy, which 20 years could be as high allows access to the death as $500 to $1,000 per day. benefit for qualifying longThe average stay at a nursterm care expenses. A well-known ing home is 2.5 years. insurance company gives a guarantee Long-Term Care can be defined of principal and a death benefit, which simply as care provided by another if never needed allows for a long-term party for the benefit of someone who conservative investment pool. is unable to care for themselves due to aging, illness or disability. There The challenge becomes protectare several ways to pay for the high ing your assets while maintaining cost of Long-Term Care: your current lifestyle. This is an Government Funded/Medicaid. opportune time to consider the value You must spend down virtually all of long-term care insurance so you of your assets prior to becoming can feel safe and secure knowing you eligible and you may not be able have some control over the cost of to receive services at the facility of long-term care expenses. your choice.

Traditional Long-Term Care InRick Kluchin is president of Encore surance. The annual premium for Wealth Planning. Contact him at 216a 55-year-old ranges from $3,000 to 313-9322 or rkluchin@encorewealth$5,000 depending on the daily benplanning.com. For more information efit and length of stay. Most plans visit www.partnershipforlongtermcare. offer a pool of benefits for a couple com/ohio-partnership/index.html

BY RICK KLUCHIN

E

Will you outlive your life insurance policy?

The effects of low interest rates and increased life expectancies

BY JEFFREY M. WASSERMAN

I

f you look over the past 20 years of declining interest rates (more than 4% decrease at this point in history according to the U.S. Department of the Treasury), combined with the increased life expectancies of the U.S. population, you’ll see that you may outlive your insurance policy. A “permanent life” policy may not even last until death without your premiums significantly increasing.

In response to increased longevity, the National Association of Insurance Commissioners adopted

Private Wealth Management

new mortality tables in In other words, if you pur2001 that had not been chase a policy to age 100, it updated since 1980. Many remains guaranteed to age insurance carriers adopted 100 regardless of interest the new table in 2003, rate fluctuation. which, for the most part If you own permanent resulted in lower insurance insurance of any kind, you costs. should have it reviewed by What does this mean WASSERMAN an insurance professional to you, the policyholder? on a regular basis. Like Simply put, if you purany asset, life insurance chased life insurance before 2003, needs to be managed and moniyou are likely paying too much. tored to ensure that the policy is Couple that with the low interest performing as expected and that it rate environment and you may is competitive relative to current be overpaying for a policy that is product. underperforming.

You owe it to yourself and to One possible solution is Guaryour family to take a fresh look at anteed Universal Life Insurance. your life insurance.

Developed in the early 2000s, these products have an interest rate Jeffrey M. Wasserman is component that could potentially Managing Director & Executive increase in favor of the policyVice President of Oswald Specialty holder but offer protection against Life. Contact him at 216-367-5990 a declining interest rate and reducor jwasserman@oswaldcompanies. tion in the duration of the policy. com.

Change doesn’t always come with a warning.

Having a solid plan in place can help preserve what you have worked so hard for.

Christopher P. Bray, JD, CPA

Darian H. Chen, CFA

Christopher J. Squittieri, CFA, CFP

Michael A. Harris, CFA

Kimberly S. Wilmore

Marcie A. Rebardo

Naples, Florida (239) 451-6008

Let us help you prepare for whatever life has in store - both the expected and unexpected.

TAX | ESTATE | RETIREMENT | INSURANCE FOR INFORMATION ON OUR AWARD WINNING FIRM CONTACT:

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Mary Eileen Vitale, CPA, CFP®, AEP® Principal, Tax Services Group vitale@hwco.com | 216.378.7204

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Crain’s Cleveland Business Custom Publishing

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Advertisement

ESTATE PLANNING

INSURANCE

Life settlements provide an ideal option for insurance management

BY JOSEPH POTELICKI

A

life settlement is a financial transaction in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party. The platform for the life settlement industry was created in 1911 by virtue of Grigsby v. Russell. In this seminal case, the U.S. Supreme Court declared insurance policies to be personal property and freely assignable, thereby granting a policyholder the right to transfer ownership to others.

POTELICKI

would result by doing a life settlement transaction.

A third option would be to engage in a life settlement transaction and receive a payout greater than surrendering the policy back to the insurance company.

Life settlements offer a rational and profitable exit strategy that addresses the financial objectives of the policyholder. The sale of a life insurance policy is a taxable event. You should consult your tax advisor based on your own particular circumstances.

Receiving an offer doesn’t obligate you to sell your policy. You can

Life settlements are a wonderful solution to consider for funding long-term care because the policy can be settled in approximately six to eight weeks.

The policy is sold for more than the cash value offered by the life insurance company but for less than the death benefit. The purchaser becomes the new beneficiary of the policy and is responsible for all of the subsequent premium payments. You should not have to pay a fee for a life settlement evaluation or transaction.

The purchasers can be large banks, hedge funds and pension funds. Each provides a higher degree of consumer protection with regard to privacy and confidentiality.

There are many scenarios that might encourage a policy owner to sell a life insurance policy. One such scenario may be a key man policy that is no longer relevant after the sale or closure of a business or if the insured is retiring. Taking the policy back to the insurance company, will result in two choices: Let the policy lapse and the policy owner receives no money Surrender the policy and receive less money for the policy than

always decide to keep the policy.

Furthermore, Ohio has a statutory 15-day rescission period after receiving payment for your policy.

Life settlements are a wonderful solution to consider for funding longterm care because the policy can be settled in approximately six to eight weeks. There are no long-term care medical requirements to qualify for, no costs involved in applying for a life settlement, no requirements to be terminally ill, and there are no more premium payments. Once the money is received from the life settlement, that money can then be directed to pay for senior housing and long-term care.

Always check with the Ohio Department of Insurance to verify Ohio licensure status of life settlement brokers and providers before engaging their services.

Joseph Potelicki is a Viatical/Life Settlement Broker for Living Covenant, LLC. Contact him at 330-3423237 or joe@livingcovenantllc.com.

NOVEMBER 10-16, 2014 E-27

BUSINESS PLANNING

Here are important steps to follow n Identify the managerial positions for which you will potentially need a successor

n Identify the talents and competencies of your employees n Involve senior leaders in the process n Analyze external sources for potential talent for continuity and efficient succession planning

Focus on details key in succession planning well-communicated succession planning process signifies that hange is inevitable. Even the current leadership is interested in the long-term development of the most seasoned and experibusiness. Investing the time and enced business leaders must effort in the process enables the face the fact that at some point, smoothest possible transition, givthe torch must be passed to the ing employees peace of mind, and next generation. offers workplace stability.

Business succession is a multiA well conceived plan will also faceted and complex process that inspire confidence in cusmust simultaneously focus tomers, clients, suppliers, on ownership succession, vendors and the commumanagement succession, nity-at- large — knowing strategic planning for that the company will the business, estate and continue functioning even financial planning for the after the departure of the retiring owner, as well as current leader or leaderthe attendant tax conseship team. quences facing both the Whether your succession business and the owner.

MENTREK plan involves a transition Changes in managerial to family members, key teams can often result in employees, or a sale to an unrelatmajor shocks to employees, as ed third party, developing superior well as the stakeholders in the employees for managerial and supply and distribution chain of other key positions is an essential the goods or services a business element of succession planning. offers. Embracing a formal and

BY JOSEPH M. MENTREK

C

n Commit to internal talent development through further qualification and mentoring n Choose relevant measuring metrics and turn performance evaluation into a long-term process n Establish strategies to recruit and retain talented employees n Implement strategies to maintain commitment and senior level loyalty

Most successful business owners are familiar with the grim statistics surrounding the success (or more commonly, the lack thereof) of the transition of a business from one generation of owners and managers to the next. Identifying and cultivating the talent necessary to lead the business into the future will certainly give you an edge. And while succession planning is not an exact science, a process-oriented approach utilizing the skills of your allied team of professional advisors will undoubtedly improve your chances of a successful transition, and are worth the time, effort and investment.

Joseph M. Mentrek is Vice President And The Director Of The Wealth Center At Meaden & Moore. Contact him at 216-928-5343 or jmentrek @meadenmoore.com.

Trust & Planning Together we provide fiduciary guidance, administrative support and tax consulting for business owners, executives and trustees.

THE RETURN ON THIS INVESTMENT IS HOPE. To make a gift today, contact Diane Tomer at 216-431-4131 x2501.

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Crain’s Cleveland Business Custom Publishing

E-28 NOVEMBER 10-16, 2014

ESTATE PLANNING

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BUSINESS PLANNING

Selling a business? Think about charitable planning Here are a few examples of how it can work: n Donor-advised funds have hen selling a business, become popular because they what is your “IPO” provide donors an immediate and strategy? Not initial full income tax deduction at the public offering; rather, what is outset. When you are busy your initial philanthropic with the many details of opportunity? A smart IPO organizing your sale, setting assessment can pay diviup a donor-advised fund can dends if you decide to add be the simplest part of your a charitable component to transaction. Then, after the the plan. big event has come and gone, When working with you can make ongoing chariyour team – your accountable grant recommendatant, attorney and wealth tions benefiting your favorite RIDOLFI management professional nonprofit organizations, both – consider including a locally and nationally. philanthropic specialist. n Supporting organizations are Philanthropic specialists can more structured in format. If you work with your professional want the formality of a private advisers before the sale transaction foundation and the tax advantages to identify tax-saving strategies of a public charity, this approach that will also create a pot of dollars may be for you. Supporting organiyou can use for your philanthropy. zations provide all the back-office One such strategy might be support and leave the joy of grantdonating unique assets, such as making to you and your family. closely held business units or pubn Charitable remainder trusts licly traded stock, with or without provide you an immediate income restrictions. tax benefit as well as an income

BY KAYE M. RIDOLFI

W What legacy will you leave behind?

The Sound for the Centennial Campaign provides an opportunity for each and every member of this ĐŽŵŵƵŶŝƚLJ ƚŽ ŵĂŬĞ Ă ůĂƐƟŶŐ ŝŵƉĂĐƚ ŽŶ dŚĞ ůĞǀĞůĂŶĚ Orchestra’s success. LJ ƌĞŵĞŵďĞƌŝŶŐ ƚŚĞ KƌĐŚĞƐƚƌĂ ŝŶ LJŽƵƌ ĞƐƚĂƚĞ ƉůĂŶƐ͕ LJŽƵ ǁŝůů ŚĞůƉ ĞŶƐƵƌĞ ƚŚĂƚ LJŽƵ͕ LJŽƵƌ ĐŚŝůĚƌĞŶ͕ ĂŶĚ LJŽƵƌ children’s children always have access to an orchestra ŽĨ ƐƚƌĞŶŐƚŚ ĂŶĚ ĚŝƐƟŶĐƟŽŶ͘ &Žƌ ŵŽƌĞ ŝŶĨŽƌŵĂƟŽŶ ĂďŽƵƚ ƐƵƉƉŽƌƟŶŐ ƚŚĞ ĂŵƉĂŝŐŶ ƚŚƌŽƵŐŚ ĂŶ ĞƐƚĂƚĞ ŐŝŌ͕ ĐŽŶƚĂĐƚ ƌŝĚŐĞƚ DƵŶĚLJ͕ >ĞŐĂĐLJ 'ŝǀŝŶŐ KĸĐĞƌ͕ ďLJ ĐĂůůŝŶŐ ϮϭϲͲϮϯϭͲϴϬϬϲ Žƌ ĞŵĂŝůŝŶŐ ďŵƵŶĚLJΛĐůĞǀĞůĂŶĚŽƌĐŚĞƐƚƌĂ͘ĐŽŵ͘

stream for your lifetime or a fixed period. The remainder can benefit one or more charities.

All of these vehicles allow for income tax benefits and, depending on structure, may also allow for estate or gift tax benefits.

More than a tax strategy

Many former business owners jump into philanthropy like they did when running a company — full go!

Philanthropy becomes their encore career as they work on a mission for their fund and involve others as advisors, much like a corporate board.

Many of our donors say that participating in philanthropy at a higher level has been one of their greatest joys in life.

At the foundation, our greatest joy is helping our donors turn their passion into purposeful giving.

Kaye M. Ridolfi is Senior Vice President of Advancement for the Cleveland Foundation.

Contact her at 216-615-7168 or kRidolfi@CleveFdn.org.

When You Need to Know

The Right Value Personal Property Appraisals & Estate Sales Personal Property Appraisers rs Equitable Distribution Charitable Donation Insurance - Estate Sales Auction Coordination IRS Compliant Appraisals

Now trending? Series LLCs can simplify asset management

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L&L offers a full range of services from a professional appraisal report to an estate sale to a full clean-out of a home.

Our services are customized to meet your individual needs with expert knowledge and care.

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Lisa K. Lowy ISA AM 440.773.4664 - Lorie Hart ISA AM 216.470.7002 www.llestateliquidation.com Members of the International Society of Appraisers

efore 1996, only separate entities could protect assets of one business, operation or property from liabilities of another, which also meant separate books, records, banking and separate state registrations and annual filings (if applicable) for each, even if wholly owned by another.

Now, some states allow for the “Series LLC” where a new, “master” LLC is formed that acts as the master entity for each separately identified business, operation or property, as sub or “series.” Each

series holds its assets and operations separate and distinct from every other series and from the master. Benefits may include: (i) cost savings FIRESTONE with a single state registration; (ii) one series’ liabilities not enforceable against assets or profits of another; and (iii) new series added merely by amending the master LLC’s operating agreement.

Ohio has no Series LLC stat-

Crain’s Cleveland Business Custom Publishing

ute, but Series LLCs organized in permitting states can register as foreign limited liability companies with the Ohio secretary of state.

To date, jurisdictions permitting Series LLCs include: Delaware, District of Columbia, Illinois, Iowa, Kansas, Minnesota, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Texas, Utah, and Wisconsin.

Julie E. Firestone is an attorney in Mansour Gavin LPA’s Corporate and Business Services Group.

Contact her at 216-523-1500 or jfirestone@mggmlpa.com.

20141110-NEWS--53-NAT-CCI-CL_--

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CRAIN’S CLEVELAND BUSINESS

WWW.CRAINSCLEVELAND.COM

53

TAX LIENS The Internal Revenue Service filed tax liens against the following businesses in the Cuyahoga County Recorder’s Office. The IRS files a tax lien to protect the interests of the federal government. 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 First Fruits Child Development 21877 Euclid Ave., Euclid ID: 45-3304729 Date filed: Sept. 23, 2014 Type: Employer’s withholding, unemployment Amount: $214,749 Cleveland Offset Press Co. 1378 E. 17 St., Cleveland ID: 34-1498683 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment Amount: $110,724 Cavalry Staffing LLC 5400 Transportation Blvd., Suite 12B, Garfield Heights ID: 26-2123291 Date filed: Sept. 23, 2014 Type: Unemployment Amount: $82,990 Trusted Home Healthcare LLC 10810 Pasadena Ave., Cleveland ID: 57-1186419 Date filed: Sept. 23, 2014 Type: Employer’s withholding Amount: $76,459 Room to Grow Learning Center Inc. 87A Northfield Road, Bedford ID: 76-0807542 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment Amount: $63,734 Carbone Properties of Cave Creek LLC 5885 Landerbrook Drive, 110, Cleveland ID: 34-1906826N Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $53,329

unemployment Amount: $37,842

Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $22,197

Amount: $11,049

Agez and Stagez Inc. 350 Columbus St., Bedford ID: 33-1167642 Date filed: Sept. 23, 2014 Type: Employer’s withholding Amount: $20,095

A&J 6395 Inc. 187 Center Road, Bedford ID: 20-0453073 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment, failure to file complete return Amount: $9,538

Picciones Jewelers Inc. 24659 Cedar Road, Lyndhurst ID: 34-0772251 Date filed: Sept. 22, 2014 Type: Employer’s withholding Amount: $31,411

Diversified Enterprises Inc. 7023 Edgecliff Road, Parma ID: 34-1747399 Date filed: Sept. 23, 2014 Type: Employer’s withholding Amount: $17,978

Thomas A Rak Landscaping Inc. 17703 Rauland Drive, Walton Hills ID: 34-1142864 Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $8,977

Pollock Financial Group LLC 28601 Chagrin Blvd., Suite 550, Cleveland ID: 27-0974418 Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $27,075

CDIS Inc. 4805 Pearl Road, Cleveland ID: 30-0137404 Date filed: Sept. 11, 2014 Type: Unemployment Amount: $15,007

First Fruits Child Development 21877 Euclid Ave., Euclid ID: 45-3304729 Date filed: Sept. 23, 2014 Type: Employer’s withholding, unemployment Amount: $31,693

Shaker Produce Inc. The Final Cut 8630 Evins Ave., Cleveland ID: 34-1595918 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment Amount: $25,684 Sun Masters LLC TA General Awning Co. 1350 E. Granger Road, Brooklyn Heights ID: 37-1660486 Date filed: Sept. 23, 2014 Type: Employer’s withholding, unemployment Amount: $24,504 Konstanzer Masonry Inc. 514 Dover Center Road, Bay Village ID: 34-0967162 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment Amount: $22,360 Lynda V. Butler D.D.S. 14100 Cedar Road, Suite 210, Cleveland ID: 34-1834802 Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $22,274 Carmax Auto Place LLC 12626 Lorain Ave., Cleveland ID: 20-4574860

B & M Motors Inc. 5111 Richmond Road, Bedford Heights ID: 34-1638040 Date filed: Sept. 11, 2014 Type: Employer’s withholding, corporate income Amount: $14,146 E-Z Electric Motor Service Inc. 23440 Miles Road, Bedford Heights ID: 34-1051853 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment, corporate income Amount: $14,109 P S & Assoc Inc. 3368 E. 113 St., Cleveland ID: 34-1765316 Date filed: Sept. 22, 2014 Type: Employer’s withholding, unemployment Amount: $13,793 Rheumatologists LLC 29099 Health Campus Drive, Westlake ID: 20-8890434 Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $12,109

Commercial Maintenance & Plumbing Inc. 21350 Libby Road, Maple Heights ID: 31-1526837 Date filed: Sept. 22, 2014 Type: Employer’s withholding Amount: $39,470 Mic Ray Metal Products Inc. 9016 Manor Ave., Cleveland ID: 34-0699197 Date filed: Sept. 22, 2014 Type: Employer’s withholding,

B & M Bar-B-Q Inc. 15116 Lake Shore Blvd., Cleveland ID: 34-1772519 Date filed: Sept. 22, 2014 Type: Employer’s withholding Amount: $6,208

Dogtopia Ltd. 2624 Noble Road, Cleveland Heights ID: 42-1620555 Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $8,088

Spectrum Home Health Care LLC 12395 McCracken Road, Suite B., Garfield Heights ID: 20-8667298 Date filed: Sept. 23, 2014 Type: Unemployment Amount: $6,156

Range of Change Enrichment Center 12200 Fairhill Road, Cleveland ID: 27-3762563 Date filed: Sept. 23, 2014 Type: Employer’s withholding, partnership income Amount: $7,853

Dzugan Method-Ohio LLC 29111 Center Ridge Road, Westlake ID: 27-1973663 Date filed: Sept. 22, 2014 Type: Employer’s withholding, unemployment Amount: $5,498

Care Store Inc. 5270 Warrensville Center Road, Cleveland ID: 27-0953831 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment Amount: $7,084

American Legion 315 Western Reserve 769 E. 105 St., Cleveland ID: 34-6607516 Date filed: Sept. 11, 2014 Type: Employer’s withholding, unemployment Amount: $5,473

Cultural Academy LLC 11411 Lake Ave., Cleveland ID: 27-1244375 Date filed: Sept. 22, 2014 Type: Employer’s withholding Amount: $6,919

Camelot Landscaping Inc. 615 Fair St., Berea ID: 34-1733390 Date filed: Sept. 23, 2014 Type: Employer’s withholding, unemployment, corporate income Amount: $5,339

Nowacki Asset Management LLC

Day & Night Transport Inc. 24091 Detroit Road, Westlake ID: 34-1909846 Date filed: Sept. 22, 2014 Type: Employer’s withholding, unemployment, corporate income

CNR Trucking Inc. 83 Justin St., Bedford ID: 27-4863010 Date filed: Sept. 11, 2014 Type: Employer’s withholding Amount: $49,567 Red Fitness 24 7 Broadview Heights 18605 Detroit Ave., Lakewood ID: 46-1653396 Date filed: Sept. 22, 2014 Type: Unemployment, employer’s annual federal tax return Amount: $43,395

KLE Construction Co. 55 Erieview Plaza, Suite 400F, Cleveland ID: 34-1822147 Date filed: Sept. 22, 2014 Type: Employer’s withholding, unemployment, Amount: $6,234

Period

Nowacki Asset Management (NET)

Growth of $1 Million

S&P 500 Total Return

Growth of $1 Million

May 2011 - Year End

-7.46%

$925,400

-6.37%

$936,300

2012

29.99%

$1,202,927

16.00%

$1,086,108

2013

51.76%

$1,825,563

32.39%

$1,437,898

10/31/2014

21.59%

$2,219,459

10.99%

$1,595,988

Note: Returns are shown in U.S. dollars after fees. Date of inception for Nowacki Asset Management is May 2nd, 2011.

Nowacki Asset Management (NAM) is a registered investment advisory firm specializing in value-oriented investment management. All client assets are included in one composite and invested using a value-oriented strategy. NAM claims compliance with the Global Investment Performance Standards (GIPS®). The S&P 500 Total Return index is subject to volatility and the NAM composite may or may not be more volatile than the index. Past performance is not aguarantee of future performance. Investments carry risks and the potential for loss. Results as of 10/31/2014 are still subject to final verification by an independent third-party. NAM only uses short-term margin or leverage to buy securities after a client commits to deposit funds and the funds are in the process of being transferred, but the money has not yet completed the transfer process. To receive a list of composite descriptions of NAM and/or a presentation that complies with the GIPS standards, contact Michael T. Nowacki at (440) 488-6936 or write Nowacki Asset Management, 29525 Chagrin Blvd. Suite 301, Pepper Pike, Ohio 44122, or michael@nowackiassetmgmt.com.

20141110-NEWS--54-NAT-CCI-CL_--

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

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WWW.CRAINSCLEVELAND.COM

55

HEALTHY continued from page 1

seen that the demand is large in that area. We want to provide comprehensive care to the patients who want to come to the Cleveland Clinic. Itâ&#x20AC;&#x2122;s important for us to be in that market.â&#x20AC;?

He added, â&#x20AC;&#x153;The demand has been greater than we even projected, and this is a response to what the community needed.â&#x20AC;?

Building a network While the Clinic has been on a building spree in Avon, other providers in the area are melding a network designed to compete head on with the regional health care giant. Now that UH is entrenched in Lorain County, for instance, the health system has cozied up to Mercy Health and its insurance arm, HealthSpan. HealthSpan last year acquired Kaiser Permanente Ohio â&#x20AC;&#x201D; an organization that had used the Clinic as its acute-care and surgery provider for its members.

But after the acquisition, that business shifted to UH. But since the acquisition, HealthSpan has homed in on Lorain County as its â&#x20AC;&#x153;number oneâ&#x20AC;? sales priority, according to Patricia Horvath, HealthSpanâ&#x20AC;&#x2122;s vice president of sales and business development.

This summer, HealthSpan launched a self-funded insurance product along with UH and Mercyâ&#x20AC;&#x2122;s hospi-

tals in Lorain and Elyria to bring more big employers into their respective systems. As Kaiser, the insurance company traditionally focused on fully insured populations.

The pitch has been so crucial to HealthSpanâ&#x20AC;&#x2122;s business that sheâ&#x20AC;&#x2122;s been joined on sales calls by Ed Oley, president and CEO of Mercy Lorain, and Don Sheldon, president of UH Elyria Medical Center, or what was formerly EMH. Last week, HealthSpan, UH and Mercy hosted a meeting for insurance brokers and Lorain County employers to tout what the collective can offer. â&#x20AC;&#x153;This is a clinical sale. This is not your typical insurance carrier sale,â&#x20AC;?

Horvath said. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve put together a high-performing, low-cost network.

Weâ&#x20AC;&#x2122;re meeting with brokers and those top employers out there.

Weâ&#x20AC;&#x2122;re creating this clinical network that provides access to the right care at the right time.â&#x20AC;?

Much of the UH, Mercy and HealthSpan sales pitch is rooted in what they believe is their ability to manage chronic health conditions such as hypertension and type 2 diabetes. â&#x20AC;&#x153;Health care changed dramatically over the last two years,â&#x20AC;? Oley said. â&#x20AC;&#x153;As we move to an environment of population health management, itâ&#x20AC;&#x2122;s created a tremendous amount of change. I think what youâ&#x20AC;&#x2122;re seeing is a response to that.â&#x20AC;?

Some critics have argued that

MILESTONE continued from page 2

and â&#x20AC;&#x2122;16 (the duration of Milestoneâ&#x20AC;&#x2122;s three-year contract with the Web.com Tour). The tournamentâ&#x20AC;&#x2122;s proceeds support Cleveland Clinic Childrenâ&#x20AC;&#x2122;s Hospital, which was the recipient of a $10,000 donation from the event in 2014.

The Bridgestone Invitational, held at Firestone Country Club in Akron, annually donates about $1 million to Northeast Ohio charities.

Cooke said the Web.com event in Columbus, the Nationwide Childrenâ&#x20AC;&#x2122;s Hospital Championship,

McDonald Hopkins

generates about $850,000 for charity each year. â&#x20AC;&#x153;That is what we hope to do,â&#x20AC;? he said. â&#x20AC;&#x153;We didnâ&#x20AC;&#x2122;t do that in the first year. That is the hope in the second year â&#x20AC;&#x201D; that we make a real dramatic impact to charity.â&#x20AC;?

The enhanced partnership with Rust-Oleum, which was one of the Cleveland Openâ&#x20AC;&#x2122;s biggest sponsors in 2014, can help make Milestoneâ&#x20AC;&#x2122;s lofty goals for the event possible, Wagner said. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s critical from the standpoint that a title sponsor enables you to

health systemsâ&#x20AC;&#x2122; aggressive building campaigns are one of the leading factors for rising health care costs, although UH and Clinic officials say theyâ&#x20AC;&#x2122;re simply responding to the needs of the market. That said, the Clinic and UHâ&#x20AC;&#x2122;s new rehab hospitals, which based on available details will be similar facilities, will sit a mere 3 miles from each other. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re only looking out for out patientsâ&#x20AC;&#x2122; care,â&#x20AC;? said Richard Hanson, president of UHâ&#x20AC;&#x2122;s community hospitals and ambulatory network. â&#x20AC;&#x153;From our standpoint, weâ&#x20AC;&#x2122;re just trying to provide the services our patients need. We want to make sure we have that continuity of care.â&#x20AC;?

Also, the Clinicâ&#x20AC;&#x2122;s inpatient hospital is a particularly bold project considering inpatient volumes across the country are dwindling.

The Clinic itself closed Huron Hospital in 2011 for that reason.

However, Donley said the Clinic has designed the new hospital so itâ&#x20AC;&#x2122;s not a drain on the rest of the system, and the high volume of patients at the health center demonstrated thereâ&#x20AC;&#x2122;s a need for the facility.

Food, laundry and other services at the hospital will be shared with Clinicâ&#x20AC;&#x2122;s other West Side outposts to save money. â&#x20AC;&#x153;This is the first time weâ&#x20AC;&#x2122;ve built a hospital thatâ&#x20AC;&#x2122;s supported by the whole system,â&#x20AC;? Donley said.

do more things relating to the fan experience onsite (one such upgrade for 2015: a B Spot pavilion on the 18th green),â&#x20AC;? Wagner said. â&#x20AC;&#x153;The look, tone and feel of the tournament improves immediately because you are able to do things that youâ&#x20AC;&#x2122;re not able to do otherwise. It affords you the opportunity to have a bigger impact on charity and worthwhile causes in the community.â&#x20AC;?

Titles are for golfers, not Milestone Wagner called the Rust-Oleum Championship a chance for Milestone to â&#x20AC;&#x153;tell the storyâ&#x20AC;? about

Cleveland being â&#x20AC;&#x153;an awesome place.â&#x20AC;?

It also could serve as a showcase event for some of the companyâ&#x20AC;&#x2122;s clients.

Milestone signed five golfers out of college in 2014, and the firm sets its sights on representing â&#x20AC;&#x153;young players that are going to graduate their way up to the PGA Tour,â&#x20AC;?

Cooke said. â&#x20AC;&#x153;The more of those guys that make it, business is better,â&#x20AC;? he said.

Wagner said the company is very selective when it chooses clients to represent, and it outlines five criteria a golfer has to meet in order to form a partnership â&#x20AC;&#x201D; a good person who is intelligent, surrounded

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by good people, marketable and, of course, able to win golf tournaments. â&#x20AC;&#x153;We want to be surrounded by winners,â&#x20AC;? Wagner said. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t have an interest in just managing everyone.â&#x20AC;?

And while Milestone wants its golfers to capture plenty of championships, the company doesnâ&#x20AC;&#x2122;t have titles for its employees. â&#x20AC;&#x153;I believe our culture should be developed with everyone willing to do whatever is necessary to deliver tangible results for our clients,â&#x20AC;?

Wagner said. â&#x20AC;&#x153;I also think titles get in the way sometimes. Iâ&#x20AC;&#x2122;ve seen it too many times in the past.â&#x20AC;?

20141110-NEWS--56-NAT-CCI-CL_--

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CRAIN’S CLEVELAND BUSINESS

Contact: Phone: Fax: E-mail:

Denise Donaldson (216) 522-1383 (216) 694-4264 DDonaldson@crain.com

WWW.CRAINSCLEVELAND.COM

NOVEMBER 10 - 16, 2014

REAL ESTATE AUCTIONS

REAL ESTATE SERVICES

NORTHEAST OHIO PREMIER REAL ESTATE AUCTION • DEC 11 COMMERCIAL, INVESTMENT, DEVELOPMENT & RESIDENTIAL OPPORTUNITIES OUTSTANDING INVESTMENT OPPORTUNITY

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OFFERED WITH A RESERVE PRICE OF ONLY

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Currently 70% occupied with over $655,000 in Gross Annual Income & $225,000 in Net Operating Income (26+% Cap Rate at the published reserve price of $850,000). Terrific Value-Added Opportunity! This landmark 4 story bldg. with 2 elevators is on a 3.65 Acre site with parking for over 300 cars! Current rent rates average $10-12 per square foot. Most tenants are insurance agencies, financial and service providers and general office users. There is a food service operation on the ground floor with several other retail opportunities available. Located minutes from all major freeways (I-77, I-71, I-480, I-80, OH turnpike) in the heart of Middleburg Heights.

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Mentor, OH 44060 ley R

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SOLD

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16

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NOVEMBER 10 - 16, 2014

THE WEEK NOVEMBER 3 - 9 The big story: Cuyahoga County’s heavily Democratic registration helped state Rep. Armond Budish win Tuesday’s election for County Executive over his Republican opponent, County Councilman Jack Schron. Budish will succeed Ed FitzGerald to be- Budish come the county’s second County Executive. Cuyahoga County stood out as a sole bright spot for Ohio Democrats in what was a big night for Republicans. Gov. John Kasich crushed FitzGerald, winning 64% to 33%. In addition to Kasich, state attorney general Mike DeWine, auditor Dave Yost, secretary of state Jon Husted and treasurer Josh Mandel all scored big victories over Democratic opponents who were burdened by the weak FitzGerald at the top of the ticket.

Howdy, partner: BDO USA LLP, a national accounting firm headquartered in Chicago and one of the country’s largest professional service organizations, will establish a foothold in Ohio following a merger with Northeast Ohio-based SS&G Inc. and its SS&G Parkland subsidiary.

The transaction is expected to take effect Jan. 1.

SS&G partners and employees are based in the Cleveland, Akron, Columbus, Cincinnati and Chicago markets. SS&G will add 375 staff, including 36 partners, to BDO. SS&G’s other businesses — SS&G Wealth Management, SS&G Healthcare and Paytime Integrated Payroll Services — are not part of the merger and will continue to operate independently of BDO.

Go for cover: CoverMyMeds, a health care information technology company in Twinsburg, received what it called “a growth investment” by Francisco Partners, a California private equity firm focused on investments in technology and technology-enabled services businesses. The companies didn’t disclose the size of the investment. Francisco Partners says it pursues “investments with transaction values ranging from $50 million to over $2 billion across a wide range of transaction types.” CoverMyMeds produces software that automates the medication benefit process to reduce administrative waste.

He’s sticking around: The Cleveland Indians signed manager Terry Francona to a contract extension. The deal is for the 2017 and 2018 seasons, and includes club options for 2019 and 2020. Financial terms weren’t disclosed. Francona, 55, was hired by the Tribe on Oct. 8, 2012, and has led the Indians to their first consecutive winning seasons since 2000 and ’01. The Tribe is 177-147 since 2013, a .546 winning percentage that ranks fifth in franchise history for a manager’s first two seasons.

On the way: University Hospitals broke ground last Wednesday, Nov. 5, on a $28 million outpatient health center and freestanding emergency department in Broadview Heights. The facility — plans for which were announced in June — is expected to be completed by fall 2016. The 51,000-square-foot health center and emergency department will sit on more than 6 acres visible from Interstate 77 and can be accessed from the state Route 82 interchange.

Just for fund: Cleveland-based private equity firm Blue Point Capital Partners closed its third fund, at $425 million. The fund, Blue Point Capital Partners III L.P., is part of more than $1.2 billion raised in capital across three institutional funds. Blue Point originally targeted $400 million for the fund, consistent with the size of its two previous funds. Blue Point invests in manufacturing, distribution and service businesses with between $20 million and $220 million in revenue.

The fund will continue to focus on investments in the lower middle market.

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REPORTERS’ NOTEBOOK BEHIND THE NEWS WITH CRAIN’S WRITERS

Spero-Smith CEO is on Detroit’s financial case With the city of Detroit ready to emerge from bankruptcy, one of its major pension funds is looking to Northeast Ohio for financial advice.

The city and the city’s emergency manager appointed by bankruptcy court have recommended that Robert Smith, chairman and CEO of Spero-Smith Investment Advisers Inc. of Beachwood, sit on the nine-member investment committee of the Detroit Police and Fire Retirement System, one of the pension plans that is restructuring as a part of the city’s return to solvency.

He would be one of five independent investment advisers on the committee along with union and city representatives.

Judge Gerald Rosen was expected to approve the city’s reorganization plan Friday, Nov. 7.

Pension fund adviser is a familiar role for Smith, whose firm manages hundreds of millions of dollars for individual and institutional investors. He currently is a member of the board of trustees of the Ohio Public Employees Retirement System and is a former member of the board of directors of the Ohio Bureau of Workers Compensation.

— Jay Miller

After exiting political stage, Jones finds voice in acting

watch party for Armond Budish at the DoubleTree Hilton Hotel Cleveland. Budish was the winner in the race for county executive, the job that replaced the county commission on which Jones served.

But Jones, a Shaker Heights resident, wasn’t there for politicking. His only political role this season, he said, was doing voiceovers for Budish commercials. He was just there to wish his friend Budish well.

And he was telling all who came around to check him out on Sunday night, Nov. 9, at the Atlas Cinema Lakeshore in Euclid, where he can be seen in the feature film, “The Umbrella Man,” a drama with allusions to the Kennedy assassination.

Although he has kept up his license to practice law, acting has been Jones’ professional focus since leaving office when the new county government replaced the old commission form of government.

He has acted at Karamu House locally and has made it to the silver screen. His movie parts so far have been modest — his character in “The Umbrella Man” is identified as “Conference Panelist #1” — but his page at iMDB.com lists 16 credits for Jones since he left the political life in 2010.

— Jay Miller

A rising business tide lifts Great Lakes boats

Former Cuyahoga County commissioner Peter Lawson Jones made an appearance last Tuesday night, Nov. 4, at the election

Great Lakes freighters are carrying more cargo than usual. A lot more.

According to the Cleveland-based Lake Carriers’ Association, the October float, as shipping tonnage is called, was up 14.7% in October from the like month last year. Bet-

WHAT’S NEW

BEST OF THE BLOGS Excerpts from recent blog entries on CrainsCleveland.com.

‘Zombie’ apocalypse

COMPANY: Diebold Inc., North Canton PRODUCT: Responsive Banking platform Diebold says it’s blending “branch transformation and omni-channel experience” with the Responsive Banking concept, which the company rolled out last week at Money20/20, a trade show in Las Vegas.

The concept is a standalone banking platform with four connected “experience zones” that are “meant to inspire future digital-to-physical convergence banking capabilities,” according to the company.

For the platform, Diebold says its R&D Incubation team created features that include: Touch surfaces and sensing devices: Meant to attract passersby, “smart” glass and video tower walls “feature dynamic content management, use near-field communications, location-based proximity sensors and motion detection to securely identify consumers, monitor traffic and personalize marketing content.”

Queue management: Consumers “have the ability to ‘get in line’ for a session with a virtual teller, remote teller or to withdraw ‘fast cash’ all from their mobile device or the concept’s exterior touch screen panels.”

Virtual tellers: An avatar “provides virtual teller services for customers needing to conduct more complex transactions by employing natural language recognition, intelligent assistant, directional audio and advanced cash-in/cash-out technologies.”

For information, visit www.diebold.com.

It’s kind of refreshing to read a story about so-called “zombie foreclosures” and find that Cleveland is cited as part of the answer to the problem, rather than a main contributor to it.

A zombie foreclosure occurs when the owner leaves the property, but the bank has yet to take possession of it.

MarketWatch.com reported “there were 117,298 owner-vacated foreclosures nationwide in the third quarter of 2014, representing 18% of total properties in foreclosure, down from 141,406 in the second quarter of 2014 (17% of all foreclosures) and down 152,033 (23% of foreclosures) in the same period last year,” according to data released Oct. 30 by RealtyTrac.

Contrary to this national trend, MarketWatch.com reported, “there were increases in owner-vacated foreclosure in the third quarter in 16 states, including New Jersey, where zombie foreclosures surged 75% year-over-year, North Carolina (up 65%), Oklahoma (up 37%), and New York (up 30%) and Alabama (up 29%).”

Daren Blomquist, vice president at RealtyTrac, told MarketWatch.com that a “short and efficient” foreclosure process prevents zombies. Cities could learn from Cleveland, he noted.

“The best antidote for a zombie foreclosure infestation is a pro-active land bank program like that in Cleveland and, more recently, Chicago designed to aggressively take possession of vacant foreclosures or demolish them,” he said.

To market they will go A Medical Mutual of Ohio executive was quoted in a Wall Street Journal story that said small companies “are starting to turn away from offering health plans as they seek to reduce costs and increasingly view the health law’s marketplaces as an inviting and

ter yet, it was up 19.6% from the month’s long-term average.

That means that steel mills and power generators, among others, have been bringing in more ore, coal and other raw materials.

It also means more business for those that serve the shipping industry, such as Cleveland’s Samsel Supply, which delivers rope, wire lines, tools and other supplies to ships at Lake Erie’s major ports. Business is brisk, reports Samsel president Kathy Petrick.

— Dan Shingler

At least somebody’s excited about voting Last Tuesday, Nov. 4, was a big day for Gary Hanson — and not just because that’s the day the executive director of the Cleveland Orchestra announced he would retire from the post in October 2015.

Hanson, 61, has been executive director of the orchestra since 2004. When he retires next fall, he will have worked there for 28 years. He will continue to live in and be part of Cleveland, “a city that I love,” Hanson said.

While he’s active in organizations including University Circle Inc. and Global Cleveland, and has spent nearly half his life in Cleveland, the Toronto native had never taken part in one major part of civic life here — voting.

But that changed last Tuesday, as the naturalized American citizen cast his first ballot in a U.S. election.

“I was proud to get the sticker,” he said.

— Scott Suttell

affordable option for workers.”

In the latest sign of a possible shift, The Journal reported, WellPoint Inc. said its small business-plan membership is shrinking faster than expected and it has lost about 300,000 people since the start of the year, leaving a total of 1.56 million in smallgroup coverage. The insurer had projected a five-year migration to “significantly reduce” small-employer membership, but it now thinks the dropoff will be compressed into two years.

The Journal said Cleveland-based Medical Mutual “is seeing the strongest shift away from offering health benefits among the smallest employers with just two to four workers.” The company “is working to ease the transition for companies that want to move from a group plan to individual coverage.”

“That’s the best way to maintain the membership,” Dan Polk, a vice president who oversees small-group business, told The Journal. He noted that Medical Mutual is retaining “a very high percentage” of those whose employers are dropping plans.

Zero-waste facility The New York Times routinely gets to declare trends that are invisible to most of us.

One recent exhibit was do-it-yourself taxidermy, and the paper found a Clevelander, Mickey Alice Kwapis, 23, to provide an example.

Kwapis holds classes in unlikely places like tattoo parlors and restaurants. “As long as you clean up afterward, there’s nothing to say you can’t hold a taxidermy class anywhere,” she told The Times. “After all, a rabbit has less bacteria than a chicken.”

In addition to teaching her students how to stuff the animals, Kwapis instructs them on how to prepare the meat for eating.

Then this part gets kind of gross: “She also shows them how to preserve the organs in jars (if that aesthetic appeals to them) and how to clean the bones to make jewelry or grind them up for fertilizer. ‘Nothing goes to waste,’ she said.”

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