Leas Gifts Support Colorectal Surgery Research. John and Jennie Lea. Continued on page 2

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1 Ideas on financial, estate and gift planning for friends of Cleveland Clinic Pyramid Leas Gifts Support Colorectal Surgery Research Autumn 2010 In 1983, armed robbers attacked Jennie Lea and her family in their home in Nigeria, leaving her with debilitating physical and psychological damage. The effects of the attack ruled her life for the next two decades. Her injuries led to bowel incontinence, causing her embarrassment and a rush of painful memories with each accident. As a result, Mrs. Lea rarely left her home. She endured the hope and disappointment of two promising, but ultimately unsuccessful, surgeries by physicians outside of the United States before finally being treated successfully by Steven D. Wexner, MD, Chairman of Colorectal Surgery and Chief Academic Officer at Cleveland Clinic Florida in Weston, Fla. In 2003, Mrs. Lea was among the first patients in the United States to enroll in a clinical trial directed by Dr. Wexner exploring sacral nerve stimulation as a treatment. With this approach, a device is inserted and wired inside the body to send electrical impulses to nerves, invoking muscle action and improving sensation. Mrs. Lea s surgery was a success, improving her symptoms by 80 percent and giving her minutes instead of only seconds to find a restroom. John and Jennie Lea It doesn t sound like much, but it s a huge difference, she says. There is freedom in getting dressed to wear what I want and not worrying about accidents. I no longer have a constant fear of something going wrong. Her successful treatment allowed Mrs. Lea to begin healing psychologically. Today, she projects self-confidence, independence and self-reliance. Continued on page 2 Inside This Issue Letter from the Vice Chairman Partners in Philanthropy Event Honors Benefactors Finding Some Certainty in an Uncertain Tax World Roth IRA vs. Traditional IRA Gifts of Stock Gift Planning With You and Your Advisor Complimentary Booklets: Ways to Give and Pyramid Legacy Society Generous Gifts Further Educational Goals New Pyramid Members

2 Letter from the Vice Chairman Hello, Friends, As I prepare to spend time with friends and family at holiday celebrations, I also want to take time to reflect and be thankful for my many blessings. You may be doing the same thing. Economic conditions this past year have made it more important than ever to make thoughtful and careful choices about how to spend, save and give our resources. That is why we especially appreciate those of you who have chosen to continue your support of Cleveland Clinic this year. Cleveland Clinic also has been mindful of the economy while making decisions that will help improve our patients health and healthcare delivery. Especially now, we are relying on the generosity of our many friends and supporters to assist in these endeavors. Jennie and John Lea are an example of this generosity. Their story is a difficult one to tell, which makes us all the more grateful to them for allowing us to share it in this issue of Pyramid. Their gift exemplifies how something wonderful can be made of something so horrific. This issue of Pyramid focuses on the best ways to make use of your resources in this uncertain economy while supporting our mission, even as estate tax questions linger. I hope that you are inspired to consider your own family legacy and how you can make a difference in the way we practice medicine today and tomorrow. My colleagues and I look forward to working with you to achieve your philanthropic and financial goals. Our gift planning team recently welcomed three new members, and I m delighted to introduce them to you. Katie Collin, Esq. passed the bar this fall and she joins us as the new Assistant Director of Gift Planning. Lisa Tersigni, our new Gift Planning Associate, comes to us from the research development area and will be sharing those skills with us. Donesha Peak, who continues her education in law at Cleveland Marshall College of Law, recently joined us as our legal intern. Katie, Lisa and Donesha already are making important contributions toward meeting your gift planning needs. Have a wonderful holiday season and a joyous new year. Katherine E. Collin, Esq. joins us as the new Assistant Director of Gift Planning. Katie is a Cleveland-area native who grew up in Lakewood and a proud Smith College alumna. She graduated from the University of Akron School of Law in May. As a law student, she interned first with The Legal Aid Society of Cleveland and then with Hickman & Lowder Co., L.P.A. She recently passed the Ohio Bar Exam. Congratulations, Katie! Lisa Tersigni is our new Gift Planning Associate for the Pyramid Legacy Society. Lisa has more than two years of research development experience and has worked as a marketing consultant. She grew up in Cleveland and attended John Carroll University. We are delighted that she has joined our team. Donesha Peak joined the gift planning team this summer as our Legal Intern. Donesha is a native Clevelander who graduated from East High School. She has her MBA from the Nance College of Business at Cleveland State and is currently a second-year law student at Cleveland Marshall College of Law. She is a welcome addition to our team. Nelson J. Wittenmyer Jr., Esq. Vice Chairman Office of Institutional Relations and Development 2 Cleveland Clinic Gift Planning Team Standing, from left: Sandra O Donaghue, Donesha Peak, Nelson Wittenmyer Jr., Esq., Amanda Steyer, Esq., Anne Corrette, Antonia Franza. Seated, from left: Katherine Collin, Esq., Nancy McCann, Lisa Tersigni

3 Leas Gifts Support Colorectal Surgery Research Continued from page 1 Deeply grateful for her successful treatment, Mrs. Lea and her husband, John, make gifts to help support Dr. Wexner s research. They recently chose to accelerate their giving by establishing gift annuities that will fulfill their testamentary gift. The gift annuity provides them with supplemental income for their lifetime, and the remainder will support Cleveland Clinic Florida in Weston. I am grateful for the Leas gifts, Dr. Wexner says. In the years since Mrs. Lea s surgery, we have made many surgical advancements in a wide array of areas including rectal cancer, inflammatory bowel disease and fecal incontinence. Although these problems may seem very different, they share the common denominator of improving outcomes for patients and improving their quality of life, in part by avoiding the need for stomas. I eagerly await approval by the FDA for routine use of this device so that this benefit can be conferred on many other patients with fecal incontinence. Mrs. Lea has had two minor surgeries since her sacral nerve surgery, neither of which required a hospital stay. I continue to be grateful for and appreciative of the ongoing life change that Dr. Wexner has brought about, she says. I hope that others will join in supporting his research, which has the potential to dramatically impact the quality of many lives. Partners in Philanthropy Event Honors Benefactors The annual Partners in Philanthropy celebration drew 260 Cleveland Clinic friends and benefactors to the InterContinental Hotel and Bank of America Conference Center in Cleveland on July 20. After welcoming guests, Joseph F. Hahn, MD, Chief of Staff, presented the 2010 George W. Crile Sr. Award to Margaret Whittemore (above, right) of Oklahoma City, recognizing her generous gifts to Cleveland Clinic and volunteer work at a hospital in her hometown. The award was established by the Pyramid Legacy Society to honor individuals for longstanding service, extraordinary commitment and outstanding contributions of time, talent and resources to the mission and people of Cleveland Clinic. Guests at this year s event attended breakout sessions featuring presentations by top physicians in the fields of arthritis, orthopaedics, heart disease, cancer, wellness and neurological disorders. Delos M. Cosgrove, MD, CEO and President, Cleveland Clinic, and holder of the Rich Family Chief Executive Chair, provided an overview of projects and progress at Cleveland Clinic. A wellness fair following the presentations offered detailed information on a wide variety of Cleveland Clinic s institutes and programs. 3

4 Finding Some Certainty in an Uncertain Tax World The end of 2010 is fast approaching, but many questions linger: Is the economy improving? Will the estate tax be reinstated in some form by the end of the year? Will tax laws return to pre-reform status? It s challenging to find certainty in an uncertain tax world, but through informed planning and by taking action now, individuals and families can save on estate and gift taxes while supporting Cleveland Clinic. One certainty: If the government does not act, the estate tax will be restored in 2011 at a rate of 55% on estates of $1 million or more. This will have a great impact on a large number of Americans. As you consider your family, your finances and your end-of-year gift planning, you might also consider some suggestions featuring tax savings and other special benefits. Charitable Gifts of Stock If you have owned stock for more than a year, allowing it to grow in value, you may use it to make a gift to Cleveland Clinic. In this way, you could avoid paying the capital gain tax that would be owed had you cashed it in yourself. Additionally, you will receive a tax deduction for the full fair-market value of the gift, making a gift of appreciated stock a popular alternative to giving cash. Example * You may have purchased stock for $3,000 five years ago that now is worth $5,000. By making a gift of that stock to Cleveland Clinic, you avoid paying $300 in tax ($2,000 gain x 15% capital gain tax). Also, if you are in the 28% tax bracket, your gift will save you an additional $1,400 ($5,000 x 28%) in taxes, making the actual cost of your gift $3,300. Life Income Gift If you want to ensure that you or a loved one has enough income for the rest of your lives, you might consider a lifeincome gift, such as a charitable gift annuity. By transferring ownership of cash, stocks or other assets to Cleveland Clinic to establish a life-income gift and receiving fixed payments for life, you also receive these benefits: Your initial gift is partially income tax deductible. Your charitable gift annuity payments are partially income tax free throughout your estimated life expectancy. Your payments are unaffected by ups and downs in the economy. A gift annuity can be for one or two people, so your spouse or another loved one also can receive payments for life. Gifts of appreciated stock usually allow you to eliminate capital gain tax on a portion of the gift and spread the rest of the gain over your life expectancy. * The examples in this newsletter are not based on actual benfactors but represent realistic illustrations of various gift planning opportunities. If you would like to know how these opportunities might apply to your situation, please contact Cleveland Clinic or your financial advisor. Retained Life Estate If you have a residence or a vacation home that your family may not want or need, you might consider a retained life estate. This gift option would relieve your family of the burden of inheriting your home and arranging for the sale, remove the residence from your taxable estate and provide support to Cleveland Clinic. A retained life estate gift may be right for you if: You want to make a major gift to Cleveland Clinic after your lifetime. You envision living in your home for the rest of your life. You re comfortable with retaining many rights and responsibilities of homeownership (maintenance, insurance, property taxes, etc.) while deeding us your home today. You would like immediate income tax relief. 4

5 Life Insurance Life insurance can serve many purposes. Most people consider it a way of protecting the family in the event that the insured passes away, but did you know that giving life insurance also can be one of the most effective ways to make a charitable gift? Life insurance is considered an asset in the taxable estate if the insured owns the policy at the time of passing. To avoid estate tax, an individual with charitable intent could consider arranging a gift of life insurance now. There are two basic approaches: You could make a gift of an existing policy. This should be considered when the policy is no longer needed for its original purpose. The simplest way to make this gift is to name Cleveland Clinic as the charitable beneficiary and assign ownership to us, removing the life insurance from your taxable estate. You will realize an immediate charitable income tax deduction for the appraised value of the policy and can fulfill your current philanthropic goals. If the policy is not paid in full at the time of the gift, Cleveland Clinic can choose to make future premium payments or simply cash out the policy. If you would like the policy to remain in place so that your gift will have a greater impact, additional, unrestricted tax-deductible contributions could be made to Cleveland Clinic by you to help keep the policy in force. Ultimately, this would lead to a larger gift supporting Cleveland Clinic s medical mission. You also could establish a new life insurance policy. If you live in Ohio, you first should establish the policy in your own name and designate Cleveland Clinic as the beneficiary before transferring ownership. It is important that you pay only the minimum needed to establish the policy (the tax deductibility of this portion of the premium payment is limited to the lesser of the policy s value or the basis in the policy, which is close to zero at the time the policy is established). Once the policy is in place, ownership can be changed to Cleveland Clinic. As in the case of a gift of an existing policy, if more premiums are owed, you could make additional unrestricted gifts to help Cleveland Clinic cover the expense of the premium payments gifts that would be fully tax-deductible. This option is appealing for benefactors of all ages, but especially to younger philanthropists because premium payments typically are lower. The benefit of making a charitable gift of life insurance is clear: a substantial gift made at a reduced cost could greatly benefit Cleveland Clinic and enhance the lives of future patients. Charitable Lead Trusts Low interest rates are likely to make you look more closely at a charitable lead trust, which enables you to set up a trust paying a current annual income to Cleveland Clinic. With this type of arrangement, Cleveland Clinic receives the income now instead of later. A trust can be established to last for your lifetime or for a set number of years. At termination of the trust, the remainder goes back to you or your heirs. The appeal of a charitable lead trust -- especially for those seeking a way to pass on wealth to children and grandchildren -- is that when interest rates are low (as they currently are), the Internal Revenue Service anticipates that the value of the assets ultimately returning to your heirs also will be low and will not increase. The result is that you may leave more money to your heirs while avoiding or reducing estate or gift taxes. Example * For example, if you put $1 million into a nongrantor charitable lead trust that pays Cleveland Clinic $70,000 for the next 20 years and distributes the remainder to your children, the present value of Cleveland Clinic s charitable interest is slightly more than $1 million. This means that none of the $1 million you put into the trust is treated as a taxable gift to the named beneficiaries. If the trust is able to achieve a return above 7%, your heirs will eventually receive more than $1 million totally free of estate and gift taxes. As you consider your year-end financial planning, it s comforting to know that unlike many other deductions, a charitable gift allows you to control the amount and the timing. If you wish to make a charitable gift to Cleveland Clinic, remember that federal tax laws, and those of many states, make it possible to reduce or eliminate taxes on amounts you give. In itemizing deductions, you can subtract funds used to make charitable gifts from the amount that would otherwise be taxed. With this in mind, you may find that you can make a charitable gift to Cleveland Clinic, or even increase the size of an existing gift. Your charitable gift helps make it possible for Cleveland Clinic to continue pursuing medical research, educating future physician investigators and providing compassionate care at the highest levels of professional excellence. If you wish to discuss, in confidence, a plan that best suits you and your family s charitable needs, please call Cleveland Clinic s gift planning professionals at

6 Gifts of Stock If you have owned a stock for more than a year, allowing it to grow in value, you may decide to harvest your gain. If you are concerned about tax you would owe, consider using this appreciated stock as your year-end gift to Cleveland Clinic. Example: If you purchased your stock for $3,000 and it s now worth $5,000, you will owe $300 in tax ($2,000 gain x 15% capital gain tax).* Making a gift of appreciated stock to Cleveland Clinic allows you to support a medical area you care about while receiving a charitable deduction for the full fair market value of the gift, and possibly avoiding capital gain tax. Tax Benefits of Gifts of Cash vs. Stock CASH STOCK Value of Gift $5,000 $5,000 Marginal income tax rate 28% 28% Tax savings from deduction $1, $1, Capital gains if sold* $2, ($5,000-3,000) Capital gain tax rate* 15% Capital gain tax* $ Net cost of gift $3, $3, An additional $300 is saved by giving appreciated stock. * Long-term stock is used for this illustration, with a cost basis of $3,000 Note: If you wish to make a gift of stock to Cleveland Clinic, please notify Valerie Maras in Cleveland Clinic s Treasury Department at Roth IRA vs. Traditional IRA In 2010, the $100,000 income limit for converting from a traditional IRA to a Roth IRA was eliminated, and any taxpayer, filing singly or jointly, can take advantage of this opportunity. Amounts converted still are taxable, but under a special optional rule, the income can be reported 50 percent in 2011 and 50 percent in Offset Additional Taxes on Roth Conversion with Charitable Gift The conversion of your traditional IRA to a Roth IRA may propel you into a higher tax bracket. If you decide that a Roth IRA conversion is right for you and your family, strategic charitable giving can offset some of the additional taxes you will incur. The tax-saving benefits increase with your tax bracket. Maximize Your Gifts in the Year of the Conversion By accelerating your giving and making as many gifts as possible in the year that you make the conversion, you will maximize your tax savings. Charitable gifts are most beneficial from a tax-saving standpoint when you are in a high income tax bracket. You should consider converting to a Roth IRA if: You can afford to pay the conversion tax and do so from sources other than the IRA. Otherwise, there is no reason to make the conversion. You do not expect to be in a lower tax bracket in retirement. You will probably not need to touch the Roth IRA for living expenses until much later. You are younger, although this could work with a healthy older person as well. You wish to provide for a beneficiary(ies) who will stretch benefits over life expectancy(ies). To discuss your charitable goals in confidence with one of our gift planning professionals, please call or , ext , and ask for the Gift Planning team, or send an request to giftplanning@ccf.org. 6

7 A $10,000 gift /charitable deduction produces the following tax savings: Tax Bracket Net Cost of Gift Tax Saving 15% $8,500 $1,500 25% $7,500 $2,500 28% $7,200 $2,800 33% $6,700 $3,300 35% $6,500 $3,500 Gift Planning with You and Your Advisor Many Cleveland Clinic benefactors rely on their personal financial advisors to assist them in establishing charitable plans that are financially beneficial to them, their families and Cleveland Clinic. Our gift planning professionals are pleased to work together with you and your advisor to help develop a plan that best suits your philanthropic needs and desires. Recently, several advisors assisted Cleveland Clinic benefactors in achieving their philanthropic goals. We thank them for their assistance: Harold L. Hom, Esq., Harold L. Hom Co., LPA Royce A. McCarty Jr., Esq, Royce A. McCarty, Jr., P.C. Share the joy of your future gift today Estate gifts reveal caring and generous people. Cleveland Clinic often receives estate gifts from people who never made their plans known to us while they were alive. These gifts are much appreciated and will certainly help us further our mission. But, we are saddened that we did not have the opportunity to express our gratitude for such kindness and generosity. By informing Cleveland Clinic today of your future gift, we both can share in the joy of your gift. Please visit our website for examples of bequest language and designations at clevelandclinic.org/ giving. You may call our gift planning professionals at , or send an to giftplanning@ccf.org. Roger L. Shumaker, Esq., McDonald Hopkins LLC Richard T. Spotz Jr., Esq., Ziegler, Metzger & Miller LLP Cleveland Clinic recognizes that the selection of a trusted advisor is your personal choice and does not endorse individual financial advisors. If you or your advisor would like more information about gift planning, you can reach Cleveland Clinic s gift planning professionals at or giftplanning@ccf.org. Complimentary Booklets Ways to Give Your family and your financial security are your first priority. Happily, even in this uncertain economic climate, you have many ways in which to fulfill both your charitable goals and family obligations. Our Ways to Give brochure outlines a variety of these giving options. Pyramid Legacy Society Please let us know whether your estate plans include a gift to Cleveland Clinic. We look forward to welcoming you into the Pyramid Legacy Society and sharing with you information on the benefits of membership, described in our Pyramid Legacy Society brochure. To request copies of these brochures, please complete and return the prepaid reply card. If you wish to discuss, in confidence, a plan that best suits your family and charitable needs, please call Cleveland Clinic s gift planning professionals at You also may send an request to giftplanning@ccf.org. We look forward to assisting you. 7

8 The Cleveland Clinic Foundation Office of Institutional Relations and Development/DV Euclid Avenue, Cleveland, OH clevelandclinic.org/giving New Members Pyramid Legacy Society The Pyramid Legacy Society was established in 1992 to honor and show appreciation to all patients, friends and alumni worldwide whose support is building a legacy for Cleveland Clinic through their charitable gift plans. These farsighted individuals are Building the Foundation for Tomorrow s Healthcare. Anonymous Friends Lenore Berke Ellen L. Boyer Rita F. Breuer Kenneth S. and Deborah G. Cohen Joyce and Ab Glickman Jeannette* and Jerome Goodman Joseph T. Gorman Margaret* and Guy* Lipscomb Judith and Herbert Lustig Dr. and Mrs. Herbert J. Naito Paula Perry Sam J. Sanfilipo* Cindy and Bob Schneider * Deceased Generous Gifts Further Educational Goals Medical education is intrinsic to Cleveland Clinic s mission, and the organization relies on individuals like you to help train the next generation of physician investigators and nurses. Gifts from Pyramid members and other friends have made the following possible: Cleveland Clinic s Lerner College of Medicine was founded in 2002 to train physician-investigators self-directed learners, innovative researchers and physicians whose work will lead to medical advances. This approach addresses a serious shortage of practicing physicians who conduct research. Cleveland Clinic s Education Institute sponsors one of the largest physiciangraduate training programs in the country. More than 800 residents/fellows from around the world currently are training in 57 residency programs and more than 70 advanced fellowship programs. The alumni network includes 11,000 members from across the United States and 70 countries. Scholarships allow Cleveland Clinic nurses to pursue undergraduate and advanced degrees, and a simulation lab trains 1,300 nurses in new technology each year. Your generosity helps physician investigators and nurses prepare for the future, allows experienced practitioners to remain current in their fields and fulfills our founding mission of caring for the sick, investigating their problems and educating those who serve. Do your estate plans include Cleveland Clinic? Let us know! Every gift makes a difference Call Pyramid volume 18 issue 3 Anne S. Corrette: Editor Elaine DeRosa Lea: Managing Editor 2010 The Cleveland Clinic Foundation Pyramid is published by the Office of Institutional Relations and Development for friends and benefactors of Cleveland Clinic. Its purpose is to identify opportunities that may be helpful in your charitable giving as well as your tax and financial planning. Please consult your professional advisors as to the applicability of any item to your situation. Cleveland Clinic, founded in 1921, integrates clinical and hospital care with research and education in a private, not-for-profit group practice. Cleveland Clinic depends on the generosity of individuals, families, corporations and foundations to ensure its continued excellence in patient care, medical research and education. Cleveland Clinic realizes that individuals would like to learn more about particular programs, services or developments. We also fully respect the privacy of our patients. If you do not wish to receive any materials containing such information, please write to the Office of Institutional Relations and Development/DV3, 9500 Euclid Ave., Cleveland, OH