The problem with estate planning is that you're never done with it, at least not while you're alive. As much as we'd all like to set it and forget it, our situations often change, and even if they don't, the government never leaves things alone.
A case in point is a set of rules now forcing thousands of people around the country to make yet another trip to the lawyer. The rules, issued last year, implement the privacy provisions of the 1996 Health Insurance Portability and Accountability Act (HIPAA, pronounced HIP-ah). The rules are meant to prevent improper disclosure of a person's medical records and related information, which is certainly a laudable goal, but lawyers have noted that the rules could create a Catch-22 for powers of attorney and other directives that are triggered when a person becomes disabled.
The rules impose substantial, even criminal, penalties on violators, so doctors, hospitals and others are understandably jumpy about running afoul of them.
A power of attorney is a document through which you give someone else authority to act for you in specified circumstances. In legalese, you are the "principal," and the person you give the authority to is your "agent" or "attorney in fact."
These documents typically cover financial matters and health care issues. They can be written to be permanently in place, but many are what lawyers call "springing," meaning that they require a triggering event or circumstance to become effective.
Typically, they also require some sort of medical certification, and they give the agent clearance to receive that. "The problem is," said Deborah A. Cohn of Paley, Rothman, Goldstein, Rosenberg, Eig & Cooper in Bethesda, "very often a financial power of attorney has a paragraph that says there can be disclosure of medical information to the agent -- but this person is not yet an agent" before he gets the information. Because of that, the doctor may be reluctant to provide the necessary certification, and there's a tangle.
The same can apply to medical powers of attorney. Medical powers of attorney typically allow the agent to contract for medical care, see medical records and permit their disclosure. In many states, they are combined with end-of-life or "living will" provisions covering treatment of terminal conditions into an "advance medical directive."
Cohn noted that many states have laws on this subject and even specific forms that take care of the HIPAA problem. However, documents drawn up long ago or in another state may not be clear enough to suit a particular doctor or hospital, so it's a good idea to review them.
And the issue can also arise with trusts, when a successor trustee seeks to take over from a trustee who has become incapacitated.
The HIPAA rules do allow a person to designate another as his or her "personal representative" to receive medical information, and many law firms have devised simple release forms for people who have executed powers of attorney or are trustees.
Cohn said she recommends that the authorization to receive medical information be written into both the medical and the financial powers of attorney, and that they be accompanied by a simple one-page form providing the authority to receive medical information.
While this may sound like overkill, "as is always the case with new regulations, [lawyers] are not quite sure what's required until it starts getting tested," Cohn said.
There are documents on the Internet and in self-help books, but it's a good idea to consult an estate-planning attorney or other expert. Your situation may involve only a simple fix, but you want to make sure it's done right. It's not something you want your family or friends to face when you're in a coma.
In the continuing legal tussle over whether cash-balance pension plans violate federal age discrimination laws, another U.S. District Court has weighed in on the side of those who argue that they do not.
In this latest ruling, handed down last month by Judge Catherine C. Blake in Baltimore, class-action status was denied to a number of discrimination claims that arose from the conversion by ARINC Inc. of its traditional pension to a cash-balance plan.
ARINC, a transportation communications and systems engineering firm headquartered in Annapolis, had previously offered a traditional "defined benefit" pension that provided retirees with an annuity based on a retiree's years of service with the company and highest three years of pay.
In 1999, ARINC converted to a cash-balance plan, under which each worker gets a hypothetical account to which interest payments are credited annually along with credits based on the worker's pay. The account balance rises over time, and at retirement a worker can receive it as a lump sum or an annuity.
A former ARINC worker named Dan C. Tootle filed suit, and sought class-action status, arguing that he and others at ARINC were discriminated against by the cash-balance plan.
Judge Blake gave that argument short shrift.
"The claim of age discrimination arises because money contributed to a younger employee [in a cash-balance plan] will be worth more (when expressed as an annuity starting at age 65) than the same amount of money contributed to an older employee, because the contribution to the younger employee will have more years to accrue interest before normal retirement age," Blake said.
"In other words, [by this reasoning] all cash-balance plans violate [federal] age discrimination [law], by virtue of their design," she said.
This essentially is the conclusion reached by a federal judge in Illinois last year in ruling against International Business Machines Corp. on its cash-balance plan.
But Blake concluded that applying "provisions designed for traditional defined-benefit plans to cash-balance plans could lead to illogical results, as illustrated in this case."
"The potential claim of age discrimination arises only by applying a definition for accrued benefits which does not fit with the way cash-balance plans are structured," Blake wrote. "The more sensible approach is to measure benefit accrual under cash-balance plans by examining the rate at which amounts are allocated and the changes over time in an individual's account balance" -- essentially the standard by which defined-contribution plans, such as 401(k)s, are judged, even though cash-balance plans are in fact defined-benefit plans.
Two other cases, one in New Jersey and the other in Indiana, have been decided similarly.