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A Better Partnership


Feb 2005
February 04, 2005

Estate Planning Focus - Winter 2005

Topics included in this issue:



The Health Insurance Portability and Accountability Act ("HIPAA") and its regulations were enacted with the laudable goal to protect against improper disclosure of your medical records and related health information. This goal, however, can prevent your family and those named in your estate plan from obtaining your medical information—leading to frustration of your estate plan.

Under HIPAA, medical personnel may incur substantial penalties, both financial and criminal, for improperly disclosing your medical information. Understandably, doctors and hospitals tend to interpret HIPAA conservatively making it harder for family members and loved ones to access your medical information.

HIPAA allows the following individuals or entities to obtain your medical information: (i) persons who are legally authorized to make health care decisions on your behalf during your lifetime and (ii) persons or entities that are authorized to act on your behalf after your death ("authorized persons").1

HIPAA looks to Michigan law to determine your authorized persons. Under Michigan law, authorized persons are your Patient Advocates and Personal Representatives. Notably excluded are your Trustees and Agents under your Durable Power of Attorney, who have no authority to obtain your medical information without further action from you.

Even though your Patient Advocate or Personal Representative is designated, medical personnel can refuse to disclose medical information to them, if medical personnel reasonably believe that they are abusing or neglecting you or that you would be endangered if medical personnel provide information to them.

According to Michigan law, your Patient Advocate cannot act until you are unable to make your own medical decisions ("incapacitated"). Thus, in order to be deemed your Patient Advocate, the person you name as your Patient Advocate must prove that you are incapacitated. However, he or she may be unable to access the medical information necessary to prove your incapacity because he or she is not your Patient Advocate until after your incapacity is proven.

Furthermore, even if your Patient Advocate proves that you are incapacitated, your Patient Advocate can obtain only the medical information needed to fulfill his or her duties. Therefore, medical personnel determine the scope of your Patient Advocate's duties and give your Patient Advocate only the medical information they believe to be relevant to your Patient Advocate's duties.

Overall, even though an authorized person under HIPAA, your Patient Advocate may have difficulty proving that he or she should be making your medical decisions, and then, upon proving that he or she can make your medical decisions, may have limited access to your medical information when actually making your medical decisions.

HIPAA allows you to sign an authorization permitting others to obtain your medical information. By doing so, you can ensure that those you trust have access to your medical information. We strongly recommend that you sign such an authorization, and WN&J has developed a form for this purpose.

If you would like to sign a HIPAA authorization, contact your WN&J attorney.

1Parents are typically authorized persons for their minor children, and therefore parents should receive all medical information regarding their minor children.

Facts About Organ Donation

Recent surveys show that nearly ninety percent of the population supports organ donation, but the number of patients who die awaiting organ transplantation is at an all-time high. Many individuals wish to indicate their desire for organ donation, but are unsure about the best way to accomplish their wish.

In Michigan, the Gift of Life Organ, Tissue & Eye Donor Registry is a computerized database maintained by Gift of Life Michigan, a nonprofit organization dedicated to increasing public awareness regarding organ donation. The Registry contains information regarding organ, tissue and eye donation and is available only to authorized hospital staff and procurement-group personnel, and it is available twenty-four hours a day. Hospitals contact Gift of Life upon every hospital death.

If you desire to donate organs, it is strongly recommended that you enroll with the Michigan Organ and Tissue Donor Registry through the Secretary of State's Web site, by mail to Gift of Life c/o Michigan Department of State, P.O. Box 30693, Lansing, MI 48909-9522, or fax to 517-241-6852. Interested parties may also contact Gift of Life Michigan directly at 1-800-482-2881 and request a Registry card be mailed to them. As of June 1 of this year, 742,289 Michigan residents, 7% of the state's population, have registered with the Registry.

Registration is effective upon completion and does not require family consent. However, when hospitals access a signed donor's record on the Gift of Life donor registry, they notify family members of the donor's desire to donate organs. If no donor registry is on file, the family of the individual may give written consent for the individual's organs to be donated. Organizations familiar with organ donation strongly recommend that potential organ donors discuss their wishes with family members to avoid any confusion, surprise and delay upon death.

You may also request organ donation in your will, although in most instances this information will be seen too late for your organs to be effectively donated. You may also make known your wishes on your driver's license, state identification card or in a written Patient Advocate Designation or "living will” document. The advantage of a Patient Advocate Designation is that you can individualize your wishes, and your Patient Advocate Designation is made part of your medical record upon admission to the hospital. While documenting your intent on your driver's license or Patient Advocate Designation is important to demonstrate your wishes, it is also strongly recommended that you register with the Registry.



By Leslie J. Miller

Unlike the Working Families Tax Relief Act of 2004, which primarily extended expiring provisions of the tax code, the American Jobs Creation Act of 2004, signed October 22, 2004 (the "Act"), amended nearly 600 sections of the tax code, and calls upon taxpayers to make decisions over the next few months that will have consequences for years to come. Below are some of the major highlights.

Tax Impact for Manufacturing

  1. Repeals Foreign Sales Corporations and Extraterritorial Income Exclusion. These two items provided significant tax benefits to domestic manufacturers with export sales, and will now be phased out over three years.

  2. The ETI is "replaced”" with a new deduction on all domestic manufacturing income. The deduction is available to C corporations, S corporations, partnerships, sole proprietorships, cooperatives, estates and trusts. When fully phased in (2010), the deduction will be 9% of qualified production activity income.

Tax Incentives for Business and Job Creators

  1. Increases the maximum number of S corporation shareholders from 75 to 100.

  2. Treats members of a family as a single shareholder for purposes of the limitation on number of shareholders.

  3. Provides for the transfer of suspended losses when stock in an S corporation is transferred between spouses or as part of a divorce.

  4. Disregards unexercised powers of appointment in determining potential current beneficiaries of certain trust shareholders.

Individual Provisions

  1. Allows taxpayers to deduct state and local sales taxes instead of state income taxes for 2004 and 2005. Taxpayers may deduct their actual sales taxes or use IRS-published tables.

  2. The rules for Deferred Compensation plans have been changed, and any plan that could be considered a deferred compensation plan should be reviewed by the end of the year to evaluate their compliance.

Charitable Contributions

  1. The Act increases reporting for noncash charitable contributions. C corporations as well as other taxpayers are required to obtain a qualified appraisal for claimed charitable noncash deductions of more than $5,000, and when the claimed charitable deduction exceeds $500,000, all donors are required to attach the qualified appraisal to the tax return for the year of the contribution.

  2. Tightens rules on deductions for charitable contributions of vehicles.

If you need help interpreting the new Act, call a member of the WN&J Trusts & Estates Group.



By Todd W. Simpson

Year 2004 brought several significant estate and gift tax changes. The amount each U.S. citizen or resident may transfer tax free at death rose from $1,000,000 to $1,500,000 (reduced by any taxable gifts made during life). Each person's generation-skipping transfer tax exemption also rose to $1,500,000. The amount an individual may gift during his or her lifetime, however, remained at $1,000,000. As a result, the additional $500,000 of estate tax relief allowed in 2004 can be used only at death, not during life.

The changes for 2005 are fewer and less dramatic. The exclusion amounts for estate taxes and generation-skipping transfer taxes remain at $1,500,000 and the gift tax-exempt amount remains at $1,000,000. The amount individuals may gift annually tax free (without filing a gift tax return and without using a portion of the donor's $1,000,000 lifetime gift tax exemption) remains at $11,000 per person.

For persons dying in 2005, two changes will apply. First, the top marginal estate tax rate (currently 48%) will be reduced to 47%. This will reduce the tax liability for taxable estates over $2,000,000. This top marginal estate tax rate is scheduled to be 46% in 2006 and 45% in 2007.

A second change involves how the federal and state governments share estate tax revenue. Historically, the federal government allowed as a federal estate tax credit the portion of tax that was paid for state estate taxes. For a number of years, Michigan, like many other states, simply collected as its estate tax the maximum amount allowed as a federal estate tax credit rather than calculating an independent state estate tax. As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001, however, the federal credit for state estate taxes is being phased out and, beginning in 2005, Michigan will receive no estate tax revenue unless a new state estate tax regime is enacted.

Several other states facing this prospect have enacted estate or inheritance tax legislation. Three bills have been introduced in the Michigan legislature to address this situation, but none of them has met with much success. We will continue to monitor Michigan's legislative response to this potential loss of state revenue.

Although the 2005 changes are relatively modest, a number of changes have occurred since 2001. If you have not reviewed your estate plan since 2001, you may be well served to contact your Warner Norcross & Judd attorney to schedule a review.


We welcome James P. Spica to our Metro Detroit office. Jim, who concentrates his practice in taxation, trusts and estate planning, joins Warner as senior counsel in the Firm's Trusts and Estates Practice Group.

Before joining Warner Norcross, Jim practiced with Gamble, Rosenberger & Joswick in Bloomfield Hills and Dykema Gossett in Detroit. He has served as law clerk to the Hon. Richard C. Wilbur on the U.S. Tax Court. In addition, Jim has been an adjunct professor of law at Wayne State University and has held a series of professorships at the University of Detroit Mercy where he lectured, most recently as a tenured associate professor of law, on taxation, trusts and decedents' estates. He has also been a visiting scholar in the University of Michigan Department of Classical Studies and an adjunct classics instructor at the Roeper School in Birmingham.

Jim is a member of the Michigan and American Bar Associations. He is a former trustee of the Roeper School and a former member of the Board of Trustees' Education Policy Committee at the Grosse Pointe Academy.

Jim may be reached at 248.784.5137 or

Estate Planning Focus


Editor: Susan Gell Meyers

Trusts & Estates Group Chairman: Mark K. Harder

Estate Planning Focus is published by Warner Norcross & Judd LLP to inform clients and friends of new developments. It is not intended as legal advice. If you need additional information on the topics in this issue, please contact your Warner Norcross attorney or any member of the Firm's Trusts and Estates Group.

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