20091116-NEWS--11-NAT-CCI-CL -- 11/9/2009 2:41 PM Page 1 planning.pdf · Your estate plan may well...

Crain’s Cleveland Business Custom Publishing

20091116-NEWS--11-NAT-CCI-CL_-- 11/9/2009 2:41 PM


ESTATE PLANNINGS-2 November 16-22, 2009 Advertisement

For all the time and effort you’ve put into buildingyour wealth, you deserve peace of mind in return. The kind that comes from knowing your assets areprotected, your wealth will be distributed as you wish,and your future is as secure as you can make it.

Whether you need to build an estate plan fromscratch, or ensure your current plan is in sync withtoday’s rapidly changing laws, our attorneys can help.We have the specialized knowledge and experience to manage all aspects of your estate.

Have you considered how taxes will impact yourwealth? Have you planned for charitable gifts…long-term care…incapacity? Do you have a living will?Have you drafted a letter of instruction to guide yourheirs when you’re gone?

We can assist in these areas and help you manage yourassets in ways that will minimize the probate processand simplify post-death administration.

Having a solid plan in place for tomorrow makesenjoying today that much easier. Talk to us about how to get started.

Gary B. Bilchik, Partner

Chair, Estate Planning and

Probate Practice Group

Licensed to practice law in Ohio and Florida

Jeffry L. Weiler, Partner

OSBA Board Certified

Specialist in Estate Planning,

Trust and Probate Law

Licensed to practice law in Ohio and Florida

Live for today.Plan for tomorrow.

Cleveland | Columbus | Philadelphia

Shanghai | Wilmington | www.beneschlaw.com

Planning for the future critical

The Estate Planning Councilof Cleveland, in conjunc-tion with Crain’s ClevelandBusiness, is pleased to pre-

sent our annual Estate PlanningSection. For more than a decade, it has been the Council’s goal withthis publication to offer the com-munity valuable information relatedto financial, retirement, insurance,business succession, estate andcharitable planning. The articles andcommentary on the pages that follow have been provided by someof Northeast Ohio’s most experi-enced professionals in these fields.

As we look back over the yearsince the Council’s Estate Plan-ning Section last appeared in November 2008, a myriad ofevents have occurred that continueto shape the financial world inwhich we live. From the perfor-mance of global markets to finan-cial issues facing our state andcities, the need to be ever-obser-vant of our personal “economic”picture is greater than ever. It isessential to evaluate how yourpersonal needs, values and goalsfor leaving a legacy have been affected and to consult with professionals to advise you on

the methods, techniques anddocuments available to ensurethat each is being met.

Whether you are concernedabout transitioning a family-ownedbusiness, planning for retirement,creating a legacy for your family orfulfilling philanthropic goals, thearticles in this section will illustratethe complexities of these issuesand the benefit of having compre-hensive, well-developed tax and estate planning advice as part ofthe planning process.

The primary purpose of the Estate Planning Council of Cleve-land is to provide a forum for ourmembers to receive ongoing edu-cation and up-to-date informationon the laws and policies affectingour clients and their personal plans.

Our goal is to provide our mem-bers with the resources they needto effectively counsel their clientsand to ensure that they have the

tools to deliver a well-crafted andthorough plan to provide for yourfamily, your legacy and yourself.

As you consider your personaland estate planning needs, the Estate Planning Council can serveas a valuable resource. The EstatePlanning Council of Cleveland iscomprised of some of the most experienced professionals whowork in the personal, estate, chari-table and financial planning indus-try. Our members are ready to provide you with thoughtful, tax-effective and value-based planning.Our web site (www.epccleveland.org)can be a useful resource to locatethose local professionals to assistyou with your planning needs.

We are pleased to be able toshare the insights and commentaryof our members and other areapractitioners with you in this annual publication. Whether youare reading these articles as a clientor as a professional, we hope thatyou will find the information insightful, helpful and valuable. ■

Erica E. McGregor, Esq., is president of theEstate Planning Council of Cleveland andan attorney at Tucker Ellis & West LLP inCleveland.

AA mmyyrriiaadd ooff eevveennttsshhaavvee ooccccuurrrreedd tthhaattccoonnttiinnuuee ttoo sshhaappee tthheeffiinnaanncciiaall wwoorrlldd iinnwwhhiicchh wwee lliivvee..

Crain’s Cleveland Business Custom Publishing staff

Editor:Mike Malley([email protected])

Copy editor:Cheryl Higley

Cover design:Kristen Wilson([email protected])

Page designers:Kathy Carr ([email protected])Joel Hammond ([email protected])

LIFE INSURANCE

S-5 “Dead peasant” life insurance

Life insurance trusts S-14

S-6 Converting from a traditional to Roth IRA

Funding college education

Charitable gift annuities

S-9

S-12

ON THE COVER

TABLEOFCONTENTS

S-4PERIODIC REVIEWRegularly review your estate plan and adjust it, if necessary, according to any economic or familial changes.

S-6CULTURAL BENEFACTORSRules governing the donations of valuable personal property like art andfurniture to nonprofits has changed.

S-4

S-7Special Needs Trusts

Supporting foundations

Fixing a broken trust

Grantor Retained Annuity Trusts

Charitable bequests

Intentionally Defective Grantor Trusts

Community foundation giving

Donor-advised funds

S-8

S-11

S-13

S-14

S-15

S-15

TRUSTS AND GIFTS

OTHER FEATURES

S-2Estate PlanningCouncil message

Movie-style planning

Estate taxes

Business succession

S-7

S-8,16

S-10

S-11S-13

S-16

S-10 Buy-sell agreements

Leaving a legacy

Powers of attorney

Funeral planning

20091116-NEWS--12-NAT-CCI-CL_-- 11/11/2009 1:56 PM Page 1

You encounter the 13 Wealth Issues every day. Now address them with an advisor.

# 1 Investment Strategies# 2 Appropriate Insurance Coverage# 8 Lifetime Giving to Children and Descendants

Every day you have to make decisions regarding your wealth. And with a Key Private Bank advisor, you can make those decisions easier with our 13 Wealth Issues: a comprehensive way we look at your wealth and how to best manage it. Combined with our solid reputation, unbiased advice and personalized approach, this process makes sure we’re not just taking care of your every day, but taking care of your tomorrows.

Trust ServicesInvestment Management Private Banking

Banking products and trust services provided by KeyBank National Association, Member FDIC and Equal Housing Lender. Insurance products offered through KeyCorp Insurance Agency USA Inc. (KIA). KIA is affiliated with KeyBank National Association (KeyBank). Investment and insurance products are:

KIA and KeyBank are separate entities, and when you buy or sell securities and insurance products you are doing business with KIA, and not KeyBank. Key.com is a federally registered service mark of KeyCorp. ©2009 KeyCorp. CS94033

To learn more about the 13 Wealth Issues call Louisa Guthrie, Key Private Bank Market Manager at 216-828-7877, or visit key.com/kpb.




University Hospitals Makes the Difference.

Siegals’ Gift to Advance Cure for Pediatric Cancer

Strong believers in the medical possibilities of stem cell research, philanthropists Anita and Michael Siegal are making a difference in the lives of pediatric cancer patients and their families. In 2008, the Siegals gave a leadership gift to establish the Anita H. and Michael D. Siegal Chair in Pediatric Experimental Transplantation and Stem Cell Biology at University Hospitals Rainbow Babies & Children’s Hospital. “Stem cell biology is the future of medicine, and children are the future of our world. This gift is meant to help cure disease and provide a more promising outlook for sick children,” says Anita Siegal.

At University Hospitals, the Diamond Legacy Society recognizes and celebrates individuals, like Anita and Michael Siegal, who establish an endowed chair or make a planned gift in support of our mission – To Heal. To Teach. To Discover.

For more information on the Diamond Legacy Society at UH, call 216.983.2200 or visit uhgiving.org.

Michael and Anita Siegal

Regularly review estate plan

Is your estate plan up to date?Your financial needs and personal situation are likely tochange over time. A regular

checkup of your estate plan canremind you to take care of impor-tant details — such as revisingyour will or changing beneficiary designations — and help preventunintended consequences.

Here are some situations thatmay prompt an estate plan review:

CHANGE IN ASSET VALUES:Your estate may include assetsthat have grown in value sinceyou established your estate plan.Perhaps you have acquired more propertyor sold your business.Your present planmay no longer accomplish the objec-tives you originally intended, such as protectingparticular assets and minimizingtaxes. If that is the case, you maywant to give more to charityand/or increase the amount you

plan to leave to loved ones. You also should review your

estate plan if the value of your estate has decreased or if you’vemade specific gifts in your will ofassets that you no longer own.You don’t want to leave yourbeneficiaries empty-handed.

CHANGE IN FAMILY SIZE:Births, deaths, marriages,

divorces — any ofthese events canchange how youwant your assetsdistributed.While a birth

or marriage may add a potential beneficiary toyour estate, a death or divorce is likely to have the opposite effect.

FAMILY BUSINESS CHANGES:Your estate plan may well deter-mine the future of your business.A tax-efficient transfer of owner-ship will require careful planningwith professional help. Changesin management, size, legal formand other conditions may requiredifferent terms in your estateplan to meet your future objec-tives.

RETIREMENT: Although yourretirement may not have an immediate impact on your estateplan, it will eventually. For example,instead of adding to your retire-ment savings, you may beginwithdrawing assets for income.Knowing your retirement incomeresources can help you decidewhen, and if, it is possible totransfer property to your familyand other beneficiaries.

RELOCATION: Estate and deathtax laws differ from state to state. Ifyou move to another state, findout the rules and revise your planaccordingly.

Special Needs Trusts protect assets for disabled

Special Needs Trust (SNT,sometimes called a “supple-mental needs trust”) is atrust designed to supple-

ment the means-tested govern-ment benefits of a beneficiarywith a disability.

By maintaining eligibility forcash income and health insur-ance, a family maystretch its collective resources to care for theindividual with disabili-ties over time.

What would promptsomeone to establish anSNT? For example:

■ A father is planninghis estate and he has achild with a disability;

■ A successful plaintiffin a personal injury action has a permanent disability and will losehis employer-provided health insurance;

■ A spouse or child in a divorce case has a disability andsupport payments will reduce hisor her SSI;

■ An aged or disabled widow istrying to become eligible for Medicaid.

Not all benefits are “means-tested” — just Medicaid and SSI.

SNTs can be living trusts or testamentary, stand-alone or partof a will or trust. They may beself-settled (“d4A” trusts or “Med-icaid Payback Trusts,” or the localCFMF Pooled Trust). At the bene-ficiary’s death, any remainingfunds go to reimburse the state. Athird-party SNT (usually wholly

discretionary, with nopayback provision) is typ-ically set up by a parentor grandparent to hold adisabled beneficiary’sshare of the estate.

Finding the right Spe-cial Needs Trust can pre-serve government bene-fits so that the beneficiaryexperiences a net gainand the funds (whether

their own or from another person)make a real difference in theirlife, instead of simply relievingthe government of its responsibilityto pay benefits. ■

Janet Lowder is a principal with Hick-man & Lowder Co., L.P.A., with officesin Cleveland and Elyria. This article wasadapted from a presentation at the2009 Stetson University College of LawSpecial Needs Conference. Contact herat 216-861-0360.

JANETLOWDER

TAX LAW CHANGES: It is crucial to stay abreast of tax lawdevelopments. Many new provi-sions in the federal tax law arebeing phased in over the nextseveral years. Make sure your estate plan is compatible withcurrent law and that it adequatelyreflects your wishes.

Major life events and changingtax laws make it a priority to

have your estate plan reviewed by a professional on a regular basis.

It’s your money. Plan, protectand pass it on. ■

Tom Danford and Dan Miltner are investment solutions specialists for Key Private Bank in Cleveland. Contact them at 877-634-2968 or visit www.key.com.

Changes in life, assets and tax law can make an impactAAlltthhoouugghh yyoouurr rreettiirreemmeenntt mmaayy nnootthhaavvee aann iimmmmeeddiiaattee iimmppaacctt oonn yyoouurr eessttaattee,,iitt wwiillll eevveennttuuaallllyy..



ESTATE PLANNINGAdvertisement November 16-22, 2009 S-5

Tanzie D. AdamsCharles F. Adler, IIIRichard A. AhrensThomas D. AndersonGraham T. AndrewsOakley V. AndrewsKemper D. ArnoldRosanne J. AumillerJames S. AussemP. Thomas AustinCharles J. AvarelloBarbara Ann BainMolly BalunekPeter BalunekAlexander D. BarclayLawrence C. BarrettStephen BaumgartenEdward J. BellMichael D. BensonGina Marie BevackMohammed J. BidarGary B. BilchikJohn J. BindasMichelle M. BizilyAlane BoffaJason BogniardDaniel L. BonderChrist BoukisLaura BozellCaprice H. BraggRoberta S. BrakemanHerbert L. BravermanJames R. BrightDavid J. BrownDon P. BrownC. Richard BrubakerRobert M. BruckenArmond D. BudishMartin J. Burke, Jr.Robert C. BurkhartAmanda M. BuzoJanice M. CackowskiJ. Donald CairnsPeter H. CalfeeCarl CamilloNancy H. CanaryWilliam G. CasterSal A. CatalanoDarian ChenMark A. CiullaR. Michael ColeWarren ColemanMaury Condon, Jr.Jeffrey P. ConsoloDavid E. CookJames I. W. CorcoranHeather A. CornellGreg S. CowanSteven CoxThomas H. CraftMichelle CruzJean M. CullenM. Patricia CullerRand M. CurtissCheryl A. D'AmicoStephen M. DarlingtonHolly N. DenhamRebecca DentThomas A. DeWerthDeAnna DeWittCarina S. DiamondDavid S. Dickenson, IIJames G. Dickinson

Gary L. DinnerJeannemarie DiPadovaLynda DolandKara DowningTimothy DoyleWilliam A. DuncanJames R. DunnHoward B. EdelsteinElaine Beth EisnerMichael E. ErneweinPatrick J. ErtleSusan M. EvansDarren A. EwaskaFrank FantozziJohn Thomas FayCharles E. FederanichWilliam C. FerryJ. Paul FidlerJulie A. FischerRobert E. FleckKimberly A. FlorcoskyRobert B. FordPatricia L. FriesBeverly GansStacey M. GardellaStephen H. GariepyRao K. GarudaRichard GaryJames E. GaydoshChristopher GeissThomas M. GencoThomas C. GilchristStephanie M. GlavinosCatherine Klima GletherowRonald J. GogulJohn C. GoheenJames A. GoldsmithSusan S. GoldsteinTom S. GoodmanLawrence I. GouldScott GoyetcheKaren GrecoMarianne GregaSally GriesAnne Marie GriffithNancy Hancock GriffithCharles M. GrimmAlan GrossJames P. GruberMarianne GymerPatrick A. HammerRonald F. HansonDana G. HastingsLawrence H. HatchRobert A. HauptmanAlbert G. Hehr, IIITheodore N. HellmuthJames M. HenrettaJames R. HickeyMark W. HicksRobert HigginsJean M. HillmanJoanne HindelKenneth G. HochmanMark L. HoffmanLeroy R. Hoffman, Jr.Doris HoganRonald D. HolmanHarold L. HomRobert S. HorbalyJames M. HorkeyMichael J. HorvitzKaren Jackson

George A. JacobsPaula JagelewskiBarbara Bellin JanovitzRobert B. JensenTheodore T. JonesJames O. JuddMatthew F. KadishStephen L. KadishRonald L. KahnJoseph W. KampmanKaren J. KannenbergKimon P. KarasWilliam E. Karnatz, Sr.William E. Karnatz, Jr.Bernard L. KarrHoward KassEdmund G. KauntzTheresa M. KeanDavid B. KearnsMichele KeithLesley KellerVeena KhannaWoods King, IIIRichard B. KiplingerStuart J. KleinerRaymond G. KlincPaul S. KlugVictor G. KmetichDaniel R. KohlerJames R. KomosThomas H. KonkolyWilliam H. KoptisJ. Joseph KorpicsHarvey KotlerRoy A. KrallPeter G. KrattEugene A. KratusThomas W. KrauseBruce A. KretchJames B. KrostThomas J. LaFondCorissa L. LandphairWilliam P. LangeGary E. LanzenDonald LaubacherDaniel J. LaulettaBerinthia R. LeVineHerbert B. LevineWendy Sue LewisKeith M. LichtcsienJames LineweaverDavid F. LongTed S. LorenzenAmy LoriusAdrienne LoveSandra C. LucasCharles S. LurieRobert M. LustigMatthew J. D. LynchJames M. MackeyDavid S. MaherStanley J. MajkrzakLaura MaloneKaren T. ManningWentworth J. Marshall, Jr.Melissa L. MarvinMichael W. MatileMark J. McCandlessNancy McCannKaren M. McCarthyLarry E. McCoyDaniel J. McGuire

Joseph M. MentrekBruce MerrellMark A. MihalikLawrence MihevicWilliam M. MillsDaniel F. MiltnerWayne D. MinichGinger F. MlakarM. Elizabeth MonihanKenneth R. MorganPhilip G. MoshierSusan C. MurphyHoyt C. MurrayNorman T. MusialChristine MyersLisa Wheeler NeelyDelos T. NelsonRobert NemethMichael T. NovakAnthony J. NuccioMichael J. O'BrienLacie L. O'DaireLinda M. OlejkoLeslie A. O'MalleyCharles J. O'TooleJodi L. PenwellDominic V. PerryAlex S. PetrusCraig S. PettiDaniel W. PhillipsThomas PillariJohn W. PinterCandace M. PollockMary Ellen PotterDouglas PriceMaria E. QuinnSusan RaceyJeffrey H. ReitzesLinda M. RichR. Andrew RichnerElton H. RiemerFrank M. RizzoLisa Roberts-MamoneKenneth L. RogatCarrie A. RoskoEdmund W. RothschildLarry RothsteinRennie C. RutmanPatrick J. SaccognaRobert SandersJennifer A. SavageBradley SchlangL. Leanne SchwindVassie Scott, Jr.June A. SeechJohn S. SeichDoris Seifert DayEmily ShacklettCarl W. ShallenbergerSally SharabaLeeDaun SharmaAndrea M. SheaJohn F. ShelleyLea R. SheptakNick ShofarRoger L. ShumakerDennis J. SicilianoBarbara F. SikonSandra M. SkocirMary Jean SkuttMark A. SkvoretzMichael J. Sliman

John M. SlivkaMartha B. SlukaN. Lindsey SmithCristin SnodgrassArthur K. Sobczak, IIIMichael L. SolomonMichael A. SpielmanRichard T. Spotz, Jr.William L SpringM. Randal StancikCindy L. SteebKimberly SteinLaurie G. SteinerSaul StephensJohn M. StickneyThomas M. StickneyRobin R. StillerRobert H. StockTimothy M. SullivanJohn E. Sullivan, IIILinda DelaCourt SummersScott SwartzJoseph N. SwiderskiNatalie Bell TakacsYeshwant K. TamaskarJohn R. Telich, Sr.Mark M. TepperDavid D. ThomasDonald A. ThompsonDonna ThranePhilip TobinEric TolbertFloyd A. Trouten, IIIMark A. TrubianoPatrick J. TulleyDiann VajskopRobert A. ValenteNeil T. Van UumMissia H. VaselaneyJoseph Frank VerciglioCatherine VeresAnthony ViolaMary Eileen VitaleMichael A. WalczakKimberly A. K. WalrodKittie WarshawskyRobert W. WasaczNeil R. WaxmanRonald F. WayneMichael L. WearStephen D. WebsterDavid G. WeibelPaul A. WeickJeffry L. WeilerKatherine E. WensinkElizabeth Wettach-GanocyMarcia J. WexbergTerrence B. WhalenSharon Kai WhitacreScott A. WilliamsTeresa M. WisniewskiNelson J. WittenmyerMatthew D. WojtowiczAlan E. YanowitzJames D. YurmanJeffrey M. ZaborMichael J. ZeleznikDavid M. ZoltJack ZugayShawn D. ZuratGary A. ZwickDonald F. Zwilling

THE ESTATE PLANNING COUNCILOF CLEVELAND

PresidentErica E. McGregor

Vice PresidentRadd L. Riebe

SecretaryLisa H. Michel

TreasurerMarie L. Monago

Program ChairBeth M. Korth

Immediate Past PresidentChristopher P. Jakyma

The end of ‘dead peasant’ life insurance

Many compa-nies insure the lives of employees in

order to fund stock purchase agreements or toreplace key employees. Theemployment relationshipcreates an “insurable interest,” and the deathbenefits received by thecompany are generally free from income taxes. An employer ownsthe policy, pays the premiums andcollects the death benefit.

In the past, employers purchased insurance even on thelives of rank-and-file employees.This practice led to the term “deadpeasant” life insurance, fromwhich the employee’s heirs received no benefits.

In the Pension Protection Act of2006, Congress tried to end thisperceived abuse. In June 2009, theIRS issued a notice detailing theimplementation of the 2006 Act.

NEW LAW: Code §101(j) changesthe general rule of tax-free treat-ment for an employer of the insured. The new rule states thatthe amount of death benefit exempt from income tax is equalto the sum of the premiums andother amounts paid by the ownerfor the contract. Excess amountswill be subject to taxation.

The law applies to contracts issued after Aug. 17, 2006. A contract is also treated as new if itwas issued before that date andthere is any material increase inthe death benefit.

Any corporation, limited liabilitycompany, partnership or even soleproprietorship engaged in a tradeor business is subject to the newrule. The definition of an employeeis quite expansive and can includedirectors and consultants.

NOTICE AND CONSENT:Before the issuance of a contract,the employee must be notified inwriting that the company intendsto insure his life and include themaximum face amount beingsought. The employer must receive written consent from theemployee as well as an acknowl-edgement that the company willbe the beneficiary of any deathproceeds.

These notice and consent requirements must be in place before the issuance of the life insurance policy. If the notice and consent requirements are contained in a buy-sell agreement executed after the purchase of alife insurance policy, they are noteffective. The notice and consentrequirements must be satisfiedeven if the employee is the soleshareholder of the company.

EXCEPTIONS: If the notice andconsent requirements are met, thedeath benefit received by an employer will continue to be tax-free if:

■ the employee was working at any time during the 12-monthperiod prior to death;

■ at the time the contract wasissued, the insured is a director or

a highly compensatedemployee;

■ the amount receivedby the employer is paidto a member of the employee’s family, a trustor his estate; or

■ the proceeds are usedto purchase ownershipinterests in the employerby the due date, including

extensions, of the tax return forthe taxable year in which thecompany received a death benefit.

New regulations designed to endabuses of employer-owned policies

What happens if a dispute arisesbetween the company and theheirs of a deceased owner? Estateplanning attorney James Dickinsonof Cavitch, Familo & Durkin notesthat there are often disputes betweenthe company and the family of alate shareholder over the value and

terms of the sale of the stock. According to Dickinson: “I

have been involved in litigationthat has taken years to resolve.Just because there is a buy-sellagreement in place does notmean that the new owners of thestock will sell without a fight.”

The new law only covers employer-owned life insurance. Ifa company owner is not an employee, the provisions of§101(j) apparently do not apply.

INFORMATION RETURN: Theemployer must report on form8925 information each year to theIRS. The law requires that a returnbe filed by every employer owningone or more insurance contractsissued after Aug. 17, 2006. ■

James Dickinson is a partner with Cavitch,Familo & Durkin and is a certified specialistin estate planning, trust & probate law.Contact him at 216-621-7860.

JAMESDICKINSON

In the past,“dead peasant”policies usually

covered rank-and-file employees.

■ With the Pension Protection Actof 2006, Congress tried to end the perceived abuse of this insurance.

■ In June 2009, the IRS issued anotice detailing the implementationof the 2006 Act.




OHIO and FLORIDAESTATE PLANNING and PROBATE

Nancy H. Canary, Esq.CLEVELAND, OH - P: 216/226/7466 F: 216/226/7426

PALM BEACH, FL - P: 561/833/5900 F: 561/833/5951

E-mail: [email protected]

The art of bequeathing your personal property

Are you consideringdonating art-work, furniture,antiques or other

personal property to auniversity, museum or anonprofit organization aspart of your estate plan-ning? Recent changes inIRS regulations, particu-larly with regards to frac-tional donations, may affect yourdonation.

Donations of personal propertyitems such as fine art, antiquesand furniture to nonprofits canprovide the donor with substan-tial tax benefits and give the nonprofit a valuable and usableitem to further its mission.

In recent years, the federal gov-ernment has imposed limitationson fractional donations of per-sonal property.

Previously, donors could transferpartial ownership of a work to adonee over a virtually unlimitedperiod of time and could revaluethe work (and therefore each frac-tional gift) in the year of each subsequent fractional gift. The newrules limit the amount of time afractional gift can last; full transferof ownership to the donee institu-tion must be completed within 10years of the date of the initial giftor the date of the donor’s death,whichever comes first. If full transfer of the item is not completedwithin the time limits, the donorcould face a substantial penaltyfrom the IRS.

Previously, donors could transferownership of a work of art to a museum while retaining posses-sion. This allowed the donor tohave her cake and eat it, too. For

example, a donor coulduse the tax deductions forher painting’s donationwhile maintaining posses-sion of and displaying thepainting in her house.Now, the museum musttake physical possession of the gift for a substantialperiod of time each yearand use the gift for the

museum’s primary purpose.Finally, the rules for valuations

of fractional gifts have changed.Under the old rules, valuationscould be adjusted for each frac-tional gift; thus if the fair marketvalue of a donated painting increased, the tax deductionwould increase for each furtherfractional donation of the painting.The new rules limit the valuationto the lesser of the fair marketvalue of the work at the time of

the initial gift, or the fair marketvalue as of the date of the subse-quent fractional gift.

The IRS also requires that chari-table donations valued at greaterthan $5,000 be appraised by anIRS-qualified appraiser in order toobtain the tax deduction. Thesequalifications require the appraiserto have earned an appraisal desig-nation (e.g., the right to use AAA,ASA or ISA), and for the appraisalto be consistent with the substanceand principles of the UniformStandards of Professional Appraisal Practice. ■

James Corcoran, AAA, ASA, ISA, FRICS,is an accredited senior appraiser andcertified fraud examiner with CorcoranAppraisal Group International in Cleveland. Contact him at 216-767-0770.

JAMESCORCORAN

DDoonnaattiioonnss ooff ppeerrssoonnaall pprrooppeerrttyy iitteemmss ...... ttoo nnoonnpprrooffiittss ccaann pprroovviiddee tthhee ddoonnoorr wwiitthh ssuubbssttaannttiiaall ttaaxx bbeenneeffiittss..

Rules have changed for donations, valuations

MAKE A CHANGE?

More individuals will be ableto convert from a traditionalIRA to a Roth IRA in 2010.

■ Individuals whose AGI wereless than $100,000 and whosefiling status were not “married filing separately” were eligible tomake a conversion. EffectiveJan. 1, the restrictions end; but aconversionmightnot beright foreveryone.

Mull financial goals, merits of switching to a Roth IRA

As we reach the end of 2009,there is a significant taxplanning opportunity avail-able beginning in 2010. It is

the ability to convert a traditionalIRA to a Roth IRA. Since 1998, tax-payers could make such a conver-sion; however, tax laws only allowed individuals whose adjustedgross income (AGI) were less than$100,000 and whose filing statuswere not “married filing separately”to convert. Effective Jan. 1, 2010,these restrictions are removed andanyone with a traditional IRA willbe able to convert it to a Roth IRA.Should you make a conversion?

The downside of the conversionis the income tax due on theamount converted.

Before we look at how the conversion works, let’s review thebasics of Roth IRAs:

■ Contributions are not tax-deductible;

■ Earnings grow tax-free;■ 70½ required minimum distrib-

ution rules do not apply during theIRA owner’s lifetime; and

■ “Qualified” distributions aretax-free. In general, qualified distrib-utions are those made after age 59½and where the Roth IRA has existedfor at least five years.

For individuals who can live offother savings and allow for RothIRA assets to accumulate past 70½,this can be a powerful estate plan-ning asset to pass on to one’s heirs.

apply to Roth IRA conversions, butit applies to distributions from RothIRAs before age 59½ unless one ofthe exceptions is met.

“From an estate planning stand-point, the ability to defer lifetimedistributions beyond age 70½ andpass the IRA to children and grand-children with tax-free distributionsover their life could outweigh payingtax on the conversion today,” ex-plains David O. Reyes, a shareholderwith Maloney + Novotny, LLC.“Keep in mind that an individualdoes not have to convert everythingat once; you can elect to convertonly a portion of your IRA or do itover a period of years.”

When the Roth IRA owner dies,minimum distribution rules applyto the beneficiary, but distributionsare not taxable. The rules serve tolimit the beneficiary’s tax-free accu-mulation of wealth.

“An IRA owner should considerimplementing a trust to assure thathis beneficiaries will not withdrawmore than the required amount except for need,” says Roy A. Krallof Weston Hurd LLP. “This concernis magnified with a Roth IRA, because there is no tax in the year ofwithdrawal to serve as a disincentive.”

Finally, if a Roth conversion is appropriate in 2010, it may also beappropriate to consider some chari-table planning in 2010 to offset theincome recognition. ■

David O. Reyes, CPA, CEBS, is a share-holder with Maloney + Novotny LLC. Contact him at 216-363-0100. Roy A.Krall practices in the Cleveland and Akronoffices of Weston Hurd LLP. Contact him at216-241-6602.

The problem is that income taxmust be paid on the conversion —and the taxes can be significant. Theprojected highest federal rate is 35%for 2010, plus up to an additional6% state tax for an Ohio resident.Special tax treatment applies to con-versions made in 2010. The conver-sion amount is not included in2010 income; instead, the tax ispaid over a two-year period — halfthe income is reported in 2011, andthe remaining half in 2012.

Alternatively, the taxpayer canelect to tax all of it in 2010. Conver-sions made after 2010 will be taxedin the year of conversion.

After the conversion, the RothIRA will grow tax-free, and futurequalified distributions are made tax-free — unless funds are withdrawnwithin five years of conversion orbefore the owner reaches 59½. The10% early distribution tax does not

New year endssome conversionrestrictions




OUR INDEPENDENCEIS YOUR PEACE OF MIND

Silver screen estate planning

W e get our news andform opinions thataffect our behaviorsfrom a variety of

sources, such as friends and family,web sites, Google, Twitter, cablenews and entertainment stationslike MTV and the E! Network toname a few.

But what about the importantand not always openly discussed

topic of estateplanning?Where are thepopular influ-ences for this?Significant informationabout estateplanning hasbeen right before our eyesfrom an unlikely

source — the movies — for morethan 50 years.

Hollywood sets the perfect stagefor the multitude of issues involvedin estate planning, given the dynamics portrayed between char-acters and plotlines in the movies.With popcorn in hand, we areglued to the big screen as romance,family tiffs and secrets play out before us. Little did we realize thatthe movies were shaping our opin-ions and behaviors about three important life concerns: estateplanning, guardianship/adoptionissues and succession planning.

The following is just a small sampling of the many movies thataddress estate planning issues:

ESTATE PLANNING ANDFAMILY ISSUES: “CATON A HOT TIN ROOF”

This 1958 classic starring Eliza-

beth Taylor, Paul Newman,Burl Ives andMadeleine Sher-wood is a greatstudy of a family’s reactionto terminal ill-ness and impending death. The drama illus-trates the influence in-laws canhave on such a situation. More importantly, it validates the statistic that 75% of Americans, atall levels of society — especially entrepreneurs who often viewthemselves as immortal — do nothave a simple will.

GUARDIANSHIP ANDADOPTION ISSUES:“BABY BOOM”

This film starred Diane Keatonand Sam Shepard in 1987 and underscores the fact that guardian-ship of children should not be leftto chance. Sadly, the movie gotsome important issues wrong. First,just because a person is a distantheir of someone who dies with surviving children, it does not meanthat person should “inherit” thechildren, especially in an interna-tional family as portrayed in thisfilm.

Parents need to be responsiblefor nominating a guardian andsuccessor guardians for their children and should be responsi-ble for providing for the securityof their children.

Life insurance at the age most individuals become a parent is extremely cheap for the protectionit provides. The other blunder ofthe movie? Speaking personally asa busy attorney, wife and mother, a

MISSIAVASELANEY

Movies tackle topics such as heirs and succession issues

1

2

woman — with the proper support— can manage a high-pressure career while raising a child successfully.

SUCCESSION PLANNING:“SABRINA”

Both the 1954 classic starringHumphrey Bogart, Audrey Hepburnand William Holden, and its 1995remake starring Harrison Ford, JulieOrmond, Greg Kinnear and LaurenHolly demonstrate what is obviousin most families with more thanone child.

Children are all different anddemonstrate different strengths andweaknesses. On a positive note, thefilms reinforce the fact that weshould not underestimate any child,because if push comes to shove, heor she may surprise you.

Surprises are fun in the moviesbut not in real life and the realitieswe all face. None of us will escapedeath, but we can make our demiseeasier and help our wishes be carried forward. Through thorough,comprehensive planning with atrusted professional counselor, ourlegacies will live on, just as they doin the movies. ■

Missia H. Vaselaney is a partner with TaftStettinius & Hollister LLP. Contact her at216-706-3956.

3

Affiliated charities benefitfrom supporting foundations

For individuals seeking toprovide significant charita-ble support while leaving alegacy for their family and

causes close to their heart, a sup-porting foundation may be avaluable philanthropic tool.

A supporting foundation is anonprofit corporation with its ownidentity, corporate structure andtax-exempt status that receives themore favorable public charity status because of its affiliation withan overseeing public charity.

The supporting foundation isgoverned and operated by its ownboard of trustees, which is chargedwith investment decisions andmaking distributions to eligiblenonprofit organizations that reflect the donor’s vision as well asthe broader mission of the supportedpublic charity.

There are many benefits to estab-lishing a supporting foundation:

■ The donor may involve heirs

in the decision-making process,training them for future roles inthe supporting foundation’s opera-tion and the continued philan-thropic vision and mission.

■ The donor receives a charitableincome tax deduction for all life-time contributions to the supportingfoundation and a charitable estatetax deduction for contributionsmade at death.

■ The supporting foundationpays no tax on investment income.

■ The supporting foundation often receives administrative, pro-fessional and operational supportfrom the affiliated public charity.

■ Costs to establish and operatea supporting organization are frequently substantially lower thanthe legal and accounting costs asso-ciated with a private foundation. ■

Alan Gross is vice president of the Jewish Community Federation of Cleve-land. Contact him at 216-566-6698.

CONTACT US

For more information about Custom Publishing with Crain’s Cleveland Business,please contact advertising sales director Mike Malley at 216-771-5070 [email protected].




Fixing a broken trust doable,but it is not always easy

Every trust should bereviewed periodicallyto make sure itmeets with the

intentions and expecta-tions of its maker. With unforeseen and inevitablechanges in family relation-ships, tax laws and levels ofwealth, trusts often don’tstand up well to the test oftime. Fixing revocabletrusts (one that is revocableand amendable) is easy.

A simple amendmentto the trust, a complete restatement of the trust or just removing some or all of the assetsfrom the trust fixes the problem.

Fixing a broken irrevocable trust— since they are designed to be unamendable — is not as easy. Inaddition, even revocable trusts usually change into irrevocabletrusts on the death of its maker.

So what if changed circumstancesmake an irrevocable trust completelyunmanageable or even just less attractive than it once was?

“Fortunately,” says Ron Wayne, a board-certified probate trusts andestates lawyer with the Clevelandoffice of Buckingham, Doolittle &Burroughs, LLP, “both Ohio andFlorida laws provide the tools to fixthe problem, but you need to knowwhere to find them.” Some of thesefixes include:

PRIVATE SETTLEMENTAGREEMENT: Under certain circumstances, all of the trusteesand beneficiaries of a trust can enter into a written agreement

Time running out on EGTRRA;some changes are expected

On the horizon isthe sunset ofmany of the taxreductions and

other changes implementedby the Economic Growthand Tax Relief Reconcilia-tion Act of 2001 (EGTRRA)and its progeny. The topicwith the most immediacyinvolves estate taxes.

There are a number of reasonswe believe the status quo is likelyto persist.

For one, a permanent and fullrepeal of estate taxes will cost toomuch for an administration desperate to preserve programsand minimize the deficit. At present, the federal tax is a flat45% and applies only to estates inexcess of $3.5 million.

What other changes should weexpect? There appears to be strongsupport for the “portability” of ex-emptions between spouses. Thatis, if the first spouse to die doesnot fully use his or her $3.5 mil-lion, which can pass free of feder-al estate tax, the surviving spousemay use the remainder to aug-ment his or her non-taxable es-tate.

This would be a great improve-

ment for taxpayers andcould make redundantsome of the trust plan-ning done simply to pre-serve tax advantages.

One of the proposalslikely to affect high-net-worth individuals is thesuggested repeal of thestate inheritance tax deduction and state death

tax credit. Up until 2003, states were

partial beneficiaries of the federalestate tax system and pocketedapproximately 10% to 16% of thefederal estate tax imposed onlarge estates under the “credit”system.

This was replaced with a deduc-tion for state taxes, requiring most states to modify their estatetax revenue statutes. With an increased burden on the states toraise revenue, it is possible a largenumber will reinstitute the state-level tax. ■

For related story, see Page 16.

Linda M. Olejko, CFP, is vice presidentand new business development manager in the Greater Cleveland office of Glenmede. Contact her at 216-514-7876.

LINDAOLEJKO

that modifies the terms of the broken trust to obtain a result thatall parties feel is more beneficial.Such an agreement, however, maynot result in an early terminationand distribution of trust assets.

MODIFICATION OR REFOR-MATION: If a private settlementagreement is not obtainable becausethe desired result falls outside of thepermissible uses of such an agree-ment, all or some of the parties to atrust can file an action in court tochange the terms of an irrevocabletrust to remedy a tax problem, repairthe faulty language in a trust, oreven restore a beneficiary who wentunintentionally unmentioned as abeneficiary of the trust.

TERMINATION OF SMALLTRUSTS: Sometimes the assets of atrust are just too small to justify thefees and administrative costs associ-ated, and the trust needs to be ter-minated and the assets distributedoutright to the beneficiaries.

DECANTING: If a trustcan’t be terminated, some-times it can be renderedharmless by moving the assets into another trustwith more favorable terms.Irrevocable life insurancetrusts sometimes fit intothis scenario.

COMBINATION ORSEPARATION OFTRUST SHARES:Dividing the assets of atrust into two or moreshares for differing invest-

ment objectives or combining theassets of separate trust shares foreconomies of scale may help fix abroken trust.

David Woodburn, trusts and estates practice group leader ofBuckingham, Doolittle & Burroughs,LLP, says: “Usually, where there’s awill there’s a way to fix a brokentrust and it’s up to the estate plan-ning attorney to find the right toolto do the job. Even charitable trusts,which are the most difficult to modify, can usually be changed ifthe right process if followed.” ■

Ron Wayne is a partner and member ofthe Trusts & Estates Practice Group ofBuckingham, Doolittle & Burroughs, LLP.He is resident in the firm’s Cleveland office. Contact him at 216-615-7349 [email protected]. David Woodburnis a partner, chair of the Trusts & EstatesPractice Group, and also serves on thefirm’s Executive Committee. He is resi-dent in the firm’s Akron office. Contacthim at [email protected] or330-258-6506.




Akron Cincinnati Cleveland Columbus Fort Lauderdale Fort Myers Naples Orlando Tallahassee Toledo Washington, D.C.

At Roetzel & Andress, we take the time to understand ourclients’ estate planning priorities and objectives, and createcustomized plans to maximize our clients’ benefits.

We use a comprehensive planning approach, taking intoaccount our clients’ investments, tax concerns, generationalplanning, and charitable goals. Our attorneys develop flexible estate and business plans that allow for unforseencircumstances, shifting economic climates, and changinglaws and family situations.

For further information, please contact Steve Cox at 330.849.6714.

220 attorneys • 40 areas of practice • 11 offices One Address: www.ralaw.com/estate_planning

Planning for the Future Begins Now

One Cleveland Center, Ninth Floor • 1375 East Ninth Street Cleveland, OH 44114 • 216.623.0150

222 South Main Street • Akron, OH 44308 • 330.376.2700

In today’s uncertain times, it’s more important than ever to stick together.

No matter what charitable causes you support, we invite you to log on to www.oprsfoundation.org/e-plannedgiving1 to:

Access a complete library of planned giving essentialsCalculate your benefits with our gift calculatorDiscover the rewards of life income giftsCreate a personal legacy(no log in necessary)

Your Partner in Legacy PlanningProvided as a public service of the Ohio Presbyterian Retirement Services Foundation. For more information about our work in northeast Ohio, please call Kerri Whitehouse or Jim Hickey at (440) 942-4342.

giftgiftsac

g

ri 2.

cy

1150 HUNTINGTON BUILDING · 925 EUCLID AVENUE

CLEVELAND, OHIO 44115-1414 PHONE 216.592.5000 FACSIMILE 216.592.5009

WWW.TUCKERELLIS.COM

CLEVELAND COLUMBUS DENVER LOS ANGELES SAN FRANCISCO

ON HER ELECTION AS 2009-2010 PRESIDENT

OF THE ESTATE PLANNING COUNCIL OF CLEVELAND

CONGRATULATES OUR COLLEAGUE ERICA E. MCGREGOR

How will you fund college education?

The annual cost of collegeattendance continues torise. Per the 2008 Trends inCollege Pricing Report, the

current annual cost (tuition, fees,room and board) of attending afour-year public college (out-of-state) is $25,000 and for four-yearprivate colleges, $34,132. The costis expected to continue to outpaceinflation. It is important to startsaving for your child’s educationas early as possible.

There are a number of optionsthat can be utilized to fund collegeexpenses; because there are manyoptions, a number of factors shouldbe considered to determine the bestoption to meet your needs. Onesuch factor is tax advantages.

“Accumulation of funds on a tax-free or tax-deferred basis allowsfor faster growth of principal,” saysCraig Petti of HW Financial Advi-sors. “For example, if money is putaway each year that earns 8% but issubject to a 35% tax bracket, the actual after-tax return is 5.2%. Assuming you save the same moneyin certain tax-deferred or tax-freesavings plans with the same earnings,your account would grow at the 8%.”

Another consideration in collegeplanning is the Kiddie Tax, if youtransfer assets to your children topay lower taxes. This option canpresent challenges since the KiddieTax rules now apply to older children. Essentially, under the“Kiddie Tax,” a child’s unearned income (interest, dividend, capitalgains) can be taxed at the parents’tax rates starting at low thresholds.

Financial aid considerations willalso be a factor. Whether a childwill qualify for financial aid (e.g.,loan, grant, scholarship or workstudy) may affect the choice of savings option. Many factors affect

Ace the course by planning early and exploring tax advantages, aid opportunities

whether a child qualifies for finan-cial aid besides family income, including assets, family size andnumber of household members incollege at the same time, etc. If achild is expected to qualify for financial aid, parents should beaware of the formulas used and assets considered. Many collegeplanning savings options are considered while others are not.

The time frame available for saving for college is an importantconsideration. The earlier the savings starts, the more aggressivethe investments and options can bein order to take advantage of com-pounding. The closer to the needfor funds, the more conservative theinvestment strategy could be.

Petti explains: “Different options and strategies avail them-selves better to varying timeframes.”

Giving children control of assets is also a consideration. Outright gifts transfer control ofthe assets to children, while optionssuch as trusts or 529 plans wouldnot. Discussing college fundingwith your older child will preventunpleasant surprises and help parents and their child better planfor the expenses that await them.

Given that many today becomeparents in their 30s and 40s, theyface the added dilemma of savingfor children’s education and theirown retirement at the same time.The best option is to develop a planthat includes both objectives anddetermine the time frames andneeds of both. ■

Mary Eileen Vitale is a CPA and CFP®,and Craig Petti is a registered investmentadvisor with HW Financial Advisors. Contact them at 216-831-1200 or [email protected] or [email protected].

TThhee eeaarrlliieerr tthhee ssaavviinnggss ssttaarrttss,, tthhee mmoorree aaggggrreessssiivveetthhee iinnvveessttmmeennttss aanndd ooppttiioonnss ccaann bbee..

There are a number of options that can be utilized to fund college expenses, including the following:

■ College savings or prepaid tuition plans

■ Coverdelleducation sav-ings accounts

■ Custodial accounts(UGMA/UTMA)

■ Gifting

■ Series EE bonds

■ Traditional IRAs and RothIRAs

■ Employer-sponsored retirement plans

■ Employee stock purchaseplans

■ Cash value life insurance

■ 2503(c) trusts

■ Crummy trusts

■ Tax-deferredannuities

■ Other tax-advantagedstrategies

■ Prepaymortgage

■ CollegeSure CD

FUNDING OPTIONS




Taft Stettinius & Hollister LLP

At Taft, we work as One Team –

driven to help you succeed and

committed to being involved in

your business. Together, we offer

greater depth and breadth of

legal services across every area of

law important to your business

success and growth. Learn how

our collaborative style, built

on a 124-year track record of

performance, can transform what

you expect from your legal team.

200 Public Square, Suite 3500, Cleveland, OH 44114-2302 / P: (216) 241-2838 / www.taftlaw.comCincinnati / Cleveland / Columbus / Dayton / Indianapolis / Northern Kentucky / Phoenix / Beijing

Success Built on a Track Record of ExperienceOutstanding Performance

Now, more than ever before, knowledge and experience, alongwith objectivity, perspective and trust are vital components ofthe relationship between a financial planning professional andtheir client. Here at Stratos Wealth Partners we embrace astrategic vision that elevates the advice and services we provide,as well as the relationships we form.

The name Stratos Wealth Partners is new to many of you; theservices we provide are not. Many of our partners have been serving clients in Northeast Ohio for more than 20 years. Stratos Wealth Partners is proud to operate throughout the United States and we are especially proud to operate our national headquarters right here in Solon, OH.

Contact us today by calling 866-553-9882 or visit www.StratosWealthPartners.com

In all things, do what is best for the client!

Stratos Wealth Partners operates on one guiding principle,a principle that is the keystone of everything we do.

Investment & Retirement Planning – Estate PlanningBusiness Succession Planning – Charitable Planning

National Headquarters: 30575 Bainbridge Road, Suite 100, Solon, OH, 44139 Securities Offered Through LPL Financial, member FINRA/SIPC

Elevating Financial StrategiesSucceed at successionHistorically, roughly one-

third of family businessessurvived a transition to asecond generation of

owners. And the odds weremarkedly worse for a hand-off tothe third generation, where thesuccess rate was a mere 10%. Howcan you ensure that the businessyou sacrificed to build does notend up in the heap of failures?

According to Joseph M. Men-trek, vice president of Meaden &Moore Financial Consultants, thekey to success in transitioning afamily business is “not only care-ful planning, but an honest assess-ment of the complex business andfamily dynamics that will affectthe outcome.”

Effective succession planning,Mentrek says, is best viewed as aprocess focused primarily on anorderly transition of three key objective components: ownership,management and finances.

Perhaps equally important is being able to effectively overlay andaddress the challenges posed by thefamily dynamic, as well as a varietyof stakeholders. These stakeholdersmight include the senior generationowners; family members with varying levels of engagement in thebusiness; employees; and even customers, suppliers and vendors.To effectively manage the processand the expectations of all, careful

communication is paramount.The family dynamic renders

the succession planning processdifferent in virtually every instance:

What happens when the ownercan’t let go, or if there is no one inwhom he has the confidence to entrust the business? What happenswhen family members who are notcontributing to the success of thebusiness have become financiallydependent upon it?

Do the future owners and man-agers have the skills to succeed?What are the expectations of thefamily members? Is participation inthe business a birth right or must itbe earned? Should the business begiven to children or sold? What arethe economic consequences of agiven course of action? Can theowner afford to retire? What are

the tax consequences? Sometimes the answers are clear;

most of the time, however, they arenot.

For that reason, Mentrek says itis critical to enlist the assistance ofan adviser to orchestrate and manage the process. The key is tochoose someone who can keep iton point and adapt to changes in circumstances, laws, etc. Look forexperience, education, innovation,independence and objectivity.

Above all, look to someone youcan trust, because the decisionsyou make are some of the most important decisions of your life,and you only have one chance toget it right. ■

Joseph M. Mentrek is vice president withMeaden & Moore Financial Services.Contact him at (216) 928-5343.

Navigating a successful buy-sell agreementway to prevent the sale ortransfer of stock outside ofthe family unit while pro-viding a deceased share-holder’s family with a market for the decedent’sstock.

A buy-sell agreementmay take the form of across purchase agreementamong the owners, a redemption agreement between an owner and the company or a hybrid. The agreement may man-date the sale, or it may be optional.In either case, the agreement usuallysets a purchase price or a formulafor determining the price.

If the agreement is valid, the parties will be bound by the priceterms. However, the IRS may not bebound by the price for purposes ofsetting the value for estate taxes.

The requirements for a buy-sellagreement to fix value for estate tax purposes are:

■ The price must be fixed and determinable under the agreement.

■ The agreement must be bindingon the parties during life and afterdeath and enforceable under statelaw.

■ The agreement must preventthe decedent from selling the stockduring life at a price higher thanthat prescribed by the agreement.

■ The decedent must not have aunilateral right to alter or amend.

■ The agreement must be a bonafide business arrangement.

■ The agreement must not be adevice to transfer the shares to thenatural objects of the decedent’sbounty.

Courts look at the facts and cir-cumstances to determine whetherthe agreement was intended as asubstitute for a testamentary dispo-

Buy-sell agreements are often used in a family-owned business successionplan as a relatively simple

sition such as:■ Relationship of the

parties;■ Health and age of

decedent;■ Lack of negotiations

among the parties beforeexecuting the agreement;

■ Lack of or inconsis-tent enforcement;

■ Failure to obtaincomparables or appraisals to deter-mine price;

■ Failure to seek professionaladvice in setting the price;

■ Lack of provision requiringperiodic review and adjustment ofprice;

■ Exclusion of significant assets,like intangibles, from price; or

■ Acceptance of below-marketpayment terms for the purchase.

For agreements entered into orsubstantially modified after Oct. 8,1990, the following additional requirement must be met:

■ The terms are comparable tosimilar arrangements entered intoby people in an arms’ lengthtransaction. The price must becomparable to what people withadverse interests dealing at arm’slength would accept. The pricemust bear a reasonable relation-ship to unrestricted fair marketvalue.

These rules only apply to familycontrolled entities. They do notapply if at least 50% of the entityis owned by people other thanmembers of the decedent’s familyand if those owners are subject tothe same buy-sell restrictions. ■

Cheryl A. D’Amico is a partner in the Estate and Succession Planning group ofthe law firm Calfee, Halter & GriswoldLLP. Contact her at 216-622-8555.

CHERYLD’AMICO

KEYS TO SUCCESSFUL TRANSITION

■ Assess thebusiness and family dynamics.

■ Re-examine the interests of stakeholders.

■ Consider enlisting an adviser to manage theprocess.

■ The processexamines ownership, managementand finances.




on receiving the2009 Distinguished Estate Planner Award

fromTHE ESTATE PLANNING COUNCIL OF CLEVELAND

Congratulations toStephen H. Gariepy

Hahn Loeser & Parks, LLP

GRAT a win-win giving option

Certain estate planningtechniques permit atransfer of wealth withno estate, gift or income

tax cost to the transferor. Theseare particularly effective when asset values and interest rates arelow. One such technique is agrantor-retained annuity trust(GRAT).

A GRAT is an irrevocabletrust into whichassets are trans-ferred by some-one whowishes tomake agift.

Thegrantor receives a fixedannuity pay-ment eachyear from theGRAT. What remainswhen the annuity term endsis transferred to a beneficiary and isdeemed a gift.

In general, a person can makegifts of $13,000 per year to an unlimited number of people, andcan make additional gifts overone’s lifetime of $1 million. Addi-tional lifetime gifts are subject tothe gift tax and generally will require payment of a tax equal to45% of the value of the gifted assets, based on the value of the

assets at the time the gift is made.However, the gift of the GRAT

remainder is not valued when theassets transfer to the beneficiary.Rather, it is valued, for gift tax purposes, when the assets are firsttransferred to the GRAT. A formulais used to estimate and project theamount that will remain in theGRAT when the term ends.

The variables in the formula are influenced by

economic conditionsprevailing at thetime assets are trans-ferred to the GRAT.

One of thosevariables is the“7520 Rate,” amarket-sensitiveinterest rate theIRS adjusts monthly.

In general, the lowerthe 7520 Rate, the less

is projected to remain in theGRAT, and thus the less is deemedgifted to the beneficiary.

The current 7520 Rate is astoundingly low.

The low rate, coupled with depressed asset values, creates anopportunity to transfer a signifi-cant amount of wealth with littleto no tax cost.

For example, assume Momwants to transfer stock that has depreciated to $1 million to achild. If she gifts the stock outright,

Mom nearly exhausts her lifetimegift tax exemption and cannotmake any future gift-tax-free giftsto anyone (with few exceptions). Ifshe sells the stock to her child,Mom will owe income tax on theproceeds.

If Mom transfers the stock to aGRAT when the 7520 Rate is 3.2%(October’s rate) and receives 12 annual payments of $101,655 fromthe GRAT, then, according to theformula, the amount projected toremain in the GRAT at the end ofthe term is $0. Thus, the value ofthe gift for gift tax purposes isdeemed to be $0.

As a result, Mom uses none ofher lifetime gift tax exemption tofund the GRAT. After 12 years, thestock transfers to the child gift tax-free. Mom pays no income tax onthe receipt of the annuity or thetransfer of the stock. The child receives the benefit of all future appreciation of the stock, and thatappreciation is excluded fromMom’s estate for tax purposes.

If the GRAT assets appreciatedbeyond 3.2%, it has been a success;if not, there has been no harmdone, no tax paid and no exemp-tion wasted. ■

Rennie Rutman is an attorney in the Estates, Trusts and Probate Group at thelaw firm of Tucker Ellis & West. Contacther at 216-592-5000.

Can you afford to leave a legacy?

W hile you may considercharitable giving asan important part ofyour estate plan,

your first cause, of course, is yourfamily. With a little planning,you can leave a legacy while providing for your heirs (evennow).

There are many ways to leaveyour imprint on the world whilegaining financial advantages tohelp make sure your heirs benefit.Consider the following:

EASY GIFTS & HIDDEN ASSETS: If you live in Ohio, consider an estate note, whichserves to irrevocably communicateyour charitable intent without theneed to change your will.

Give a paid life insurance policyyou no longer need or assign acharity as a beneficiary to a currentpolicy.

Use your IRA, taking advantageof the charitable rollover legislationthat is in effect until Dec. 31. Or,make a charity a beneficiary.

Save on capital gains taxes by using appreciated securities to fundyour gift.

LIFE INCOME PLANS: Providefor family while reducing taxes using a trust that will meet yourgoals and needs.

Charitable gift annuities providea fixed payment stream to thedonor (and a second person, if desired) for life.

DEPRECIATED ASSETS: A giftof real estate can provide helpfultax savings without the hassle ofselling the property. Real estate canoften be used to fund charitablegift annuities.

Depreciated securities can beused to fund various types of gifts,providing numerous tax advan-tages or even higher income, ifyou’re using them to fund a life income gift.

Explore your options before assuming that a gift is not in yourbest interests. Developing yourcharitable estate plan now can helpsafeguard your family’s future andsupport the causes you believe in,giving you greater peace of mind. ■

James R. Hickey, CFRE, CAP, is seniorgift planning director for Breckenridge

Village Retirement Community and Ohio Presbyterian Retirement Services Foundation.




At Calfee, we begin with a single objective: to help our clients succeed. Everything else stems from that objective. From our extreme responsiveness to our practical legal counsel that helps clients take

and delivers sophisticated advice tailored to each client.

goes above and beyond. And backwards. And sideways.A CALFEE ATTORNEY

Calfee, Halter & Griswold LLPw w w . c a l f e e . c o m

A sound choice in all timesIn these challenging times, your clients rely on you more than ever for the right advice. And, when it comes to charitable giving, you can be confident in recommending the Cleveland Foundation.

We are Greater Cleveland’s largest grantmaking organization. And for 95 years, we’ve been helping Greater Clevelanders make a lasting impact on causes they care about deeply. We work in partnership with your clients to help them realize their charitable goals.Through our expert knowledge of the community, their gift can have positive long-term effects on the place we each call home.

Giving through the Cleveland Foundation is a sound choice in any climate. Learn more by visiting www.clevelandfoundation.org.

The foundation is a leader in public education reform and has helped launch eight new-conceptschools, including the Cleveland Girls LeadershipAcademy at Douglas MacArthur School.

C L E V E L A N D F O U N D A T I O N

If you want to be remembered, do something memorable.TM

216.861.3810www.clevelandfoundation.org

A charitable gift annuity can be gift for all seasons

Funding a charitablegift annuity is a creative yet simpleway to achieve

personal, financial andphilanthropic goals. Acharitable gift annuity is auseful tool for donors ofmodest means anddonors of great wealth.Donors can guaranteelifetime income for themselves ora dependent parent and simulta-neously support their favoritecharity.

A charitable gift annuity is a contract between a donor and acharity. In exchange for thedonor’s gift of cash or property, thecharity agrees to pay a fixedamount for life to a named benefi-ciary or beneficiaries.

Regardless of inflation or interest rate changes, annuitypayments are fixed and guaran-teed for life. Establishing a chari-table gift annuity with a well-established, financially strongcharitable institution ensures that

your lifetime paymentswill continue througheconomic downturns.

The annuity paymentrate offered by the charitydepends upon the age ofthe beneficiary or benefi-ciaries — the older the recipient, the higher thepayment. In this case, itpays to be older. The gift

annuity can provide for paymentsto the donor and/or spouse or aparent.

The payments can begin imme-diately or be deferred until retire-ment. The payment is fixed basedon the age of the recipient whenpayments start. A donor can establish multiple gift annuitiesover a period of years so that thepayment rate increases as thedonor ages (i.e. “laddering”process).

Charitable gift annuity ratesare attractive compared withyields on U.S. Treasuries and other fixed-income investments.The rates are set by the American

Council on Gift Annuities. Ratesare adjusted periodically based onexpected returns and to assurethat a meaningful amount offunds will remain to accomplishthe donor’s charitable purpose.

Charitable gift annuities pro-vide significant economic and taxbenefits. In addition to the securityof fixed lifetime payments, donors

Donor receives tax breaks, yearly paymentswhile assisting others in times of need

enjoy tax advantages. A portion of each annuity pay-

ment is tax-free when it is received.In the event the beneficiary outliveshis or her life expectancy, paymentsbecome ordinary income. In theevent the beneficiary dies early, adeduction is allowed on the final income tax return.

In addition, donors can claim acharitable income tax deductionin the year of the gift. If long-term, appreciated assets are usedto fund the annuity, donors canreduce their capital gains taxes.

Charitable gift annuities can bea good strategy for donors in a

variety of circumstances, truly, agift for all seasons. Charitable giftannuities are known as the “giftsthat gives back.”

Donors can plan for current ordeferred income needs and receivetax benefits. In addition, donorsexperience the satisfaction of making a significant gift duringtheir lifetime to their favoritecharitable institution. ■

Patricia L. Fries is senior gift planning officerfor University Hospitals, including IrelandCancer Center and Rainbow Babies andChildren’s Hospital. Contact her at 216-844-0430.

PATRICIAFRIES

A charitable annuity allows individuals to support a charitywhile receiving a cash rewardfor years to come. It is a greatway to give a donation and payyourself back over time, whilereducing your tax bill. Followingis a hypothetical example* ofhow an annuity works:

■ Mary, 68, wants to make a donation to her favorite charity.She would also like to receivecash back every year.

■ Mary provides a one-time cash

donation of $5,000. Her AnnuityRate of Return, determined by theAmerican Council of Gift Annuitiesbased on her age, gift amount andother factors, is 5.5%. The rate isfixed over her lifetime.

■ Her tax deduction the first yearis $1,847.

■ She will receive $275 everyyear ($180 tax-free, $95 ordinaryincome).

“Many donors are now realizingthe benefits of charitable annu-ities. They provide a competitive

and reliable rate of return and allow donors to support their fa-vorite charities at the same time.Annuities are a solid investment intoday’s economy while also providing a tax benefit,” says KerryA. Mink, development manager ofthe Benjamin Rose Institute.

*Calculations are for illustrativepurposes and should not be con-sidered legal, accounting or otherprofessional advice. Actual bene-fits may vary depending on thetiming of the gift.

Kerry A. Mink, Esq., is development manager of the Benjamin Rose Institute, a Cleveland nonprofit that provides home health care,mental health and social work services to the elderly. The Benjamin Rose Institute includes the Margaret Blenkner Research Institute andthe Katz Policy Institute, which focus on gerontology and advocacy for the elderly. Contact her at 216-373-1607.

HOW A CHARITABLE GIFT ANNUITY WORKS




Philanthropy: Shaping the Future of Medicine

Every life deserves world class care.

Together, we build the foundation for tomorrow’s healthcare.

To speak with a member of Cleveland Clinic’s gift planning team, call 216.444.1251, visit clevelandclinic.org/giving or email [email protected].

Philanthropy has helped make Cleveland Clinic a world leader in healthcare. It supports the best minds, the most sophisticated technology

medicine and conquering disease. By customizing gift plans, Cleveland Clinic’s gift planning professionals help supporters achieve their philanthropic goals.

Charitable bequests:Make wishes known

Planning an estate is a verypersonal task. Often, peoplefeel uncomfortable aboutsharing their plans with

children or other relatives. However,those leaving gifts to charity shouldconsider notifying these organiza-tions of their intent.

Many individuals who are unable to make major gifts duringtheir lifetimes choose to do sothrough their estates. Sharing theirplans with their chosen recipientcharities allows benefactors to discuss their visions and motiva-tions for their gifts, which will helpto ensure that the charities use thegifts as they were intended.

“It’s my great pleasure to showthem how their legacy will becreated and live on,” says Nelson J.Wittenmyer, Esq., at the ClevelandClinic.

One of several options may bechosen to convey estate planninginformation to a charity. Many individuals send documentsthrough their attorneys, and some

include a copy of their will or trustas proof of the gift. Alternatively,often a charity has a simple formthat a donor can complete. Thecharity will keep the informationon file as a record of the gift’s intended use.

Notifying a charity of a future estate gift allows the organizationto plan. It is estimated that chari-ties are aware of less than 30% ofthe gifts that they receive throughestates. Awareness of future philan-thropic dollars gives charities anadded advantage in setting long-term goals.

When charitable wishes aremade known, the gift can be recognized, the donor and familycan be honored, and the gift ismore likely to be used as it was intended. ■

Nelson J. Wittenmyer is vice chairmanof Institutional Relations and Develop-ment for the Cleveland Clinic. Contacthim at 800-223-2273, extension41245.

Safeguarding the POAs

A“power of attorney” is anauthorization for one person to act on someoneelse’s behalf in a legal or

business matter. The person autho-rized to act under a power of attorney is the “agent” and the person granting the authorization isthe “principal.”

A durable power of attorney is apower used to create the agencythat continues after the principalbecomes incapacitated.

The durable power of attorney isan inexpensive method of substi-tute decision-making for principalswhose assets do not justify more sophisticated planning, such as withthe creation of a trust. The durablepower of attorney is for incapacityplanning as well as convenience.

Ohio has had laws governing theuse of powers of attorney since1953. These laws have been periodi-cally updated and are now underconsideration for further changes.

A committee of Ohio lawyers isconsidering asking the state legisla-ture to enact the Uniform Power ofAttorney Act (UPOAA) in Ohio.

Group of Ohio attorneys considers push for uniformity SSuubbssttiittuuttee ddeecciissiioonn--mmaakkiinngg nneeeeddss ooff oouurraaggiinngg ssoocciieettyy aarree ......aaiiddeedd bbyy tthhee uussee ooffppoowweerrss ooff aattttoorrnneeyy..

Nationally, studies of durablepowers of attorney revealed that theforms being used did not addressthe use of multiple agents, the impact of divorce of the principalfrom the agent, and the ability touse forms across state lines whenthe principal or agent moved.

In addition, these studies foundconcern about granting powers toagents who might alter a principal’sestate plan.

Ohio’s version of UPOAA wouldbe similar to the uniform act andaddress those issues and permit theagent to perform acts necessary tomaintain the standard of living ofboth the principal and the princi-pal’s children and other individualswhom the principal has customarilysupported and is legally required tosupport.

If a principal wanted to give anagent the ability to affect the estateplan, the principal would have tospecifically authorize an agent toamend or create a trust on the prin-cipal’s behalf, to make gifts and tochange beneficiary designations.

Third parties, such as banks andbrokerage firms, would not be required to accept power of attorneyforms drafted under UPOAA, butfollowing the provisions of the actwould make the creation and use ofthese forms more uniform acrossstate lines.

Incapacitated individuals areuniquely vulnerable to financialabuse, but the substitute decision-making needs of our aging societyare greatly aided by the use of powers of attorney by trustworthyagents. Enactment of UPOAA inOhio will help individuals to choosetrustworthy agents and clearly spellout the authority those agents willpossess. ■

Joanne Hindel is vice president and senior personal trust office for Fifth ThirdBank. Contact her at 216-274-5633.




Why let your money sit in a low-interest account when you can earn more income right now? With a Federation charitable gift annuity, you can support the Jewish community while receiving great returns on a lifetime annuity for yourself, spouse and/or another loved one. You can lock in payment rates of up to 9.5% (depending on your age) and know that you are making a real difference in the lives of so many.

For a personalized illustration or to learn more, contact Alan D. Gross at 216.566.9200 or e-mail [email protected].

4969

Age606570758085

90+

Rate %5.05.35.76.37.18.19.5

At 85, her future neverlooked so bright.

This morning, the retun on her investment went from 2% to 8.1%.

ESTATE PLANNING

TRUST & PROBATE ADMINISTRATION BUSINESS SUCCESSION PLANNING

CHARITABLE GIVING ·ASSET PROTECTION PLANNING PROBATE LITIGATION

GARY L. DINNER, CHAIR 216.696.2758 BRIAN W. FITZSIMONS 216.696.2487 ROBERT S. FROST 216.696.3289 ERICA E. MCGREGOR 216.696.4224 SUSAN L. RACEY 216.696.3651 RENNIE C. RUTMAN 216.696.4749 BERNARD J. SMITH 216.696.3952

1150 HUNTINGTON BUILDING · 925 EUCLID AVENUE

CLEVELAND, OHIO 44115-1414 PHONE 216.592.5000 FACSIMILE 216.592.5009

PRACTICAL AND EFFICIENT SOLUTIONS TO ACHIEVE YOUR

FAMILY AND BUSINESS OBJECTIVES

A ‘defective’ trustcan be a useful tool

The Intentionally DefectiveGrantor Trust (IDGT) is anadvanced estate planningtool used to protect assets

from taxes. An IDGT moves assets outside

the grantor’s estate. Any assetsheld within the IDGT appreciatein value outside the donor’s tax-able estate, effectively “freezing”the value of that donor’s estate.

“Do not let the term ‘defective’dissuade you from considering thisstrategy,” says Jeffrey A. Concep-cion, president & CEO of StratosWealth Partners, Ltd. “The termmerely refers to an irrevocable trustthat would normally keep assetsand income out of a grantor’s es-tate but in this case has ‘defective’language that causes income to betaxed to the grantor, instead of thetrust.”

Because the grantor is paying theincome taxes incurred by the trust,the assets grow unreduced by theincome taxes. This, in turn, increasesthe value of the assets available tothe trust’s beneficiaries.

An IDGT can be used as a succes-

sion planning tool for transferringa closely held company to the nextgeneration.

The company’s value is “frozen”for the purposes of estate and gifttaxes on the day the shares in thecompany are sold or given away.The grantor transfers or gives busi-ness assets to the trust at a discounted rate by utilizing a discount valuation strategy.

In exchange, the trust gives thegrantor a promissory note. Thegrantor receives the non-appreci-ating asset, the note, in place ofthe shares in the business, whichhopefully will continue to appre-ciate in value. Upon the grantor’sdeath, the increased value of thecompany’s shares pass to the desig-nated heirs free of federal estatetax. The donor’s estate pays tax onthe note’s unappreciated or“frozen” value.

Today’s historically low interestrates combined with the depreciatedvalue of many assets creates an ideal environment where the IDGTcan be an especially effectivemeans for transferring wealth.

Life insurance trustscontain many benefits

Life insurance often plays animportant role in estateplanning. It can be used toreplace the earnings of a

deceased family member, to benefita charity or to pay estate tax. Without careful preparation, how-ever, life insurance may actually increase the taxes due at your death.

Life insurance proceeds normallypass to beneficiaries free of incometax. However, if you own the policyat your death, the proceeds are considered part of your taxable estate and are subject to the estatetax. Therefore, proper planning iscrucial.

To avoid the estate tax on life insurance proceeds, you must remove the policy from your tax-able estate. The policy should beowned and controlled by someoneelse. Initially, that sounds simple.But if you don’t own the policy, whowill? Very often, a life insurancetrust is the answer.

A life insurance trust is an irrevo-cable trust created for the purpose ofowning a life insurance policy. Because the trust is irrevocable, it requires careful drafting. Whenstructured correctly, an irrevocablelife insurance trust (ILIT) can beused to avoid estate tax at yourdeath, at the death of your spouseand even in future generations.

Once established, your ILITshould own the insurance policy. Ifyou already have an insurance policy,it can be transferred to the ILIT. Thetransfer of an existing policy to the

No planning strategy is a perfectfit for every person or for every situation.

“Executing an IDGT properly isthe key,” Concepcion says. “Thetrust document must be properlywritten and transactions need to bestructured to provide the maximumtax advantages. If a valuation is involved — gifting shares of a company for example — using areputable and experienced valua-tion firm is important. ■

Jeffrey A. Concepcion is president and CEO of Stratos Wealth Partners, Ltd. Contact 440-519-2500 or visitwww.StratosWealthPartners.com.

ILIT has some drawbacks. Ideally,the ILIT would own a new policy.

The trustee of your ILIT wouldapply for a new policy on your life,and you would make periodic transfers of cash to the ILIT to paythe premiums.

These cash transfers are generallyconsidered taxable gifts, but thetrust could contain provisions to allow you to eliminate the gifttax by using your annual gift taxexclusion.

Recent economic developmentshave made it more likely that estatetaxes are here to stay. Life insuranceand life insurance trusts can play avaluable part in the efficient transferof your estate to your heirs. ■

Steven St. L. Cox is a partner with Roetzel & Andress in Akron. Contact himat 330-849-6714 or [email protected].

Life insurance mayactually increasethe taxes due at

your death.

■ At today’s tax rates, the estate tax could cost you nearly one-half of your insur-ance benefits.

■ To avoid the estate tax onlife insurance proceeds, youmust remove the policy fromyour taxable estate.




+ Cleveland 216.363.0100 | Canton 330.966.9400

Elyria 440.323.3200 | maloneynovotny.com

It’s time to consider if you’re getting the service you need… the service you deserve from your CPA firm.

Maloney + Novotny, one of Ohio’s largest certified public accounting firms, will take the time to fully understand your needs. For over 75 years, we have

embraced changing times by offering the expertise, tools, resources and exceptional service clients deserve.

It’s time.

So much is changing around us... Is it time for YOU to make a change?

Since 1908, we have countedon donations to providecompassionate care toCleveland’s elderly people.We continue to provide homecare, mental health, social workand senior day programs,as well as conduct researchand advocate for seniors.

To receive tax savings from yourcharitable gift, call 216.373.1607or e-mail [email protected]

TO SET AN EXAMPLE.TO SHARE TRADITIONS.TO INSPIRE GENEROSITY.PHILANTHROPY IS INHERITED;BE SURE TO PASS IT ON.

It’s Your Turn...

Foundations use your gifts for the greater good

Community foundationsare perhaps the most impactful and versatile— and often among the

least discussed — vehicles forcharitable giving.

That is especially ironic inCleveland, the city that gavebirth to the community founda-tion movement in 1914 andwhere no fewer than five suchfoundations operate within 50miles of downtown.

Community foundations buildand strengthen communities byallowing donors to create fundsthat meet present and futureneeds. Community foundationsare often the primary catalysts forpositive change within a city orregion through their grantmakingand leadership activities.

Northeast Ohio is fortunate tohave a number of small and largecommunity foundations, includingsuch organizations as the Akronand Cleveland foundations, andthe Community Foundation of

Lorain County.The concept of community

foundations originated in Cleve-land nearly a century ago, whenbanker Frederick Harris Goff established the Cleveland Foun-dation for the purpose of poolingcharitable resources into a single,great and permanent endowmentfor the betterment of the city.

Goff’s vision has evolved todayinto community foundations thatoffer a wide range of charitablegiving options — from outrightgifts and bequests to more complex arrangements like giftannuities, charitable remaindertrusts and charitable lead trusts.

The advantages of givingthrough a community foundationfor donors are numerous.

For example, gifts of cash and ordinary income property to a community foundation are generallydeductible up to 50% of adjustedgross income. Such gifts to privatefoundations are deductible only upto 30%. In the same way, gifts of

appreciated property to communityfoundations are deductible up to30%, vs. 20% for a private founda-tion.

Community foundation staffalso have in-depth knowledge ofthe community and its ongoingneeds. Staff members work withdonors to identify their charitableinterests and to help match thoseinterests with the most pressingneeds of nonprofit organizations.

A fund established through acommunity foundation benefitsfrom the expertise of the founda-tion’s financial professionals, who

to create new programs and inno-vative services that might not otherwise exist.

Community foundations applytheir funds to a long list of areas,including youth and economic development, education, humanservices, scholarships, and arts andculture, among many others.

Community foundations haveshown to be excellent options fordonors who seek to give back to thecommunity and improve the livesof their neighbors, both now andinto the future. Their flexibility,built-in financial advantages andsense of mission make them attrac-tive choices for donors of all meansand charitable intents. ■

Caprice Bragg is vice president for gift planning and donor relations at the Cleveland Foundation. Contact her at 216-261-3810.

Donor-advised funds grant giver flexibility

As we prepare for Thanks-giving, our thoughts turnto those less fortunate.This year, so many of our

friends and neighbors need ahand. But sometimes we aren’tsure how best to help.

As you consider the worthwhileorganizations in your community,you may be looking for a vehiclethat will help you guide your givingto the causes most important toyou. If so, a donor-advised fund at alocal community foundation mayhelp you achieve this goal.

Donor-advised funds are philan-thropic funds out of which gifts orgrants are made to charitable orga-nizations.

Donor-advised funds are offeredby most community foundationsand can be established with aninitial gift as low as $10,000.

Once your fund is in place, youcan make recommendations regarding the size and recipientdistributions. Provided they meetthe conditions set forth by thecommunity foundation adminis-tering your fund, those distribu-tions generally will be made toyour chosen charity.

One of the most appealing benefits of donor-advised funds isthe expertise available from thecommunity foundation.

According to David Dombrowiak,executive director of the CommunityWest Foundation, donors often seekadvice on what charities are best atserving the needs of their commu-nity.

“We often help donors make thebiggest possible impact with theircharitable dollars by sharing our experience with our area’s nonprofitorganizations,” he explains.

Donor-advised funds are also idealvehicles to help engage family inphilanthropy. Making your grant

recommendations a family projectteaches children and grandchildrenthe value of giving to communityand presents an occasion to learnmore about the needs of those whohave less, and about the valuableorganizations that serve thoseneeds.

Many families find the holidayseason a perfect time to discuss potential grant recommendations.There is no better way to ensureyour values are passed on than bydemonstrating those valuesthrough conversations about philanthropy.

There can be significant tax andfinancial benefits to establishing adonor-advised fund.

Gifts to donor-advised funds aretax deductible in the year of the

gift, but distributions can be spreadout over one or more years.

This flexibility makes a donor-advised fund a valuable resource inyears in which you may need acharitable income tax deductionbut are unsure about the organiza-tions or causes you would like tosupport.

Donor-advised funds can be established with gifts of cash, equities, bonds, life insurance orreal property. Donor-advised fundscan sell appreciated securities freeof capital gains taxes, allowing thefull value of your assets to be usedfor charitable purposes. ■

David Dombrowiak is executive directorof the Community West Foundation.Contact him at 216-476-7060.

invest dollars in ways designed tomaximize growth and long-termcharitable impact, as well as fromthe administrative convenienceand cost savings associated withcommunity foundation giving.

Donors can choose to establishrestricted funds that focus on a single area or organization, orthey may give in an unrestrictedmanner so that program officerscan work with charitable agencies

DDoonnoorr--aaddvviisseedd ffuunnddssaarree aallssoo iiddeeaall vveehhiicclleessttoo hheellpp eennggaaggee ffaammiillyyiinn pphhiillaanntthhrrooppyy..

COMMUNITY FOUNDATION GIVING BENEFITS

■ Gifts of cash and ordinary income property generallyare deductible up to 50% of adjusted gross income.

■ Gifts of appreciated property are deductible up to30%, vs. 20% for a private foundation.

■ A fund established through a community foun-dation benefits from the expertise of the founda-tion’s financial professionals.




James Corcoran, AAA, ASA, ISA, CFECertified Appraiser/Certified Fraud Examiner

We are Northeast Ohio’s only IRS QualifiedAppraisers of fine art, antiques, etc.

216-767-077012610 Larchmere Blvd. • Cleveland, Ohio 44120

www.corcoranagi.com • [email protected]

CORCORANAppraisal Group InternationalCertified Appraisers for over 30 years

The Personal Property Appraisal Experts

• Insurance • Estate/Donation • Sale

Wealth transfer system future unclear

In 2001, President Bush signedinto law the EconomicGrowth and Tax Relief Recon-ciliation Act (EGTRRA), which

provided an increasing schedule ofestate tax exclusions from 2001-2009, and repeals the federal estate tax during 2010.

In 2009, the federal estate taxexclusion amount (the amountone can leave estate tax-free atdeath other than to a spouse or

exclusion amount (theamount one can gift to aperson each calendar yearbefore it is considered a“taxable” gift) is $13,000.

Under EGTRRA, onecan make $1 million in“taxable” gifts duringone’s lifetime withoutpaying a federal gift tax.If one makes taxable life-time gifts, one’s estate taxexclusion available atdeath is reduced. For example,someone who makes a $1 milliontaxable gift in 2008 has $2.5 million available at death in 2009.Lifetime taxable gifts in excess of $1million are taxed at 45%.

On Jan. 1, 2010, the estate tax isscheduled to be repealed for 2010.The gift tax will not be repealed, butthe top rate will be 35% on taxablegifts in excess of $1million. The basisstep-up will be lim-ited to $1.3 million,plus another $3million for propertypassing to a spouse.

Unless Congressacts prior to Dec.31, 2010, on Jan. 1,2011, the estate taxexclusion will re-vert to $1 million,the gift tax and estate tax exclu-sions will be unifiedand the maximumfederal estate taxrate on estates under $10 million will be 55%.

When EGTRRA was passed, fewpeople thought we would get thisclose to 2010 without having a newlaw in place. However, the reality isthat a myriad of estate tax bills inCongress lie dormant and are takinga back seat to health care reform.Changes in the law being consid-ered by Congress may greatly impact one’s estate plan.

President Obama’s plan keepsthe estate tax exclusion at $3.5million and the tax rate at 45%,while the House Republican Lead-ership bill permanently repealsthe federal estate tax on Jan. 1,2010. Various proposals are pendingin Congress that meet betweenthe president’s proposal and permanent repeal.

House and Senate bills make

Designate an agent for burialarrangements

Several years ago I met withan unmarried couple to dis-cuss updating their estateplan. They wanted a provi-

sion in their wills stating that theywere to be buried next to eachother.

While I could put the provisionin their wills, under the existingOhio law the provision was not en-forceable. They were upset to learnthat their respective families, which objected to their relationship, could

determine theirfuneral and burialarrangements.

Anotherclient’s fatherhad remarriedand was sur-vived by aspouse who wasnot the client’smother. Thestepmother

wanted her husband cremated,but our client wanted his fatherburied next to his mother. Underthe existing Ohio law at the time,his stepmother — as the survivingspouse — would determine thearrangements.

Several weeks later, I attended anOhio State Bar Association meeting,where I found that colleaguesthroughout Ohio had clients experi-encing similar problems. The OhioState Bar Association Committeesuggested that we propose a changein the Ohio law to permit people tohave more control over their funeraland burial arrangements.

During this process, a front-pagearticle in The (Columbus) Dispatchdescribed how a terminally ill manwanted to be buried so that underhis religious beliefs his soul wouldgo to heaven, but his soon-to-be-widow (a second spouse) wanted tohave him cremated. The widowwon a lawsuit filed by his child, andthe man was cremated.

This lawsuit dealing with religious observances received theattention of the Ohio General Assembly. Several months later, anOhio law was adopted that permitspeople to name an agent for theirfuneral and burial arrangements. Byselecting the appropriate person,people living in Ohio can havesome assurance that their viewsconcerning funeral and burialarrangements will be observed.

This is accomplished by completing and signing a formthat names the agent to carry outtheir wishes. This form can bevery important when differencesin opinion about burial vs. crema-tion, religious observances, andburial location or disposition ofcremated remains can be antici-pated among surviving familymembers.

An attorney is not necessary tocomplete the form. The form isavailable on the Internet by printing Ohio Revised Code Section 2108.72(B). ■

Jeffry L. Weiler is a certified specialist inestate planning, trust and probate law forBenesch Friedlander Coplan & AronoffLLP. Contact him at 216-363-4551.

JEFFRYWEILER

With EGTRRA set to expire in 2009,potential changes are up for debate

charity) is $3.5 million. Assets inexcess of that amount are subjectto federal estate tax at 45%.

An asset that is inherited at deathreceives a “step-up” in income taxbasis to its federal estate tax value.

In 2009, the federal gift tax annual

permanent the $3.5 million exclu-sion and the 45% rate. One Housebill eliminates the use of valuationdiscounts for family limited part-

nerships and minority interest discounts forfamily businesses.

Other proposed bills unify the gift and estatetax exclusion amounts,make the estate tax exclu-sion amount portable between spouses, tie theestate tax rate to the topincome tax rate on capitalgains, double the rate forestates over $25 million,phase in an estate tax

exclusion amount of $5 million by2015, and/or propose different exclusion amounts (between $2 million and $5 million).

Congressional Democrats appeardetermined not to have the federal estate tax repealed. With the currentdeficit, it is likely that Congress willat least pass a one-year extension ofthe 2009 estate tax system before

Dec. 31. If thescheduled repeal in2010 is changed,Congress may increase the federalestate tax rate to55%, with an exclu-sion of $1 million,without taking additional legisla-tive action.

The Senate appears to favor“permanent” reform of the estate tax.

Regardless ofhow Congress addresses the federal

estate tax issue, one’s estate likelywill remain subject to Ohio estate tax.

In most cases, it will remain advisable for married couples to divide their assets between thespouses and establish trusts to mini-mize their Ohio estate tax liability.

Perhaps most importantly, if federal estate tax planning becomesless of an issue, the importance ofthe non-tax, personal aspects of theestate planning process will becomemore significant. Thus, in an envi-ronment of uncertainty, wherelong-term planning has been a challenge, it remains vital that individuals work closely with theirestate planning advisers. ■

Barbara Bellin Janovitz is chair ofReminger Co. LPA’s Estate PlanningGroup. Contact her at 216-430-2178.

PHOTO PROVIDEDPPrreessiiddeenntt BBaarraacckk OObbaammaa’’ss ppllaannkkeeeeppss tthhee eessttaattee ttaaxx eexxcclluussiioonn aatt$$33..55 mmiilllliioonn aanndd tthhee ttaaxx rraattee aatt 4455%%..

BARBARABELLINJANOVITZ


20091116-NEWS--11-NAT-CCI-CL -- 11/9/2009 2:41 PM Page 1 planning.pdf · Your estate plan may well...

Documents

Transcript of 20091116-NEWS--11-NAT-CCI-CL -- 11/9/2009 2:41 PM Page 1 planning.pdf · Your estate plan may well...