Wealth Management 2021 by Crain's Cleveland Business

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The foundation and pillars of a strong relationship By JOHN MICKLITSCH, Ancora

lient/financial adviser relationships are unique. Advisers become privy to some of your most privileged personal information. In addition to having a clear and complete picture of your financial situation, advisers also have a front row seat for your hopes and dreams, your worries and fears and what a life well-lived means to you. For the client/adviser relationship to reach its full potential, we believe there are three principals built on top of two concepts that every successful advisory relationship should have. We explore these building blocks of the client/ adviser relationship below. PRINCIPAL #1 TRUST: Trust should not be easily given. It should be earned and given only after careful assessment of both party’s intentions on entering the client/adviser relationship. Are each party’s expectations and capabilities clearly and transparently outlined to create alignment? At Ancora, we believe the starting place for any discussion around trust and alignment starts with the fiduciary standard. Fiduciaries must always put the client’s interest above

their own. Think of your fiduciary adviser as your personal bodyguard who is constantly looking out for you. Be cautious because this is not the standard for all financial advisers but, in our opinion, it should be your standard as you look to form an advisory relationship built on trust and your best interests. PRINCIPAL #2 COMMUNICATION: There are things in life we don’t always want to hear, but we need to hear if we are going to be successful in achieving our goals. I can remember like it was yesterday; I thought I had played well in a high school game when my most influential coach shoved a game tape in my chest and asked me to watch it and think about whether I liked what I saw. I didn’t want to hear that I was making the wrong decisions on the field, but I needed to see it from a different and more objective perspective, free from my own bias. The same communication patterns can improve outcomes in client/adviser relationships. We don’t always want to hear that our instincts or gut feelings may be lowering the probability of achieving our long-term financial goals, but sometimes we just need to see the issue from a different perspective or, more importantly,

through the lens of the appropriate time horizon. PRINCIPAL #3 EXPERTISE: Credible expertise in any field comes from thousands of hours of study, practice and application. I had another influential teacher in my life who said, “life is cumulative.” The same holds true in your professional life. The client/ adviser relationship is built on the premise that both parties come to the relationship with credible expertise earned over time that will enhance

A client/adviser relationship built on mutual trust, communication and expertise is likely to succeed. the working relationship. The adviser must continually develop and sharpen their craft throughout the years while the client continues to invest in their personal and professional growth. Together, through a commitment to expertise, they both grow in mutually beneficial ways. FOUNDATIONAL CONCEPT #1 HUMAN CAPITAL: Human capital is

a reference to the labor and problemsolving skills we bring into our careers each day. In proportion to the value created by those efforts, we receive financial capital as compensation. In the client/adviser relationship, the services the financial adviser provides should be so complete and well-conceived, communicated and constructed that they allow the client to work undistracted on maximizing their human capital, which in turn will produce financial capital that can be invested. This positive feedback loop is the mark of a successful client/adviser relationship. FOUNDATIONAL CONCEPT #2 FINANCIAL CAPITAL: There comes a time, however, in virtually every client/ adviser relationship where the client has less human capital to commit. Age, new personal goals, health and changing interests all can reduce human capital output. At this point, it is the role of the adviser to help the client transition from relying on human capital to relying on their accumulated financial capital to fund the life they want to live. The client should be honest and forthright with their level of desire to continue to produce human capital

and the adviser should be prepared to show the client if their financial capital is sufficient or when and under what conditions it will be sufficient to replace their human capital. A client/adviser relationship built on mutual trust, communication and expertise is likely to succeed. Those three pillars are foundational to any long-term professional relationship, not just a client/adviser relationship. These three principals, on top of the foundational understanding of the role human capital and financial capital plays at different points in our lives, will provide a clear understanding and road map for working well with your adviser and getting the most out of your personal and professional financial journey.

John Micklitsch, CFA, CAIA, is chief investment officer at Ancora. Contact him at 216-825-4000 or jmicklitsch@ancora.net.

MICKLITSCH

Get more with Ancora. Life. On your terms. We offer investment opportunities covering equities, fixed income and alternatives, as well as wealth planning and retirement plan solutions— all delivered with a personalized service that’s focused on helping you to get more out of life. Get more with Ancora. 216-825-4000 / www.ancora.net

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Organizations partner through sustainable investments Sustainable investing: the what and how By Andres Arsuaga, Clearstead

he last eighteen months have been marked by health and economic crises, as well as renewed calls to confront social inequalities and climate change, all of which are taking their toll throughout the globe. As difficult as these issues are, they provide a spark to sustainable investing. In 2021, there were record inflows to these strategies as investors emphasized investments and companies tackling these difficult issues. Yet while progress has been made to better define sustainable investing and utilize consistent data, it is still in its infancy. WHAT IS SUSTAINABLE INVESTING?: Sustainable investing is an investment approach that seeks to incorporate economic, social and governance factors into asset

allocation and risk decisions to generate sustainable, long-term financial returns, according to a 1984 article in The Academy of Management Journal. Many investors associate sustainable investing with environmental issues, but it encompasses much more. Below are examples of the types of criteria included in sustainable investing: • Environmental: Natural resource use, carbon emissions, energy efficiency • Social: Workforce, human rights, diversity, supply chain • Governance: Board independence, board diversity, shareholder rights, and corporate ethics

Navigating toward sustainable investing approaches can be a complicated process that must consider investment objectives as well as organizational and financial priorities. DRIVERS OF GROWTH: Sustainable mutual funds during 2020 saw inflows amounting to $51.1 billion, which were double 2019 flows and nearly ten times 2018 flow, according to a 2021

report from Morningstar. Of all the net flows into stock and bond funds in 2020, sustainable investing mutual funds accounted for approximately a quarter of all flows. There were multiple drivers that likely caused such a large increase, including the pandemic, changing views toward climate change, social movements, and a new president and administration. Fund flows are not projected to slow any time soon. Deloitte estimates that by 2025, in the U.S. alone, half of all managed assets will have some type of ESG mandate. Institutional investors also contributed to the acceleration of sustainable investing, a shift that has received wide publicity, even more

than the shift among retail investors. According to the US Sustainable Investing Foundation’s 2020 report on US Sustainable and Impact Investing Trends, institutional assets account for 70% of sustainable investing assets. Institutions have been vocal about these changes, which include Norway’s sovereign wealth fund announcing the sale of all fossil fuel assets representing $13 billion of their $1 trillion fund. The $500 billion New York State pension fund announced that, over four years, they will divest oil and gas holdings. This momentum among institutional investors is unlikely to slow as trustees, shareholders and boards of directors ask more questions about what companies

are doing to address sustainable investing issues. Climate change is a cornerstone to Biden administration policies, both from economic and environmental perspectives. Biden created a specific Climate Change position in his cabinet to address this issue. In January 2021, Biden issued an executive order establishing climate considerations as an essential element of U.S. foreign policy and national security; mandates that the U.S. government use its buying power to enact positive changes; and plans to rebuild U.S. infrastructure for a sustainable economy. In addition, the U.S. Department of Labor is making it easier for 401(k) plans to invest in

sustainable investing funds. These initiatives, focused on climate change, should be a tailwind to sustainable investing. CLEARSTEAD’S APPROACH: ESG principles are increasingly being incorporated into investment programs. ESG considerations are categorized into three main investing strategies. This continuum ranges from exclusionary screens, which ensure investments are not made in unacceptable activities; to ESG integration, which uses sustainable factors to proactively move a portfolio toward desirable attributes; to impact investing, which makes direct investments in assets that generate acceptable financial returns and positive social or environmental effects. Institutions like The MetroHealth Foundation have begun to formally integrate ESG factors as a component of their investment philosophy and manager research process. Each manager goes through a rigorous selection process and receives a sustainable investing rating based on our assessments. Navigating toward sustainable investing approaches can be a complicated process that must consider investment objectives as well as organizational and financial priorities. Sustainable investing is not a fad and will continue to grow. However, it

is in its infancy and can be difficult to put into action. There are 836 registered investment mutual funds and ETFs with sustainable mandates, according to US SIF. There also are numerous private strategies that incorporate ESG factors. Deciding which strategies best align with an institution’s values can be daunting. Clearstead’s experience and commitment to sustainable investing can help clients integrate values and goals into portfolios. As more sustainable investing options become available and mainstream, companies will be incentivized to push a higher ESG standard in their business practices. In 2020, Clearstead partnered with The MetroHealth Foundation to incorporate sustainable investing into their investment program. This collaboration allowed Clearstead to continue prudent management of the investments, and The MetroHealth Foundation to meet their investment objectives while moving the portfolio toward alignment with the broader Foundation mission.

Andres Arsuaga, CFA, is director of portfolio management at Clearstead. Contact him at 216-621-1090 or aasuaga@clearstead.com

ARSUAGA

Sustainable investing: The why By Rob Soroka, MetroHealth

he MetroHealth Foundation seeks to support The MetroHealth System by developing philanthropic resources and relationships to advance MetroHealth’s goals of health, healthy communities and health equity for all. One way in which we deliver on our mission is through our financial impact. Over the last year, we have taken a deeper look at how we can align our investments with our mission. As a health care provider, we see firsthand the negative impact of things like tobacco, firearms and climate change on the well-being of individuals and communities. We partnered with our investment adviser, Clearstead, to incorporate sustainable investing into our investment program. First, we conducted basic education on the topic of sustainable investing to our Finance and Investment Committee. Committees can have varying opinions and attitudes, and it was important to make sure that everyone understood the topic. Second, we discussed our investment objectives and how to emphasize key areas of our mission. Third, we focused on ways to

incorporate both exclusionary and inclusionary approaches. This included negative screens for areas like tobacco and firearms, as well as positive screens toward securities that score well from their environmental, social and governance practices. Fourth, we reviewed several investment options that would achieve this objective and moved forward with

We are proud of the steps that we have taken in aligning our investments with our mission. implementation. It was important for us to balance the sustainability considerations with financial considerations and not sacrifice return. The options that we evaluated performed in-line or better than nonsustainable investments, with similar levels of risk. We will conduct an annual audit of our holdings and exposures to sensitive areas. Over time, we believe these sustainable investments will grow and be emphasized. We are proud of the steps that we have taken in aligning our investments with our mission. This is an area that is increasingly important to all stakeholders, including patients,

doctors, board members, donors and the broader community. We believe that we can equally do well by doing good. Information provided in this article is general in nature, is provided for informational purposes only and should not be construed as investment advice. These materials do not constitute an offer or recommendation to buy or sell securities. The views expressed by the author are based upon the data available at the time the article was written. Any such views are subject to change at any time based on market or other conditions. Clearstead disclaims any liability for any direct or incidental loss incurred by applying any of the information in this article. All investment decisions must be evaluated as to whether it is consistent with your investment objectives, risk tolerance, and financial situation. You should consult with an investment professional before making any investment decision. Performance data shown represents past performance. Past performance is not indicative of future results. Current performance data may be lower or higher than the performance data presented.

Rob Soroka is treasurer and vice chair of finance and investment of The MetroHealth Foundation Board of Directors. Contact him at 216-7785665.

SOROKA

The MetroHealth Foundation T O G E T H E R , W E C A N H E L P YO U

STEADFAST CLARITY FOR YOUR COMPLEX WORLD Clearstead is relentless in providing financial solutions so our clients can exceed their aspirations and build stronger legacies for their families, their communities, and themselves. PRIVATE WEALTH MANAGEMENT INSTITUTIONAL INVESTMENT CONSULTING 401(K) & RETIREMENT PLAN CONSULTING OCIO / DISCRETIONARY VISIT CLEARSTEAD.COM TO LEARN MORE

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L E AV E Y O U R M A R K O N C L E V E L A N D .

MetroHealth is changing how health care is delivered in Northeast Ohio. We are a catalyst for change – for our health, for our neighborhood, for our economy and for our future.

J OIN U S.

To learn more, contact Kate Brown, Chief Development Officer, at 440-592-1401 or kbrown@metrohealth.org.

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Business succession planning strategies for entrepreneurs

Investing in innovation can supercharge your portfolio

By JACLYN M. VARY AND MAUREEN T. PAVICIC, Calfee

By JIM ELIOS & RYAN DOBROKA Elios Financial Group Inc.

aving a business succession plan that is congruent with your estate plan will avoid confusion as to ownership, management and control of your business while ultimately ensuring that your business and personal legacy flourishes. Does your estate plan work with your business succession plan? The following explores a few succession planning considerations for entrepreneurs: OWNERSHIP: A few questions to consider: Do you envision your children ultimately owning and running the business? Do your children have the desire and ability to do so? Do you have multiple children in the business? If multiple children and/or their spouses are officers and/or employees, how will differences be resolved? What if you have some children involved in the business but others who are not? Should the children who are not involved still benefit from the family business (such as receiving health insurance or a company car)? If you do not envision your children owning the business, lifetime

exit possibilities include selling the business (possibly to another family member) or establishing an Employee Stock Ownership Plan (ESOP). If the business is not sold until after your passing, it may lead buyers to think that the company is in distress without its founder and should be sold for a bargain or to provide liquidity for estate tax purposes. If you decide your children should ultimately inherit your business, your estate planning counsel will probably continue to ask you a series of questions: Should the business be transitioned during your lifetime or at your death? Should it be transitioned outright to your children or held in a multigeneration trust? If you give the business to a child during your lifetime, will you “equalize” gifts to your other children during your lifetime or wait to “equalize” gifts at your death? MANAGEMENT AND CONTROL: Further, you must determine which individuals should continue to manage the business operations. Perhaps you include incentives for the retention of key employees and also provide a clear hierarchical management structure. Additionally, you must decide who will

control the voting interests and whether to restrict a future transfer of business interests (in a buy-sell agreement or in a trust instrument) so that the ownership must remain in a family line or be sold. REVISIONS TO CORPORATE DOCUMENTS: Consider the dayto-day role you play in the business. If you are the only person with certain banking or check-writing privileges, you should determine who should take over these duties in the event of your incapacity or death. Corporate resolutions may be put in place to add a succession of individuals to fill these roles if and when necessary. TITLE THE BUSINESS INTEREST: Ensure that the business interest is held in non-probate title. Options include titling the business interest directly in your revocable trust or adding a transfer-on-death designation to your revocable trust. Your estate planning counsel should work with corporate counsel to ensure the corporate records are appropriately changed. Titling may also have tax implications if the entity is an S-corporation; therefore, tax advisers also should be consulted.

SPECIFICALLY NAME THE ENTITY IN THE TRUST: Estate planners are all too familiar with the “Prudent Investor Rule” under the Uniform Trust Code. This rule provides that the trustee of a trust must make investment decisions in the context of the trust portfolio as a whole and as part of an overall investment strategy, with having risk and return objectives reasonably suited to the trust. This means a trustee must generally diversify the trust portfolio. However, many business owners may want to ensure their business is retained regardless of the nature of the other trust assets. Thus, the trust should specifically name the business and provide that the trustee has the power to specifically retain that business. This strategy will protect the trustee from objections that the trustee has violated the Prudent Investor Rule. APPOINT A CLOSELY HELD BUSINESS ADVISER: Consider nominating an independent person in your trust to act as a closely held business adviser. This adviser would handle business interests held in the trust, and this structure shifts much of the burden from the trustee to this adviser. This person could be someone

who has more familiarity with the business than the trustee might have. TIME IS OF THE ESSENCE: The time to create or revisit your estate and business succession plans is now. The current federal estate, gift and generation skipping transfer tax exemption is $11.7 million per person. Current tax proposals seek to lower the exemption amounts to $5 million (plus inflation) per person (or possibly even lower) and would also change individual and corporate income tax rates. Jaclyn M. Vary is a partner with the Estate and Succession Planning and Administration group at Calfee, Halter & Griswold LLP. Contact her at jvary@ calfee.com. Maureen T. Pavicic is an associate with the Estate and Succession Planning and Administration group at Calfee, Halter & Griswold LLP. Contact her at mpavicic@calfee. com.

VARY

PAVICIC

ver the past few years, disruptive ideas, innovations and economic forces have reshaped the way we invest. Accelerating these forces is the COVID-19 pandemic and its immense effects on the economy, technology, government and society. An important focus in today’s investing industry has emerged as a powerful way to not only keep up with the change, but to benefit and profit from it: investing in innovation or “thematic” investing. Broadly speaking, thematic investing is the approach of taking advantage of future trends while avoiding fads. Thematic investments take a top-down approach, providing investors an opportunity to generate alpha (excess returns) by looking at global trends and innovation. Its forward-looking approach stands in contrast to an investing strategy that relies heavily on market capitalization to determine weights in a portfolio found in popular index funds and ETF’s. Fundamentally, the objective of thematic investing is to not only generate superior returns but to evolve

from traditional index investing that sometimes misses opportunities in emerging technologies and companies. According to research by Ark Investment Management LLC, focusing on the top technology platforms and themes should generate more than $50 trillion in business value and wealth creation over the next 10 to 15 years, giving today’s investors an opportunity to significantly capitalize and reap future gains investing in innovation and global themes. CLEAN AND GREEN: The structural shift in global energy production and usage is accelerating. Clean and sustainable energy is here to stay, and companies involved in renewable energy production, storage and smart grid implementation stand to benefit. Adding more tailwinds to this growth area, many developed countries and governments have subsidized their success, with billions being invested to continue the transformation away from carbon fossil fuels. Think electric vehicles, battery technology, solar, wind and lithium mining as examples. HEALTH TECH, GENOMICS, AND THE FUTURE OF HEALTH CARE:

Science and technology are enabling profound and transformative changes in health care. While “genomics,” “enhanced longevity” and “telemedicine” are the current buzzwords, we think that, more broadly, emphasis should be placed on the “care economy.” People are living longer, and quality of life expectations are rising. Instead of narrowly thinking about traditional health care, we also look for high-growth candidates from the broader “well-being” sector. Think telemedicine, gene sequencing and immunotherapy.

ARTIFICIAL INTELLIGENCE AND BIG DATA: Artificial Intelligence touches us daily, from simple Internet searching to mobile directions and streaming TV. Companies focused on acquiring and interpreting as much data as possible have proven to be more adept at enhancing their offerings and improving their targeting. We expect significant growth in enterprises focused on creating efficiencies in data mining, analysis and storage. Think autonomous vehicles, smart homes and Internet of Things.

REMOTE WORKING, E-COMMERCE AND CLOUD COMPUTING: The lockdowns required to contain the COVID-19 virus moved our work lives to our homes. It is not clear whether the work-from-home trend will continue. The physical world will cede some ground to the digital world or “metaverse.” Areas of opportunity are wide-ranging, from cloud computing, virtual networking, e-commerce, social media, video games and cybersecurity. From Zoom to Minecraft to TikTok, how wide swaths of people spend their time (and money) has changed and will continue to evolve, which present significant investment opportunities.

BLOCKCHAIN, CRYPTOCURRENCY, AND FINANCIAL TECHNOLOGY: The emerging financial technology sector has transformed staid businesses like lending, insurance and banking into exciting and innovative places to invest. Mobile payments, digital wallets and peer-to-peer lending should revolutionize the financial sector, which impacts every sector of the global economy. With blockchain technology, the rise of cryptocurrency has upended the view of currencies and stores of value. The idea of a “decentralized” financial system has immense potential as well as risks. We

think cryptocurrency is here to stay and should be part of a well-diversified portfolio. BE A TREND FOLLOWER: ADD INNOVATION AND THEMATIC TO YOUR PORTFOLIO: Investing in exciting trends and innovation is becoming far easier for the average investor. Many firms and thought leaders are happy to share their most up-to-date ideas. Whether it is Cathie Wood of Ark Investments who shares her trades daily, or Global X creating a new ETF any time they feel a catalyst to merit it, there is no shortage of good investment trends to follow. Investment advice has never been more readily available and transparent. Adding thematic and innovation investment ideas to your portfolio should always be within the context of a good financial plan, proper risk tolerance assessment and your tax bracket. Work with your financial planner and wealth manager to structure a forward-thinking portfolio that makes sense for you. Done properly, a well-diversified portfolio that includes future thought leadership

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True Family Financial Fiduciary

Helping Clients Solve Complex Estate and Succession Planning Needs The attorneys in Calfee, Halter & Griswold LLP’s Estate and Succession Planning group can help you make some of the most important decisions of your life. With deep knowledge and experience in finance and the law, our professionals provide exceptional value to clients seeking: • • • • •

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

We are a fiduciary providing ongoing planning, advice, and professional investment management as part of an overall financial plan.

ENVISION | ENLIGHTEN | ENRICH Contact us for a complimentary consultation today 30700 Center Ridge Road Westlake, OH 44145 440.617.9100 | www.eliosfinancial.com

©2021 Calfee, Halter & Griswold LLP. All Rights Reserved. 1405 East Sixth Street, Cleveland, OH 44114 Advisory services offered through Elios Financial Group, Inc. a Securities Exchange Commission Registered Investment Advisor (RIA). Securities offered through Private Client Services, Member FINRA/

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WEALTH MANAGEMENT targeted to innovation will help you meet your long-term investment goals. Happy returns! There are risks involved with investing which may include market fluctuation and possible loss of principal value. Particular investments may not be suitable for certain situations. Carefully consider the risks and possible consequences involved prior to making an investment decision.

James T. Elios, MBA, CHFC, CLU, is a wealth adviser, president and CEO at Elios Financial Group Inc. Contact him at 440-617-9100 or jim@eliosfinancial. com. Ryan Dobroka, CFP, CHFC, is a wealth adviser at Elios Financial Group Inc. Contact him at 440617-9100 or ryan@ eliosfinancial.com.

The gifts that give rise to breakthrough treatments ELIOS By MAUREEN KATANIC Akron Children’s Hospital

DOBROKA

t times, Laci Guidry had wondered if her 10-yearold son, Reese, would be

able to do all the things other kids could. Diagnosed at a young age with nystagmus, a genetic condition characterized by constant, involuntary eye movements, Reese couldn’t see well at school or participate in some sports. And the care that he received in

More moments like this. That’s what a donor can do. More steps. More joy. More birthdays. Your gift of 100% kid-dedicated care provides the therapies, treatments and breakthroughs that make more childhood possible. Make a moment like this possible. Give today at akronchildrens.org/donate.

their Louisiana hometown – using prescription eyeglasses and visual assistance technology – wouldn’t improve his vision or stop the eye fatigue and headaches he experienced. What could potentially improve Reese’s vision was an innovative procedure by the specialists at the Vision Center at Akron Children’s Hospital. Laci heard about it via social media and decided to make the trip to Akron to have Reese seen there. How did the Vision Center at Akron Children’s Hospital, along with other specialties, earn accolades as an advanced center of excellence? A major factor in raising the level of care at Akron Children’s Hospital has been the philanthropic giving earmarked for specific initiatives and specialties. The gifts make it possible for the hospital to continue to invest in breakthrough technologies, research and premier expertise. As senior director of planned giving, I’m honored to work with donors who invest in the hospital with philanthropic funds. Time and again, benefactors express their intentions to give children the ability to grow up healthy through their gifts. Akron Children’s is incredibly grateful for the support, and we make sure our benefactors know this appreciation. The late David Horn, a colleague and mentor, explained the most meaningful conversation we can ever have with a donor isn’t about the type of gift, but about its purpose. GIFTS THAT CHANGE LIVES A fitting example relates to a 2020 gift from the Cynthia Miller Estate. When attorney Nicole Hawks contacted me about the bequest, I asked what Mrs.

Time and again, benefactors express their intentions to give children the ability to grow up healthy through their gifts. Miller hoped her gift would accomplish. It was then that the story of a real American war hero began to unfold. Cynthia and Jack Miller willed more than $500,000 to the hospital to help children with blinding and visually disabling disorders, in honor of Cynthia’s husband, Jack, who had died in December 2019. A Vietnam War veteran, Jack had sustained serious injuries in 1969, when, during a firefight, a grenade exploded in his face. The explosion occurred just a week before Jack’s 21st birthday, sending shrapnel throughout his body and leaving him blind. Jack never allowed his injury to stop him from enjoying life or from losing his positive outlook. Instead, it inspired him to take action that would benefit children struggling with visual impairments, since he himself was blinded at a young age. The gift has allowed the hospital to

More childhood, please.

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establish a fellowship in their names: The Jack and Cynthia Miller Fellow in Pediatric Ophthalmology and Strabismus provides clinical training in ocular and visual system disorders in infants, children and teens, and eye movement disorders and strabismus in adults. The fellow also instructs students and residents and participates in research. The significance of the gift is best expressed by Dr. Richard Hertle, director of pediatric ophthalmology at Akron Children’s: “The naming of the pediatric ophthalmology fellowship is especially meaningful given Jack Miller’s personal experience with blindness while serving in Vietnam. We are grateful for his and his wife Cynthia’s commitment to providing the resources to help children regain or improve their eyesight. The support from the Millers’ estate advances this

vital fellowship program and honors their legacy.” Thanks to the gift, Dr. Heidy Martinez, the first to hold the fellowship, is studying the use of a MicroPulse laser to treat pediatric glaucoma, instead of incisional surgery. If the research proves promising, then it may alter how glaucoma is treated in children, changing their lives for the better. The gift also has bolstered the Vision Center’s ability to invest in medical advancements for those diagnosed with nystagmus, like Reese. Post-treatment, Reese’s eyesight has improved. And with continued progress, Reese could gain the ability to do more of the things other teens do, such as learning how to drive. To that end, Reese’s mom says the care has given her and her son an infusion of hope when no one else could. It’s precisely the reason that Cynthia and Jack Miller – and so many others – are helping patients and families every day through their philanthropy. By elevating the standards of pediatric care, the gifts are changing lives for the better. Do you have a personally inspired mission or desire to advance pediatric care? Learn more about planned giving with Akron Children’s and how you could contribute to breakthrough care by visiting akronchildrens.planmygift.org. Maureen Katanic is senior director for planned giving at Akron Children’s Hospital. Contact her at 330-5438343 or mkatanic@ akronchildrens.org.

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Estate planning in the current environment

hroughout much of 2021, we have been monitoring the impact of the evolving post-pandemic reopening, the administration’s economic agenda and, most of all, various proposed tax law changes that call into question traditional estate planning techniques.

By LINDA M. OLEJKO Glenmede

From a monetary policy perspective, we continue to operate in a period of historically low interest rates, a scenario that presents an opportunity for individuals to use various tax planning techniques to efficiently transfer wealth from one generation to another. However, many of these

planning techniques were highlighted in proposed legislation earlier this year. The release of the Biden administration’s budget, the House Ways and Means Committee’s proposed legislation and the Treasury Department’s explanation of various revenue provisions give us some insight into the timing of proposed

tax law changes. With the exception of a change to the capital gains and dividends tax rate, all proposed tax law changes are, for now, prospective in nature. Even more encouraging from a tax planning perspective is that many of the tax planning techniques mentioned in earlier suggested legislation are

volatility. If asset values within the GRAT spike, the grantor is permitted to “swap in” more stable assets to lock in gains for future beneficiaries. Since varying asset classes often move out of step, GRATs can be created with a single asset class or even a single concentrated stock position.

not included in the House’s proposed legislation. Given the prospective focus of legislation and the current low interest rate environment, what steps should we consider taking now? Here are some low interest rate planning techniques.

You deserve a wealth management partner who goes beyond the numbers. As a trusted partner and advisor to individuals and families for more than 65 years, Glenmede Private Wealth empowers our clients to confidently pursue their purpose, passion and legacy through personalized, integrated wealth and investment management. Our team of specialists tailors strategies intended to help you reach your lifestyle, legacy and philanthropic goals. What are your wealth objectives? We welcome the opportunity to learn more about your passions and your goals.

To begin the conversation today, kindly contact: Linda Olejko

216.514.7876 go.glenmede.com/cleveland

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Estate planning for cryptocurrency

INTRAFAMILY LOANS This technique can be a convenient, low-cost way to assist family members with purchasing a home, starting a business or affording living costs. However, loans can also be used by the borrower to invest in the market.

Given the prospective focus of legislation and the current low interest rate environment, what steps should we consider taking now? Loans exceeding the $15,000 annual gift-tax exemption ($30,000 for couples) should be documented with a formal loan agreement specifying repayment terms to avoid being characterized as a gift. Family lenders should consider the potential impact on family relations if loans are perceived as unfair. They must be prepared to consider the loan a gift — with potential tax consequences — if the borrower is unable to pay interest or return principal in the future. Loans between family members may be worth considering in this low interest rate environment, and loans conforming to IRS rules can avoid gift and inheritance tax consequences. Annual interest rates for loans made in July 2021, for example, ranged from 0.18% for loans up to three years, 0.45% for loans three to nine years and 1.17% for loans greater than nine years — a fraction of commercial rates. What’s more, rates are fixed for the loan term, so interest costs won’t increase if rates rise. GRANTOR RETAINED ANNUITY TRUST The GRAT is another efficient technique used to transfer asset appreciation to beneficiaries with minimal gift or estate tax consequences. GRATs often are designed to last two to three years to leverage historically low interest rates and market volatility. GRATs can be effective during periods of market

Creating several GRATs at the same time can diversify exposure and increase the odds of overall success. Success is increased by employing a cascading or rolling GRAT strategy, which moves each annuity from an existing GRAT into a newly established GRAT. By doing this, the grantor increases the odds of capturing asset appreciation for intended beneficiaries. CHARITABLE LEAD ANNUITY TRUST A CLAT functions much in the same way as a GRAT, except for one key difference: The annuity payments are made to charity rather than the grantor. For individuals who have philanthropic as well as family legacy goals, a CLAT may be a desirable planning technique. CLATs can be an effective way to balance an individual’s desire to benefit charity and family in a tax-efficient manner. When deployed in a low interest rate environment, the results can be significantly rewarding. CONCLUSION Now that we have a sense of Congress’s tax focus and potential timing for tax law changes, we should be making plans that involve taking advantage of the currently low interest rate environment and some tried-and-true estate planning techniques. Some planning techniques, particularly GRATs and CLATs, may be very limited or even eliminated by the proposed legislation within a very short timeframe. Therefore, this fall you should consult your estate planning attorney before creating any new trusts or completing any transfers. Linda M. Olejko, CFP, CEP, is managing director of business development at Glenmede. Contact her at 216-514-7876 or Linda.Olejko@ glenmede.com. OLEJKO

This presentation is intended to provide a review of issues or topics of possible interest to Glenmede Trust Company clients and friends and is not intended as investment, tax or legal advice. It contains Glenmede’s opinions, which may change after the date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss anything they see here of interest with their tax advisor, attorney or Glenmede Relationship Manager.

state planning increasingly is becoming challenging and uncertain. In addition to the unpredictable federal tax laws, we can add cryptocurrency to the list of estate planning nightmares. What exactly is cryptocurrency? It’s not intuitive. In the IRS’ eyes, cryptocurrency is not “currency,” but a capital asset (like a stock.) Therefore, capital gain income and losses are recognized any time cryptocurrency is used in a transaction. Despite the IRS’ view, cryptocurrency actually can be used to purchase goods and services. When a cryptocurrency unit is purchased, a private key is issued. A private key is a long string of letters and numbers, similar to Apple’s

Careful planning for cryptocurrency may help clients and their advisers sleep (a little) better at night. strong password suggestions. Like cash, the private key is stored in a “wallet.” There are two types of wallets: hot and cold. A cold wallet is tangible and disconnected from the Internet — a hard drive, USB drive or simply written on a piece of paper. A hot wallet is connected to the Internet and is accessible with a username and password. Cryptocurrency ownership is completely decentralized, and transactions are verified and recorded in a blockchain. Put simply, a blockchain is an encrypted checkbook ledger, accessible online to other cryptocurrency owners. Cryptocurrency is showing up in estate planners’ nightmares for three main reasons. The first reason is volatility. If a client’s net worth is over or close to the current/proposed federal estate tax exemption, their cryptocurrency should be monitored closely. Cryptocurrency’s rollercoaster values can send a client over the federal estate tax exemption and cause federal estate tax liability. Also, despite public exchanges, valuing cryptocurrency still requires an appraisal. The second reason is accessibility. However private keys are stored, a fiduciary must know of a client’s cryptocurrency and how to access it. Remember cryptocurrency is decentralized — there isn’t a 1-800 number for a fiduciary to contact. For a cold wallet, any related passwords or private keys should be stored with important documents (for example, in a fireproof box.) For a hot wallet, a client should create a list of online account usernames and passwords for use by a fiduciary. The last reason is probate avoidance. Currently, there isn’t an easy solution to this issue, although clients may purchase and title the cryptocurrency in their trust, or it may be included in an assignment of personal property to

By Ashton E. M. Bizzarri Schneider Smeltz Spieth Bell LLP

their trusts. Careful planning for cryptocurrency may help clients and their advisers sleep (a little) better at night.

BIZZARRI

Ashton E. M. Bizzarri is an attorney at Schneider Smeltz Spieth Bell LLP. Contact her at 216-696-4200 or abizzarri@sssb-law.com.

HELPING CLIENTS PROTECT THEIR LEGACY Protecting what you have built for the next generation takes careful planning and an experienced partner who understands your goals and objectives and can tailor a plan to help you achieve them. At Hahn Loeser, we work with our clients to navigate the evolving tax laws, minimize tax exposure and create a strategy that will help them preserve their legacy.

LET US KNOW HOW OUR ESTATE PLANNING TEAM CAN HELP

Dana M. DeCapite Partner 216.274.2465

Stephen H. Gariepy Partner 216.274.2224

Christina D. Evans Partner 216.274.2442

M. Patricia Culler Partner 216.274.2534

Douglas C. Carlson Partner 216.274.2313

Joan M. Gross Senior Of Counsel 216.274.2277

Frank C. Krasovec, Jr. Of Counsel 216.274.2373

Cynthia K. Port Of Counsel 216.274.2307

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WEALTH MANAGEMENT

Retirement, investments afford an ideal philanthropic opportunity

The benefits of supporting organizations By MATTHEW A. KALIFF Jewish Federation of Cleveland

By LIA JONES, The University of Akron

ecause a great deal of wealth is held in retirement and investment assets, there are substantial opportunities for individuals to make a meaningful impact on organizations they care about by utilizing these assets to accomplish philanthropic goals. A Qualified Charitable Distribution from an Individual Retirement Account – also known as an IRA Charitable Rollover – provides an opportunity for those ages 70½ or older to make charitable gifts and reduce their taxable income. This strategy permits donors to direct all or part of their annual required minimum distribution to a qualified charitable organization for up to $100,000 per year. This is true even if the required minimum distribution is less than $100,000. The required minimum distribution is simply the minimum amount one must withdraw. The donor’s taxable income is reduced by the gift amount, regardless of whether that individual itemizes or takes the standard deduction. These gifts are easy to facilitate and can be accomplished by instructing the IRA custodian to transfer funds directly to

the donor’s charity. Retirement accounts can also be earmarked for charitable purposes through a beneficiary designation. Using retirement assets to accomplish philanthropic objectives as a part of an estate plan has the benefit of offsetting

Using retirement assets to accomplish philanthropic objectives as a part of an estate plan has the benefit of offsetting potential estate taxes and maximizing the gift’s impact. potential estate taxes and maximizing the gift’s impact. Individual beneficiaries are taxed on the gifted amount at their ordinary income tax rate of up to 37%, while charitable beneficiaries are not taxed and receive 100% of the gift. Gifts of long-term appreciated stock are also advantageous assets for charitable giving purposes. Donors will receive a charitable tax deduction for the fair market value of the stock transferred and avoid capital gains

taxes. A stock portfolio can also be directed to a charitable beneficiary by completing a transfer on death form. By considering a gift from retirement or investment assets – looking beyond checking or savings accounts – donors can bolster the impact of their philanthropy while also maximizing tax savings. Doing so may enable them to make a larger gift with greater impact than they previously thought possible. The important work of charitable organizations is strengthened through philanthropic generosity. We are all better because of this community’s philanthropic spirit. As we say at The University of Akron: We rise together.

Lia Jones, JD, is director of the Center for Gift and Estate Planning at The University of Akron. Contact her at 330-972-2819 or LiaJones@uakron. edu.

A JONES

YOUR TEAM FOR TRUSTS & ESTATES Charles F. Adler

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Charitable gifts: balancing donor intent and institutional flexibility By ELLEN E. HALFON, Case Western Reserve University

lthough tax planning is often suggested as an incentive for charitable giving, the primary reason individuals make charitable gifts is their emotional connection and passion for a specific mission or charitable need. While unrestricted gifts provide optimum flexibility for charities, many donors desire restrictions of purpose, spending/timing of a gift and/or name recognition in perpetuity. Aligning a donor’s philanthropic passion with a charity’s mission can best be accomplished with a gift agreement that thoughtfully reflects the parties’ mutual understanding of how a gift will further both the donor’s and charity’s goals— something Case Western Reserve University strives to accomplish with our philanthropic partners. For example: CONFIRM THAT THE DONOR’S GOALS ARE CONSISTENT WITH THE CHARITY’S MISSION/ OPERATION AND WILL STAND THE TEST OF TIME : For both lifetime and estate gifts, donor restrictions as to use, timing, etc., should be vetted to ensure they are consistent with the charity’s mission, governance and applicable law. Overly restrictive conditions without flexibility might not be feasible, create complications for future use or become obsolete. ANTICIPATE POSSIBLE CHANGES IN CIRCUMSTANCES/ NEEDS: Many charities include a “variance” clause in their gift instruments and/or governance to allow for modification when a purpose becomes impossible or impractical. Gift agreements can also provide for an alternate contingent use or a method for modification that includes consultation with the donor or other designees. Such provisions can help avoid the need to

seek approval for changes from the attorney general and/or court. CONSIDER DONOR RECOGNITION AND NAMING RIGHTS: How and whether a gift is publicized should be mutually agreed on by the parties. Some donors prefer anonymity or require approval of any publicity. Where naming rights (as in a building or space) are included, the gift agreement should contemplate a change in purpose or physical nature of the space named. Some organizations may even want the right to remove the name of a donor associated with criminal or moral impropriety. PROVIDE FOR POST-GIFT STEWARDSHIP: Regular communication/reports to and with donors and their families furthers both donor oversight and institutional accountability and can also cultivate future giving by the donor’s family. Legal claims by a donor’s family that a charity failed to honor the donor’s intent are financially and emotionally costly, can face challenges of “legal standing” and risk damaging donor confidence and institutional reputation. Thoughtful communication and carefully drafted gift agreements help provide a mutually beneficial balance between a donor’s intent and the need for institutional flexibility. At Case Western Reserve University, we are committed to working with donors to ensure their passion and our mission for education are aligned and can benefit generations to come. Ellen E. Halfon, JD, is senior philanthropic advisor at Case Western Reserve University. Contact her at 216-368-2630 or Ellen.Halfon@case. edu.

HALFON

ndividuals and families who aim to deepen their philanthropic activity often think first of a private foundation. Family engagement, hands-on grantmaking, name recognition and legacy make private foundations an attractive solution. However, donors often do not realize that private foundations have their costs: administration, tax consequences, minimum distribution requirements and tax returns. One popular alternative to a private foundation is the donor-advised fund, given its simplicity. However, less well-known is the supporting organization. It offers some of the best features of the private foundation with less cost and hassle. WHAT IS A SUPPORTING ORGANIZATION?: A supporting organization (sometimes referred to as a “supporting foundation”) is a separate nonprofit corporation with its own identity, board of trustees/directors and grantmaking mission. What distinguishes a supporting organization from a private foundation is its status as a public

charity. This status derives from its close affiliation with and “support” of the mission of another public charity such as a university, hospital or local community foundation. The supporting relationship and public charity status enable the supporting organization to provide maximum benefits to a donor under federal tax law and avoid many of the burdens of private foundations. Federal law recognizes three types of supporting organizations. The model donors will most likely encounter at local community foundations is analogous to a parent-subsidiary relationship. In this arrangement, a donor or donors make a contribution to fund the supporting organization. The community foundation (the supported public charity) elects a majority of the supporting organization’s board of directors or trustees. The donor or his/her representatives (usually family members) in turn elect the balance of the board. The minority status of the donor trustees is necessary to qualify the supporting organization as a “public charity” rather than a “private foundation.” Despite their minority status, the donor-elected trustees may actively participate in the governance of the supporting organization. They may

serve as officers, recommend and vote on charitable grants, craft a mission statement and participate in setting investment and spending policies. In short, the donor/family trustees of a supporting organization can experience all the same kinds of activities as they would in a private foundation. This includes using the supporting organization as a platform for engaging multiple generations of a family in a charitable mission and legacy. It is vital to note that demonstrated adherence to corporate formalities is essential to maintaining the supporting organization’s public charity status and accompanying advantages. A supporting organization may have broad latitude in charitable grantmaking provided that grants are consistent with the affiliated public charity’s mission. Grants must be made for charitable, educational or religious purposes; they cannot benefit a donor or other private individuals. Unlike private foundations, supporting organization grants may not reimburse donors or family for personal expenses incurred on supporting organization business (e.g., travel expenses). ADMINISTRATION: Running a supporting organization is the

responsibility of the affiliated public charity rather than the donor. The public charity handles grant payments, maintains records, invests assets and prepares the supporting organization’s annual IRS and state filings. In addition, supporting organizations affiliated with local community foundations assign dedicated professional staff who serve as consultants on grantmaking and philanthropy. The staff can manage annual grant meetings, act as liaisons to grantees and generally carry out the work of the supporting organization. The supported public charity may charge fees to cover back office and professional services, but these should be significantly lower than the cost to a private foundation to accomplish the same tasks through paid staff or outside professionals. The potential tax and cost efficiencies of a supporting organization leave more assets available for charitable grantmaking. CONTRIBUTIONS AND TAXES: The public charity status of a supporting organization presents significant tax advantages over a private foundation. Most notably, unlike private foundations, supporting organizations have no minimum annual grant requirements and

do not pay tax on investment income. Cash gifts to a supporting organization are deductible up to 60% of a donor’s adjusted gross income. The limit for private foundations is 30% of AGI. Deductions for gifts of long-term capital gain property receive more generous deduction treatment than similar gifts to private foundations. The supporting organization may be the ideal solution for individuals and families who like the idea of taking their philanthropy to the next level. It offers many of the most appealing traits of the private foundation, favorable tax treatment and fewer costs. The ultimate decision is unique to each donor’s situation and priorities. Of course, you should always consult with legal and tax advisers to carefully evaluate the different charitable vehicles to chart the path that best aligns with your goals and expectations. Matthew A. Kaliff is assistant director of endowment development at Jewish Federation of Cleveland. Contact him at 216593-2831 or mkaliff@ jcfcleve.org.

KALIFF

Support the causes and organizations you care about most by creating a lasting legacy for the Jewish future. It’s easier than you might think! To learn more about charitable gift and estate planning strategies that can benefit you and your community, please contact Carol F. Wolf at cwolf@jcfcleve.org or 216-593-2805.

A PROJECT OF THE JEWISH FEDERATION OF CLEVELAND

jewishclevelandgifts.org

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Life settlements may harness value from insurance By JEFFREY WASSERMAN Oswald Specialty Life Insurance Cos.

or more than 20 years, life settlements have been a little known, yet powerful tool that provided individuals over age of 70 a way to unlock value in their existing life insurance policy. In its basic form, a life settlement transaction involves a policy owner, the seller of the life insurance policy and an institutional investor, the buyer. The benefit to the seller is that the buyer purchases the policy for an amount greater than the policy’s cash value. This yields the seller more value than they would otherwise have received if they cashed in the policy. WHY SELL A LIFE INSURANCE POLICY?: There are many types of policy owners who are interested in selling a life insurance policy. Some are individuals who no longer need the policy or do not want to continue paying premiums. Another ownership type is a trust/trustee who finds a policy no longer meets the original estate planning needs of the insured. Finally, corporations once had a buy-sell or key person need that no longer exists.

In any of these cases, sellers have the potential to realize up to four to five times more than the policy cash value through a life settlement transaction. Even those who own term insurance have the potential to sell a policy that otherwise has no value. CURRENT STATE OF LIFE SETTLEMENTS: The industry has dramatically evolved since the early 2000s. Many state insurance departments have heavily regulated the industry, and new laws have been put into place to protect the best interest of the policy owner/seller. Also, the market for sellable policies has expanded. A life settlement is no longer a transaction for someone over the age of 70 who has health impairments. We are now seeing healthy individuals in their mid-60s cash in on their unwanted policies. Even with market advancement, studies have shown that, on average, $200 billion of life settlementeligible policies are lapsing or being surrendered each year. Furthermore, the data show that nearly 90% of all universal life insurance policies issued are either lapsed or surrendered. These are staggering numbers considering

there could potentially be a more lucrative alternative. MANAGING YOUR LIFE INSURANCE: Life Insurance is an asset, and as such, should be reviewed by a professional on a regular basis. The prolonged low interest rate environment has caused many policies to underperform, resulting in policies lapsing prematurely. Insurance carriers’ have begun increasing the cost of insurance in response to low interest rates and increased longevity in the population. As a result, the carriers are

The most important step in reviewing your life insurance portfolio is to determine if you need the coverage. increasing the cost of insurance, which in-turn, increases the policy owner’s premiums. Finally, higher estate tax exemptions may negate or reduce the need for life insurance for estate planning purposes. In any of these circumstances, regular reviews with your advisers could uncover potential problems and/

or opportunities within your existing life insurance portfolio. For people who are relatively healthy and want to maintain coverage, there may also be an opportunity to sell your current policy and use the proceeds to purchase new lower cost life insurance with more favorable contractual guarantees. WHAT TO KNOW WHEN CONSIDERING A LIFE SETTLEMENT: When contacting a life settlement professional, it is important to note there are buyers and there are brokers. Many buyers advertise nationally and offer to work directly with the policy owner to purchase the policy. When working with a buyer, it is important to know that they are an institutional buyer with hundreds of policies in their portfolio and that they are registered with your specific state’s insurance department. Small unregistered or individual buyers should be avoided. Working with a broker provides the owner access to an entire market of state-registered institutional buyers. A broker is an unbiased third party who works on behalf of the policy owner and conducts an auction that maximizes the value of the policy being

sold. Often, the final sales price is more than double the initial offer. When working with a broker, it is important to know how long they have been in the life settlement business, how many buyers they work with and their annual volume of policies sold. Engaging a life settlement professional and going through the bidding process is non-binding, even after the sales proceeds are delivered. The seller still has a period of time during which they can return the funds and retain their life insurance policy. The most important step in reviewing your life insurance portfolio is to determine if you need the coverage. If someone needs their life insurance, can afford it and the policy is competitively priced, they shouldn’t sell it. However, if one or more of those qualifications does not exist, exploring a life settlement transaction may be a prudent exercise. Jeffrey Wasserman is executive vice president and managing director of Oswald Specialty Life Insurance Cos. Contact him at jwasserman@ oswaldcompanies.com WASSERMAN

Pandemic reinforces need for thoughtful planning By DOUGLAS MCCREERY CM Wealth Advisors

t seems that almost every commentator has their own opinion on the extent of permanent change brought about by the pandemic. While no one has a crystal ball, it seems certain that we may never go back to exactly how things were before COVID-19. Some trends that were noticeable before the crisis have accelerated during the past year and likely signal permanent changes in our behavior. Online purchases expanded markedly and have converted many traditional in-store shoppers to the convenience offered by the Internet. All levels of education, from elementary to advanced postgraduate programs, have been compelled to do much more with online learning. The avoidance of traditional business meetings has made Zoom, Teams and similar Internet meeting platforms flourish, demonstrating that in a wide range of situations, in-person business meetings can be a waste of time and resources. Also, the surge in popularity of Internet meetings may usher in a permanent reduction in business travel. The pre-crisis bias against working remotely has eroded and may cause a

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significant long-term reduction in the need for simultaneously basing all of a company’s employees in commercial offices. Another developing trend is a heightened awareness of interdependence of family members across multiple generations. With the sad exception of loss of life among the elderly from COVID, expanding life expectancy is increasing the population of individuals in their nineties and past the age of 100 years. The result is that the children of these elders are commonly into their retirement years, while their own children are enjoying mid-life with young adult children of their own and may often have their own grandchildren. So, an increasing number of the eldest generation has the experience of knowing their great-grandchildren and can even enjoy gatherings with five living generations of the same family. This trend accentuates the need for thoughtful financial planning. As an example, for families with significant wealth, longer planning horizons brought about by increasing life expectancy has made the trustee selection decision much like a game of chance. The decision maker must wager that the person selected (or the bank’s

personnel) will be both competent and caring about the family’s circumstances, potentially for great-grandchildren and even more remote generations. Wealth advisers are evolving a number of strategies to address these issues, but each family is different, and no single approach has universal application. Less clear is the extent that the pandemic will permanently impact our individual view of the world, our sense of well-being and personal objectives.

We may find that the pandemic has changed our perspective on how we live our lives and the positive impact we can have on our family and others that are important to us. While the polio epidemic caused widespread death and disabilities, after the Salk vaccine was introduced in 1953 and was widely administered, there was little evidence that polio had a permanent psychological impact on our society. However, health crises such as the current pandemic offer a significant

opportunity to consider changes we can make in our lives to focus on matters that are most important to us individually and for our families, rather than just returning to the way things were pre-COVID-19. But a renewed focus on the important things in life invokes the question: what brings you joy? How can you increase the amount of your time, energy and money you invest in your family, friends, work and other experiences that bring you happiness? What did you truly miss the most during the shutdowns? How can you make changes to spend more time on these activities? On the other side of this equation, are there things or activities that you thought were essential to your happiness that you now realize you can easily do without, so perhaps you can change your priorities and focus on more important aspects of your life in the future? We may find that the pandemic has changed our perspective on how we live our lives and the positive impact we can have on our family and others that are important to us. While wealth advisers typically focus on financial aspects of our

client’s lives, the COVID-19 crisis has reminded us that our ultimate purpose as advisers is to help our clients live the life they wish for themselves and their family. The core objective of financial planning is to identify and manage issues to help clients think through not only asset management matters, but also human concerns and challenges that individuals and families face throughout their lives. Financial decisions inevitably represent choices and tradeoffs that are part of life, so it is vital to identify and make choices in ways that are consistent with long-term objectives. While there are so many things beyond our control as demonstrated by the past year, by concentrating our efforts on matters we can influence, we will improve our own and our families’ lives.

Douglas McCreery is CEO and managing partner at CM Wealth Advisors.

MCCREERY

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WEALTH MANAGEMENT

Maximize charitable giving impact through life insurance By BENJAMIN MCKELVEY Cleveland Clinic

ife insurance is a significant, but often overlooked, financial resource for donors who want to leverage their assets for greater charitable impact. There are two types of life insurance policies: term life insurance and permanent life insurance. A

donation of a permanent life insurance policy is ideal since a term life insurance policy is only in force for a fixed number of years. Permanent life insurance is paid out to a beneficiary or beneficiaries after the policyholder’s lifetime, provided that the premium payments were maintained. Life insurance offers flexibility as a gift planning tool. The assets a donor would typically use for a gift can be

leveraged as funding for the premium payments on a policy to produce a much larger donation for charity than the donor may have originally thought possible. For example, a donor who intends to make a donation of $10,000 gift of cash or stock to charity could instead obtain a universal life insurance policy with a $100,000 death benefit at a total cost of $12,500 in policy premiums. This cost would be spread across

five years of annual $2,500 premium payments. For an additional cost of just $2,500, this donor could increase their impact by a factor of ten, instead of making the outright gift of cash. And as with the original $10,000 cash donation, this donor’s cash gifts for policy premiums would be deductible against income taxes. Life insurance gifts are also versatile, which is appealing to donors

The Power of Every

Legacy

who would like to make either an immediate or a future impact on charity. When a person donates an existing life insurance policy to the charity of their choice, the actual ownership of the policy is transferred to the charity. The charity can then choose to surrender the policy for its cash value or keep the donated policy in force. The donor can fund the remaining policy premiums with annual cash donations. Donors who make a gift of life insurance can take advantage of several tax benefits. For instance, when an existing policy is donated and then surrendered for its cash value, the donor receives an immediate income tax deduction for the lesser of either the policy’s fair market value or the net premiums that have already been paid. If the donated policy is kept in force by the charity, the donor’s ongoing cash donations for support of the premium payments are deductible against the donor’s income taxes. Another way donors can use life insurance for charitable giving is by taking advantage of their personal insurability, which is an oftenoverlooked asset. Many donors can establish a new life insurance policy

Lifecycle events that create legacy opportunities By KATIE SHAMES The Cleveland Orchestra

he late, great composer and playwright Jonathan Larson wrote, “How do you measure the life of a woman or a man?” As a planned giving gift officer, I am privileged to mark the seasons of life through planned gifts that benefit valued donors and their most cherished institutions. Finding and marking these life events is both a responsibility and an opportunity. This article will expand the traditional ideas of what these lifecycle events look like, taking advantage of them to benefit you, your loved ones and the organizations you care about. Most people think of legacy and lifecycle events as traditional rites of passage: graduations, marriages, births and deaths. These are deeply important events in many of our lives, but there are additional creative ways to think about rites of passage that look increasingly different today than even one generation ago. Single people are now buying real estate on their own rather than waiting for marriage. Entrepreneurship is flourishing among young people, who

are more frequently creating startups and foregoing traditional forms of employment. We are living longer and looking for new opportunities to create meaning in our own life and others’ as well. For those of us who work directly with donors looking for deep and meaningful legacy opportunities, this is truly a wonderful time. Let’s consider these modern situations: INCOME BENEFITS FOR YOU OR YOUR LOVED ONES: We all know the traditional ways charitable gift annuities work: gift over cash or appreciated securities to a charity and receive lifetime income and tax benefits based on age and current percentages. But consider these additional life events that can inspire such a gift: • Provide a jumpstart for a young adult in your life: Investing in a charitable gift annuity, with its attendant tax benefits, can provide helpful income to a child or grandchild who has just bought a first home or started a business. • Plan for extra income in your later years: A desire to travel during retirement can be the impetus to create a deferred gift annuity. Younger adults

can donate appreciated stock (now is an ideal time since the market has been doing so well), get an immediate tax benefit and collect income after the age of 65. • Provide income support for a loved one: Perhaps a relative or loved

We are living longer and looking for new opportunities to create meaning in our own life and others’ as well. one needs a fixed amount over his or her lifetime. Assuming certain thresholds are met, one can simply buy an annuity for another. • Celebrate your 70 ½ birthday: Utilize a required minimum distribution (RMD) from an IRA. • If it’s time to downsize: Donate appreciated real and/or personal property, intellectual property or even mineral rights. FROM GENERATION TO GENERATION: It is no longer a given that children will continue to live in the same city as their parents – which has long-term effects for the bonds between

local institutions and families. Good planning, however, can keep these civic bonds alive and strong. For example, an endowment gift to an arts organization can carry annual recognition and engagement through supported performances. This allows future generations to be involved with the institutions that are most meaningful to you. GET CREATIVE WITH YOUR PLANNED GIVING: The current financial atmosphere makes charitable lead trusts an especially attractive option. The intangible benefit, in addition to the advantageous rates, is the opportunity to celebrate the donor’s impact during his or her lifetime. A charitable lead trust allows life income to go to a benefitting institution, with the remainder to a specified beneficiary upon the donor’s death. In addition to allowing the donor to enjoy the impact of their giving during his or her lifetime, a charitable lead trust also provides the opportunity to continue the conversation about additional gifts. Charitable lead trusts can be funded during both traditional lifecycle events – say the birth of a grandchild – but

also through other situations such as selling a business or downsizing a home and directing the profit toward a gift. In “Leaving a Legacy: A New Look at Planned Gift Donors” commissioned by Giving USA, respondents to the survey indicated that they changed their will two to three times during their life as their own personal circumstances changed. Thus, the answer to the question “When is a good time to have a discussion about a planned gift?” is right now! So, what is the measure of a woman or a man? Jonathan Larson’s “Seasons of Love” describes the perfect impetus for both donor and planner to have “the story never end” by using estate vehicles to improve the lives of future generations while ensuring the future of the institutions we cherish and want to preserve.

Katie Shames, J.D., is the planned giving and major gift officer at The Cleveland Orchestra. Contact her at 216231-8006 or kshames@ clevelandorchestra.com.

SHAMES

Donors who make a gift of life insurance can take advantage of several tax benefits.

For 100 years, we have been at the forefront of discoveries and innovations that have changed healthcare in Cleveland and around the world. The generosity of our donors is an integral part of our history. Whether you’re an estate planner, attorney or financial advisor, you can help your clients create a lasting legacy, and enable Cleveland Clinic to improve the lives of our patients and our communities to make the greatest impact. We look forward to transforming the next 100 years of healthcare together. Visit PowerOfEveryOne.org Call 216.444.1245 Or email giftplanning@ccf.org

and donate it to a charity. The charity takes control of the policy from the start, including its cash value and future policy benefit, while the donor makes a pledge to cover the necessary premium payments to fund the policy. The process for making a gift of life insurance is usually simple to implement and maintain. The easiest option is to change the beneficiary of an existing life insurance policy to a charity. Most insurance carriers can accommodate this process through a basic changeof-beneficiary form. While this option does not provide for an immediate income tax deduction, it does allow donors to maintain control of the policy during their lifetime, enabling them to make a charitable gift while retaining a sense of security against future risk and uncertainty. Cleveland Clinic’s Gift Planning Team is dedicated to working with donors to help Cleveland Clinic transform health care for our patients and shape the future of medicine. Our experienced team of professionals with backgrounds in law, finance and charitable planning is ready to maximize your charitable impact and leave a lasting legacy. If you are interested in making a gift of life insurance to Cleveland Clinic, or in discussing your overall charitable giving strategy, please contact the gift planning team.

“We make a living by what we get, but we make a life by what we give.” —Winston Churchill When you give to The Cleveland Orchestra, you make music a way of life in Northeast Ohio – for you and your loved ones today, and for generations to come. Contact us to learn how you can use your assets to plan a thoughtful gift that benefits you and those you love – and leave an enduring legacy with America’s finest orchestra. Katie Shames 216-231-8006 legacy@clevelandorchestra.com

Benjamin B. McKelvey, Esq, is associate director of gift planning at the Philanthropy Institute at Cleveland Clinic. 211317_CC_Power of every legacy_ad_8.125x10.indd 1

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SPONSORED CONTENT

November 1, 2021

SPONSORED CONTENT

November 1, 2021 S17

WEALTH MANAGEMENT

The case for a durable general power of attorney By MARGARET M. METZINGER Frantz Ward LLP

Durable General Power of Attorney (DGPOA or POA) is a legal document which allows you (the Principal) to designate another person (your Agent) to manage certain financial, health care, lifestyle and other matters on your behalf. A DGPOA is a written expression of your intent and should be drafted to include broad powers for your agent to conduct your business as you would were you able. A valid POA will eliminate any disputes among your family members, friends or business associates about who has the authority to act on your behalf. A power of attorney is effective once it is signed. Most states will accept and enforce an out-of-state POA. However, if you move to another state, you should consult with a local attorney to ensure your POA is still valid and enforceable. The person you designate as your agent does not have to reside in the same state as you but should be someone who has knowledge of your assets, property and business interests. A POA is only valid during your lifetime; therefore, an agent may not make decisions or transact business for you after your death.

A primary benefit of a DGPOA is that it remains in effect if you become incapacitated and cannot make decisions for yourself. However, a DGPOA also gives your agent broad authority to manage your financial and personal affairs while you are fully competent. Under these circumstances, you may want to execute a “limited” POA to be used for specific transactions. For instance, you could use a limited POA to allow your agent to engage in real estate transactions on your behalf, but you may also need a separate limited POA to authorize an agent to act for you when you do not have sufficient knowledge to manage certain financial or legal matters. If your agent is going to handle real estate transactions, the POA must be recorded with the county recorder’s office where you reside. Your POA should permit your agent to access your financial accounts to pay for your support, health care, housing needs and other expenses. Your agent can also be authorized to file your taxes, buy or sell real estate, obtain a mortgage, receive bank statements, access your safety deposit box, collect debts owed to you, operate your business, make gifts,

engage in litigation on your behalf and make investment decisions. If properly articulated in the document, your agent can apply for governmental benefits such as veteran’s and Medicaid benefits and social security. A general DGPOA may contain language that allows your agent to authorize and consent to medical or

A valid POA will eliminate any disputes among your family members, friends or business associates about who has the authority to act on your behalf. dental procedures and to arrange for the services of a companion, convalescent care, extended care or nursing home care. Designating an agent can be tricky because you need to appoint someone you trust who also understands the nature of your business and assets. Common options include designating your spouse, a relative or a close friend. Keep in mind that giving your agent the POA makes it easy for the agent to misuse his or her authority, especially if

you are incapacitated, so it is important to designate a trusted confidant. Creating a POA while you are healthy and fully able to manage your finances and property provides you with the security that if you become incapacitated or if you are overseas or otherwise unable to transact business, your designated agent (as opposed to a court-appointed guardian) can immediately step in to assist you. The guardianship process can be complicated and take several weeks to complete and may not be finalized in time to make important decisions on your behalf. While an agent has broad authority under a general POA, you can carve out transactions which you do not want your agent to handle. For example, your documents can be drafted to prevent your agent from creating a trust and modifying or terminating your existing will or trust. To the contrary, your POA should include language that requires your agent to preserve your existing estate plan. Likewise, you may want to prevent your agent from changing beneficiary designations on life insurance, retirement accounts or other assets. The document can be drafted with such exclusions.

Your agent is generally prohibited from changing your POA or transferring it to another person unless you have already identified a successor or alternative agent in the POA. Finally, your agent is bound to uphold his or her fiduciary duty to act in your best interest and is prevented from self-dealing or acting in his or her own interests. There is generally no court supervision over your agent, so if your agent breaches these duties, you or your next of kin may have to initiate litigation to recover any misappropriated assets.

Margaret M. Metzinger is a partner at Frantz Ward LLP. Contact her at 216-515-1075 or mmetzinger@ frantzward.com.

METZINGER

Defining current wealth management themes By DAVID ALLEN J.P. Morgan Private Bank Cleveland

robust periodic review of your finances and tax liabilities is standard practice. But this fall, we recommend starting your review a little earlier. There is so much uncharted territory to cover: the evolving global pandemic, possible changes to U.S. tax law and the all-time highs of the U.S. equity markets. Give yourself the gift of more time to connect with advisers, make thoughtful decisions — and act. Consider the following themes as a path toward making those discussions as effective and efficient as possible. 1. REVIEW YOUR PORTFOLIO: Equities kept soaring in 2021, and our market outlook remains positive. Even so, make sure you understand how you’re currently positioned and check that your overall strategy is still aligned with your goals. Pay particular attention to any holdings that have become a “concentrated position,” which might disrupt your financial future if markets were to turn. We’re now focused on three pillars that help with portfolio diversification:

• Traditional sources: Traditional diversifiers, such as core fixed income and dynamic asset managers who target low correlation to risk assets, can help dampen volatility. • Alternative sources: Hedge funds with less correlated return streams can serve as a valuable complement to traditional portfolio buffers. • High-quality growth exposure: Companies with strong balance sheets and participation in lower-beta strategies can help protect capital on the downside while allowing participation on the upside. 2. REMEMBER THE IMPORTANCE OF CYBER AND FRAUD PROTECTION: Losses due to fraud reported in 2020 totaled over $1.5 billion, according to the Federal Trade Commission (FTC), as fraudsters grew in sophistication and their targets failed to keep pace. Take a multi-layered approach to preventing cybercrime and fraud by creating a fraud prevention plan, and find a financial partner who can provide constantly evolving defenses that detect and prevent potential threats. In addition to finding a financial partner to help protect

your wealth, contemplate a few key questions; for example: Has your business engaged partners to review your current threat detection? Are you getting cyber guidance, education and timely content? 3. REVIEW YOUR TAX AND ESTATE PLAN: In a low interest rate environment, U.S. investors may be able to take advantage of certain lending techniques, and trusts that leverage those rates, to transfer wealth with little to no gift tax consequence. However, recently proposed policy changes could mean that the environment will change, and soon. For business owners, this may be particularly important to consider in terms of succession planning. The new economic dynamic of a post-pandemic world has spurred corporate merger and acquisition activity, and we see that demand lingering well into 2022. Beyond the tax implications of selling a business, consider factors like executive compensation as it relates to your longterm wealth goals or an earnings analysis as you prepare your business for a sale. 4. CONSIDER YOUR WEALTH’S IMPACT AND PURPOSE : Today,

many of us are more interested in utilizing investments and charitable donations to make an impact than ever before. For the investor, Environmental, Social and Governance (ESG) investing may be of interest. From renewable energy to social equity and equality, the momentum to shift toward a more sustainable economy continues to accelerate. We’ve identified many investment opportunities that align with these trends and investing sustainably does not require a performance tradeoff. If interested in impactful giving, there are ways to make the most of your charitable dollars. For example, if you give to a large number of charities and want to simplify your tax reporting, two options to consider include giving to a donor-advised fund (DAF) or a private foundation. Both strategies allow you to make a single irrevocable contribution to “front-load” multiple years of gifts (or, if you prefer, you can make multiple gifts over a period of years). You generally will receive a charitable income tax deduction in the year of the gift equal to the fair-market value of your contribution. Similar to previous market shocks,

the post-COVID 19 environment has made clear that a comprehensive wealth management strategy is crucial. Take the time to sit down with a financial professional to outline a plan that works for you and your family. Consider using the current themes identified above as a basis for that discussion. Creating a plan and sticking to it is the first step to securing a brighter future. David Allen is executive director at J.P. Morgan Private Bank Cleveland. Contact him at 216-781-2597. ALLEN J.P. Morgan Private Bank provides customized financial advice to help wealthy clients and their families achieve their goals. Clients of the Private Bank work with dedicated teams of specialists that bring their investments and financial assets together into one comprehensive strategy, leveraging the global resources of J.P. Morgan across planning, investing, lending, banking, philanthropy, family office management, fiduciary services, special advisory services and more. More information about J.P. Morgan Private Bank in Cleveland is available at privatebank.jpmorgan.com/Cleveland.

An estate needs a plan like a house needs a foundation. We help families and businesses create a solid base for achieving their long-term goals.

David Weibel

Matthew Kadish Margaret Metzinger

For families, our estate plans are tailored to their specific needs, including the special needs of beneficiaries, asset protection, and tax planning. We also provide advice on family goals and governance, and establish and represent charitable trusts, private foundations, and donor advised funds within public charities. For business owners, we advise on business succession matters, including transitioning a business, recruiting, developing and retaining managerial talent, and owner exit strategies, including the formation of ESOPs and the sale of stock to ESPOPs. Contact one of our Estate Planning attorneys today. David Weibel – (216) 515-1072 – dweibel@frantzward.com Margaret Metzinger – (216) 515-1075 – mmetzinger@frantzward.com Matthew Kadish – (216) 515-1078 – mkadish@frantzward.com

Ralph Higgins

Ralph Higgins – (216) 515-1617 – rhiggins@frantzward.com William Duncan

William Duncan – (216) 515-1073 – wduncan@frantzward.com

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