For most married couples, filing federal income taxes jointly rather than separately results in a lower tax bill. However, this "all for one, one for all" approach can have a downside if questions arise about the accuracy of the return. The general rule is that both taxpayers will be responsible, individually as well as collectively, for any taxes, interest, and penalties owed, even if only one spouse was earning the income. It may be that in a couple's division of labor only one spouse is in fact responsible for understating income or erroneously claiming deductions, but by law each spouse can be made to answer to the IRS.

It is always good advice for anyone signing a tax return to do so only after carefully reviewing and understanding every line of it. But even such common-sense measures cannot prevent mistakes and/or deception from happening. To avoid unfairness in such circumstances, the Tax Code has provisions designed to protect "the innocent spouse."

Under this general heading, there are three kinds of relief: innocent spouse relief, relief by separation of liability, and equitable relief. To request relief, a taxpayer must file the appropriate form with the IRS no later than two years after the IRS first tries to collect the tax. An attached statement must explain why the taxpayer believes he or she qualifies for relief. If the IRS rejects the claims for the first two types of relief, it will automatically determine whether equitable relief is warranted.

Innocent Spouse Relief

An innocent spouse must meet the following conditions to qualify for relief: (1) a joint return understated taxes because of erroneous claims by the requesting party's spouse, such as unreported or underreported income, or unjustified deductions or credits; (2) when the return was signed, the innocent spouse did not know or have reason to know that there was an understatement of tax. If the spouse knew, or should have known, that there was an understatement, but did not know by what amount, partial relief may be given; and (3) in light of all of the surrounding circumstances, it would be unfair to hold the requesting party liable for the understatement of tax. Among the factors taken into account by the IRS are whether the taxpayer benefited from the erroneous return in the form of a higher standard of living and whether the joint filers later were divorced or separated.

Separation of Liability

Separation of liability means an allocation between the spouses of unpaid liabilities resulting from the understatement of taxes owed. Either of the following requirements must be met: The parties filing the joint return are no longer married or are legally separated, or the joint filers were not members of the same household at any time during the 12-month period before the relief is sought. This relief is not available if spouses transfer assets between themselves to avoid tax or as part of a fraudulent scheme. Another disqualifying factor is actual knowledge of the other spouse's erroneous items on a return that gave rise to the deficiency.

Equitable Relief

As a last resort, equitable relief may be available when there has not been any fraud and, all things considered, it would be unfair to hold the spouse seeking relief liable for the understatement or underpayment of tax. A broad range of "fairness" factors may be considered by the IRS. There is no exhaustive list, but some examples include separation or divorce, economic hardship if relief is not granted, and the fact that the tax for which relief is sought is attributable to the other spouse. Weighing against equitable relief would be factors such as knowledge of the items causing the understated tax, receiving a significant benefit from that understatement, or not making a good-faith effort to comply with federal income tax laws for the tax year in question.

More than most athletic endeavors, golf is known for being a setting for the mixture of business and pleasure. Many business relationships have been formed or strengthened, and many deals have been closed, somewhere between the first tee and the eighteenth green. That aspect of the game played a part in a recent court decision in which an employee was held to be entitled to workers' compensation benefits based on injuries he sustained while taking part in a golf tournament.

Kenneth worked as a shipping supervisor for a furniture manufacturer. A trucking company invited Kenneth and some other managers to play in its annual golf tournament, free of charge. Participation was voluntary, but you do not need to twist a golfer's arm to get him to play golf on what otherwise would have been a regular workday. Unfortunately, the fun stopped abruptly for Kenneth when the golf cart in which he was riding struck a tree and he was injured.

When Kenneth tried to get workers' compensation benefits, his employer challenged his claim. Its argument was that Kenneth was taking part in a voluntary recreational activity that made him ineligible for benefits. There is such an exclusion in the law, but it did not apply to bar Kenneth's claim. The golf tournament was voluntary, but it was not "recreational," in the sense of being unrelated to Kenneth's employment. Under the "mutual benefit doctrine," even an activity that is generally regarded as recreational will fall within the workers' compensation laws if some advantage to the employer results from the employee's conduct.

Kenneth's participation in the golf tournament was at least equal parts business and pleasure. His employer benefited because Kenneth was able to meet with and establish better relationships with the trucking company representatives whom he had previously only talked with by telephone.

Margaret worked in a clerical position for a hospital. During the first three years of her employment, she was disciplined several times for unexcused absences, and she risked termination if her absenteeism continued. Then, Margaret slipped and fell while at work, fracturing her elbow and ankle and aggravating an existing wrist condition. Over the next 10-day period, she worked only one complete workday. Margaret missed parts of the remaining workdays because she had medical appointments, or was not feeling well, or both.

The hospital, seeing these absences as the straw that broke the camel's back, fired Margaret for excessive absenteeism. Margaret sued her ex-employer, contending that her absences after her fall were protected leave under the federal Family and Medical Leave Act (FMLA). A federal court ruled that the hospital was free to fire Margaret without running afoul of the FMLA.

The outcome in Margaret's case turned on a fine distinction about language in the FMLA and a regulation issued under it. The FMLA provides that an eligible employee can take up to 12 workweeks of leave during any 12-month period because of a "serious health condition" that makes the employee unable to perform the functions of the employee's job. After taking such leave, an employee must be reinstated to the position held before the leave. Part of the statute's definition of "serious health condition" is a condition that involves "continuing treatment by a health care provider." That phrase is not defined in the FMLA itself, but a Department of Labor regulation describes it as including "a period of incapacity . . . of more than three consecutive calendar days." Incapacity refers to the inability to work or perform other regular daily activities.

Margaret argued to no avail that she had been incapacitated for more than three consecutive calendar days, and that she therefore had taken only protected leave for a "serious health condition." The problem was that she missed work for only a part of all but one of the days in question. The court reasoned that a "calendar day" is commonly understood to mean a whole day, from midnight to midnight. Thus, to be afforded protection under the FMLA, the period of incapacity must last for more than 3 whole days, that is, 72 consecutive hours. In addition to parsing the language from the regulation, the court ruled that the incapacity either extends for over 72 straight hours, or it does not. By contrast, under the interpretation argued for by Margaret, more issues would arise about how much incapacity on a given day is enough for that day to count toward the requirement in the regulation. The court was "loathe to adopt a strained interpretation of a regulatory provision that would result in employers, employees, and courts facing an uncertain and ever-shifting legal landscape."

Developers bought 12 acres in a hilly, rural area, with plans to build homes on the property. Because surface water pooled on a large central part of the land after heavy rains, the owners channeled the excess water into a roadside ditch. The roadside ditch was connected to a series of waterways that eventually reached a river eight miles away.

The developers' plan hit a major snag when they were sued by the United States Army Corps of Engineers. The Corps contended that the roadside ditch was a waterway of the United States that fell under the protection of the Clean Water Act and the jurisdiction of the Corps. With that premise, the developers first needed a permit from the Corps before digging the drainage ditch on their property.

While the Corps exercises no control over isolated wetlands, it has jurisdiction over wetlands that are adjacent to navigable waters and their tributaries. In particular, the Clean Water Act requires a permit from the Corps for the discharge of fill material into waters that are in the Corps' jurisdiction. When the contractors piled the excavated dirt on each side of the 1,100 foot-long drainage ditch, this constituted the "discharge" of fill material into wetlands without a permit.

A federal court took the side of the Corps in holding that a permit was required. First, the court deferred to the Corps' interpretation of the regulation under which the tract to be developed was regarded as having wetlands. Second, the adjacent roadside ditch was a tributary of navigable waters, even though water from the ditch flowed through several other nonnavigable watercourses before reaching the river and later the Chesapeake Bay. The court accepted the Corps' interpretation of "tributary" as encompassing all of the streams whose water eventually flows into navigable waters.

The court required the developers to fill in the drainage ditch on their property and restore their wetlands to their pre-violation condition. It rejected the developers' argument that a more reasonable remedy would have been to allow the ditch to stay by removing the fill to a nonwetlands part of the property.

Developers are well advised to carefully evaluate whether any existing ditches or drainage swales are linked to navigable water, however indirectly, before dredging or filling what might appear to be an isolated wetland beyond the jurisdiction of the United States Army Corps of Engineers.

Generally, business entities such as corporations or limited partnerships are legally separate and distinct from the shareholders and members who compose them. When justice requires it, however, courts have ignored the separation of the business and the individual and have allowed a creditor of the business to satisfy the debt from the assets of an individual closely connected to the business. This concept is known as "piercing the corporate veil." A variation on the idea, called reverse piercing of the corporate veil, allows someone to reach the assets of the business entity to satisfy a claim or judgment obtained against a corporate insider. In both instances, a court disregards the normal protections given to a business structure in order to prevent abuses of that structure.

Neither type of "piercing" is done lightly. There must be such a blurring of the lines between a business and an individual that the separate personalities of the two no longer exist. Moreover, while a court's analysis is highly dependent on the facts of each case, typically the party seeking to disregard the distinction between a business and an individual associated with it must show that the individual controlled or used the business so as to evade a personal obligation, perpetrate a fraud or a crime, commit an injustice, or gain an unfair advantage.

Recently, a state supreme court approved the use of "reverse piercing" to allow two creditors of an individual to use the assets of a limited partnership controlled by that individual to satisfy his personal debts. The businessman owned or controlled various business entities. The creditors showed that revenue from the largest of these, a limited partnership, was transferred to a corporation owned by the same individual. Then the funds were used to pay for the businessman's lavish lifestyle, including such items as a second home, a country club membership, a luxury vehicle, credit card bills, and college tuition for the businessman's son. Under these circumstances, the legal distinction between the partnership and the person controlling it had become a fiction to be ignored in the interests of justice.

Medicaid is a governmental program that provides health insurance coverage for low-income children, seniors, and people with disabilities. As the baby boomers age, Medicaid's other role, as a source of nursing home benefits, is getting more attention. Each of the states operates its own Medicaid program, subject to some overriding rules set up by Congress and the federal Centers for Medicare and Medicaid Services. The following is an overview of some of those rules. Be aware that the specific requirements can vary from state to state, and must be checked before making decisions.

Asset Rules

An individual may have no more than $2,000 in "countable" assets to be eligible for Medicaid nursing home benefits. Assets that are not counted in this calculation include personal possessions, one motor vehicle (valued up to $4,500 for an unmarried recipient and of any value for the resident's spouse), a principal residence in the same state where benefits are sought, prepaid funeral plans and a small amount of life insurance, and assets deemed to be inaccessible. To promote the independence of the nursing home resident's healthy spouse, usually referred to as the "community" spouse, that spouse may keep one-half of the couple's countable assets, up to a maximum of $92,760 in 2004. The least that a state may allow the community spouse to retain in 2004 is $18,552. The couple's assets are totaled as of a "snapshot date," which is when a spouse enters a long-term facility in which he or she then stays for at least 30 days.

Transfer Penalty

To avoid giving benefits to those who present a false picture of poverty, there is a transfer penalty that is imposed when people transfer assets without receiving fair value in return. The Government divides the amount so transferred by the average monthly cost of a nursing home in the state in question. The person is then ineligible for Medicaid during the resulting number of months. Several provisions limit the impact of the transfer penalty. First, Medicaid officials can consider only transfers made during the 36-month "look-back period" preceding the application for Medicaid (or 60 months for transfers made to certain trusts). As a result, it is prudent not to apply for benefits in the three years after a large transfer. Second, the transfer of assets to particular categories of individuals, such as spouses and blind or disabled children, will not bring about a penalty. Finally, a penalty can be completely wiped away, or "cured," if the transferred asset is returned, or the penalty may be reduced to the extent that the asset is partially returned.

Treatment of Income

The starting point for dealing with income under Medicaid is that nursing home residents pay all of it, less certain deductions, to the nursing home. The types of deductions are as follows: a $60 per month allowance (subject to some variations among the states) for the resident's personal needs; a deduction for any uncovered medical costs, including premiums for medical insurance; for married applicants, an allowance for the spouse at home if he or she needs income support; and a deduction for any dependent children living at home. Income attributable solely to the community spouse is off-limits. It is not taken into account in determining eligibility and the community spouse will not have to use his or her income to support the spouse receiving Medicaid benefits in a nursing home.

The transfer of ownership interests in a small business should take into account all of the considerations that make each business, and especially a family-owned business, unique. The vehicle for accomplishing the transfer is usually called a buy-sell agreement. Its name barely begins to describe the buy-sell agreement's various purposes. With professional advice, the agreement can be tailored to meet the objectives of each small business, whether the business is in the form of a close corporation, partnership, limited liability company, or some other structure.

By creating a market for the ownership interest of a shareholder who has retired, become disabled, or died, a buy-sell agreement insures that such an interest can be converted into cash when cash is more important than having shares in the company. Since small businesses often pay out most or all of their profits in salaries, an equity interest in the business would be much less valuable if its owner was not assured of being able to sell that interest back to the business or to other shareholders.

Valuation of the Business

When a triggering event in a buy-sell agreement causes the interest of one owner of a business to be purchased by other owners, or by the business as an entity, a critical issue is placing a dollar value on that interest. It is difficult to set a market value for shares in closely held corporations, whose stock by its nature has little or no liquidity. An agreement can set the price for shares according to a predetermined formula, value as shown on the company's books, an appraisal by a third party, or some other method. In any event, it is important that the provisions on the valuation and purchase price of shares in the company be kept current.

Orderly Transition of Ownership

A buy-sell agreement also may serve as an orderly method for maintaining control over the company despite a change in the composition of its owners. In a family-owned business, this may mean a clause in the agreement effectively keeping the business in the family by allowing remaining family members to buy the interest of a departing owner. For children who decide not to carry on in the business, cash, perhaps generated by life insurance on a senior owner, might be an alternative to inheriting part of the business.

A typical buy-sell agreement for a family business provides that, on the death or departure of one shareholder, the remaining shareholders have the right to purchase his or her shares. Those participating in the buyout usually acquire those shares in an amount commensurate with their holdings. An alternative could give the corporation itself the right to purchase the shares. However, this option may bring into play laws for the protection of creditors that limit the power of corporations to purchase their own shares. A hybrid approach sometimes used in buy-sell agreements allows the business to buy its own shares, only to the extent permitted by relevant statutes, but the remaining shareholders could then purchase any shares not acquired by the corporation.

Avoid Conflicting Terms

Since one of the triggers for application of a buy-sell agreement is a shareholder's death, shareholders should avoid conflicts between the terms of the agreement and their estate plans. When the terms of an agreement and a will cannot easily be reconciled, the odds increase for litigation, rather than the smooth transition for which the agreement was designed. If a will predates the agreement, it may be necessary to draft a new will that is consistent with the agreement. A less-complicated approach is to amend the will with a codicil providing that business interests are to be disposed of according to the buy-sell agreement.

Consistency between an estate plan and a buy-sell agreement is important not only as to disposition of shares, but also as to voting or management rights in the company. A shareholder should determine whether his estate or heirs should have such rights, and then be sure that the documents accurately reflect the shareholder's wishes. Similarly, a shareholder should consider whether limits on his executor's voting rights are desirable, so as to avoid the possibility that the executor will act to frustrate the shareholder's intent.

One purpose of any contract is to avoid future disputes between the parties by establishing rights and duties for future contingencies. Aside from dealing with the substantive issues raised by transferred ownership, a buy-sell agreement also can head off conflict, or at least help solve it, by providing for a form of alternative dispute resolution or mediation.

When the time comes for an important transaction for an individual, such as buying insurance, taking out a mortgage, or applying for a job, having good credit can be critical. Second only to having good credit is being able to prove it in writing, in a consumer report compiled by one of the credit reporting agencies (CRAs) that have credit information on millions of Americans. If you have ever applied for a credit card, insurance, or a personal loan, one or more of the three major CRAs has a file on you.

By law a consumer has the right to request a copy of a report from a CRA, and that right should be exercised annually to check on the accuracy of the report's contents. Such oversight has added significance if a major purchase is being considered. Rectifying any errors ahead of time, which itself can be time-consuming, can shorten the waiting period for loan approval.

A CRA must divulge everything that is in a consumer report including, in most instances, the source of the information. The consumer also has the right to know who has requested the report during the preceding year, or two years if the request is related to employment. Aside from reports prompted only by the consumer's initiative, a report can be requested when a consumer is notified that a company has turned down the consumer's application for credit. That notice, including the CRA's name, address, and phone number, is required by law.

If you detect errors in your report, the process of setting the record straight involves contacting both the CRA and the provider of the information in dispute. A consumer's rights concerning errors in a consumer report are as follows:

• If disputed information cannot be verified, the CRA must delete it;

• If there is inaccurate information, the CRA must correct it;

• If there is incomplete information, such as a record that shows that a consumer made late payments but does not show that the consumer is current, the CRA must complete it;

• The CRA, having changed or removed information after a reinvestigation, may not put it back in the file unless the information provider verifies the information and the CRA gives advance notice to the consumer;

• The CRA must delete any account not belonging to the consumer;

• If requested by the consumer, the CRA must send notices of a corrected report to anyone who received it in the preceding six months, or two years if received for employment purposes.

If the credit story told by a consumer report is sad but true, the best ally for a consumer who has changed his ways is the passage of time. As a general rule, accurate negative information in a report can stay there for only seven years. There are some exceptions, for which the "shelf life" of negative information is extended. For example, bankruptcy information may be reported for ten years, and there is no time limit for information on criminal convictions. Similarly, there is no time limit for credit information stemming from an application for a job paying more than $75,000, or an application for more than $150,000 worth of credit or life insurance.

It is a common practice for an employer to require an employee to sign an agreement preventing the employee from competing with the employer for a certain period of time and in a designated geographic area. For many years, interpretation and enforcement of these noncompetition agreements or covenants not to compete, as they sometimes are called, have led to lawsuits. When an ex-employer attempts to enforce an agreement in another state, which happens more often in today's economy, special issues arise because of the variations in how receptive or hostile the different states are to the anticompetitive effects of these agreements.

Dueling Lawsuits

When Mark was hired in Minnesota to work for a manufacturer of medical devices, he signed an agreement not to compete with the employer, for two years after leaving, and in any area where the employer marketed its products. In a typical "choice-of-law" clause, the agreement also said that it was governed by the laws of the state where the employee last worked for the employer.

After five years, Mark resigned and moved to California to take a job with a company that was competing head-to-head with his ex-employer. Correctly anticipating a fight, and wanting to reach the courthouse first, Mark and his new employer sued his former employer in a California court on the same day he started his new job. Except in limited circumstances, California law prohibits anticompetition agreements, so Mark asked for a declaration that the agreement he had signed was void and unenforceable against him in California. More than that, he also asked the court to prohibit the ex-employer from taking any action outside of the California court to enforce the agreement. At about the same time, the former employer did, in fact, sue in a Minnesota court, which issued a preliminary order to enforce the terms of the agreement.

A stalemate ensued, with each side having obtained a ruling in its favor, and purporting to prevent pursuit of the litigation in the other state. When the California case was appealed to that state's highest court, it ruled against any interference with the pending litigation in Minnesota. At the same time, the court recognized California's aversion to noncompetition agreements and allowed Mark's California case to proceed unless and until any Minnesota judgment became binding on the parties. In short, the race to a favorable judgment continued.

Georgia on His Mind

In another similar case, James signed a noncompetition agreement with a company in Ohio that gave computer support services to providers of wireless communications. Later, he left and relocated to Georgia, which does not prohibit noncompetition clauses outright but does subject them to close scrutiny. The agreement had provided that Ohio law was controlling.

Like Mark in the California case, James went to work for a competitor in his new state and sued there to invalidate the covenant not to compete. Unlike the California case, however, there were no dueling lawsuits in different states because James had misrepresented to his first employer that he was leaving to become a stockbroker.

James's lawsuit in Georgia to rid himself of the agreement was partially successful. The agreement was too broad and restrictive to pass muster under Georgia law, so it could not be enforced there, even though the agreement itself referred to Ohio law. James was relieved of the agreement, but only while working in Georgia, because, as the court put it, "the public policy of Georgia is not that way everywhere."

California recently entered new territory in legislative responses to the growing problem of identity theft. A new law requires a business to notify any California resident whose personal information may have been compromised by a breach of its computer security. The legislature was acting, at least in part, in response to an incident in which hackers got the personal information of over a quarter of a million state employees in an attack on a government database. A company that violates the notification requirements is subject to a suit for damages and civil penalties.

The measure's impact would be significant even if it were confined to California, but the law likely will have much more far-reaching effects. It applies to any company that conducts business in California. It may take court decisions to sort out what constitutes doing business in California, but any business having contacts with California customers should be aware of this law. Moreover, although the law only speaks to the interests of California residents, a case can be made for notifying any customers affected by a breach. Otherwise, customers in other states who are the victims of identity theft might argue that a company was negligent in not extending them the same treatment as Californians.

The disclosure requirements apply only to unauthorized access to a person's name, plus either their Social Security number, driver's license number, or information from a financial account. Encrypted personal information or information in public records is outside of the law, but it is up to the business to determine what personal information in its possession is subject to the law and whether such information has been acquired by an unauthorized person. This places a premium on having adequate security systems and procedures in place to detect an intrusion and respond to it.

Businesses with customers in California are well advised to put into place incident response policies and procedures even before experiencing any breach of a security system. Not only will this allow the kind of prompt response required by the law, but another provision states that following such a policy for notifying affected persons will be treated as compliance with the law's notification requirements. If a business does not already have its own notification procedures in an information security policy, it must give the notice by methods set forth in the law.

A state supreme court has ruled that a commercial landlord has a duty to mitigate damages when a tenant breaks the lease by leaving the property. A bookstore agreed to a ten-year lease in a shopping center. Citing lost profits due to competition from a new bookstore in the same mall, the tenant abandoned its store space with only six months left on the lease. For the rest of the lease term, the tenant paid no rent and the landlord did not rent the space to anyone else. When the landlord sued for the rent due under the lease, the tenant argued that the landlord should have reduced its damages by leasing the space to a new tenant.

A lease is a hybrid under the law, having aspects of property law and contract law. As originally conceived, leases were viewed primarily as transfers of an interest in property. If the tenant abandoned the property, he was seen as simply having given up that interest. The landlord could stand by and do nothing but demand the rent, which was due as a fixed obligation.

On the other hand, when seen mainly as a contract to convey an interest in property, a lease, like any other contract, carries with it the duty to mitigate damages. The injured party is expected to make efforts to avoid the consequences of the breach by the other party. The landlord need not accept just any new tenant, however, and only reasonable efforts are required. In the context of a shopping center, it may well be reasonable for the landlord to hold out for a tenant that will restore the overall balance of stores that existed before one tenant abandoned the premises.

The goal is to put the injured party in as good a position had the contract not been breached, at the least cost to the defaulting party. Some courts also have reasoned that requiring the landlord to mitigate damages encourages the productive use of land and decreases the likelihood of physical damage to the property.

In deciding that the shopping center landlord had been under an obligation to mitigate damages by attempting to re-rent the store space, the court was joining a modern trend that treats leases more as contracts for the use of property than transfers of property. The court also declined to make an exception for commercial leases. It is true that a commercial landlord has a special interest in maintaining the right mix of tenants in a shopping center. That interest is protected, however, not by relieving the landlord of the duty to mitigate damages, but by allowing the landlord to recover not just lost rent, but such other financial losses as may have been caused by the breach of the lease.

Recently, the first-ever federal privacy standards to protect individuals' health-care information went into effect. The mandate for these standards, collectively known as the Privacy Rule, was in the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The Privacy Rule gives individuals access to their medical records and greater control over the use and disclosure of their personal health information. States are still free to keep or adopt their own policies or practices that are at least as protective as the new federal requirements.

Who Is Covered

Entities subject to the Privacy Rule include health-care providers, health plans (including insurance companies and HMOs), and health-care clearinghouses, such as physicians' billing services. The regulations also apply to "business associates," meaning any organization or person (other than a worker for a covered entity) that receives or accesses private medical information on behalf of a covered entity. When a covered entity uses a business associate, the two must enter into a written agreement containing specific protections for the health information used or disclosed by the business associate.

On its face, the Privacy Rule does not directly apply to employers, but that is not to say that employers need not become familiar with its requirements. Employers frequently interact with covered entities and their business associates. In addition, employers administering their own group health plans are effectively brought within the reach of the Privacy Rule.

Safeguards for Individuals

The Privacy Rule applies to "protected health information" (PHI), defined as all individually identifiable health information held or transmitted in any form or media, whether electronic, paper, or oral. Individuals generally should be able to see and obtain copies of their PHI within 30 days of a request. Covered entities must provide a notice to individuals describing how their PHI may be used and informing them of their rights under the Privacy Rule.

In the interest of promoting quality health care, providers are not restricted in their ability to share information needed to treat patients. Generally, PHI may not be used for purposes unrelated to health care.

However, in the rare cases where it is allowed, only a minimum amount of protected information may be used or shared. Covered entities may release medical information to outside businesses such as insurers, banks, or marketing firms only with specific written authorization from the individual.

The Privacy Rule gives individuals the right to request alternative means or locations for receiving PHI communications. For example, a patient could ask a doctor to communicate with the patient through a designated telephone number or address. Another reasonable accommodation might be sending medical information to a patient in a closed envelope rather than on a postcard.

Policies and Procedures

The Privacy Rule requires covered entities to set up policies and procedures to protect the confidentiality of PHI. Written privacy procedures must identify staff with access to PHI and describe how such information will be used and when it may be disclosed. There must be training of employees in privacy procedures and designation of an individual to be responsible for insuring that those procedures are followed.

Covered entities may continue existing disclosures of health information for certain public responsibilities, subject to limits and safeguards that are specific to such circumstances. Examples include emergencies, identification of the body of a deceased person, and public health needs. If there is no other law that mandates disclosure to meet a particular public responsibility, covered entities may use their professional judgment to decide whether to make disclosures.

Enforcement

The Government may impose civil penalties of $100 for each failure to comply with a Privacy Rule requirement. A penalty may not exceed $25,000 per year for multiple violations of the same requirement in a calendar year. If a violation is due to reasonable cause, involved no willful neglect, and is corrected within 30 days of when an entity knew or should have known about it, no civil penalty may be imposed. A knowing violation of the Privacy Rule could also bring a fine of $50,000 and up to a one-year prison term. Maximum criminal penalties are higher if the wrongful conduct involves false pretenses, or use of the health information for commercial advantage, personal gain, or malicious harm.

Personal Guarantees Nondischargeable

Stanley and his wife, Kay, owned and operated a travel agency. To facilitate the business of selling airline tickets, the agency entered into an agreement with an airline ticket broker. The broker acted on behalf of airline carriers, issuing tickets and collecting payments from travel agents. The travel agency maintained a trust account for holding customer payments owed to the broker. Part of the deal was that the couple signed personal guarantees for any debts owed by their agency to the broker.

When the travel agency began experiencing financial trouble, it also began to fail to deposit the proceeds of ticket sales into the trust account. As the broker tried to draw from the trust account, the checks started to bounce. The agency's fortunes continued to decline and it went into bankruptcy. The broker then sued Stanley and Kay on their personal guarantees, claiming that, because the debtors had violated their fiduciary duty, the debt owed to the broker was not dischargeable in bankruptcy.

The Bankruptcy Code provides that a debt is not dischargeable if it is for failure to meet an obligation while acting in a fiduciary capacity. In general terms, a fiduciary is one who undertakes to act primarily for another's benefit, such as in managing money or property.

Stanley and Kay maintained that only their agency had a fiduciary duty to the broker, so that whatever debt they owed because of the personal guarantees could be discharged in bankruptcy. A federal court disagreed. It was true that, by itself, the fact that the couple had personally guaranteed the agency's debt to the broker did not put them in a fiduciary relationship with the broker. The critical factor was that Stanley's and Kay's personal actions had created the debt owed by the agency to the broker. They had withheld money that should have gone into the trust account and had depleted that account to the point that checks were returned for insufficient funds. The court refused to allow Stanley and Kay to use bankruptcy to avoid the consequences of their own misconduct.

On May 28, 2003, the Jobs and Growth Tax Relief Reconciliation Act of 2003 became law. Much of this federal tax law applies only to the years 2003 and 2004, after which provisions in the 2001 Tax Act will again become effective. Nonetheless, the Act contains some significant changes for individuals as well as businesses.

Individuals

The child tax credit increases from $600 to $1,000, which is an acceleration of a scheduled phase-in that was to have occurred between 2005 and 2010. In 2005, the credit will fall to $700, but will then gradually rise to $1,000 again by 2010 by virtue of the 2001 Act.

The standard deduction for married couples will double to twice the amount of the standard deduction for single taxpayers. Married taxpayers filing a separate return will claim the same standard deduction as a single person. Similarly, for 2003 and 2004, the upper limit of the 15% income tax bracket for married couples will increase to a dollar amount that is twice that for a single taxpayer.

For 2003, income levels for the 10% tax bracket will increase to $7,000 for single taxpayers and $14,000 for joint filers. In 2004, these levels of income will be indexed for inflation. Retroactive to January 1, 2003, the new tax rates for individuals are 10%, 15%, 25%, 28%, 33%, and 35%. For transactions taking place from May 6, 2003 to December 31, 2007, the maximum capital gain tax rate has dropped from 20% to 15%, and from 10% to 5% for lower-income taxpayers.

To reduce the double taxation of corporate earnings, dividends received by an individual shareholder from a domestic or qualified foreign corporation will be taxed like capital gain income. This means a rate of 15% for most taxpayers and 5% for those at lower-income levels, assuming the stock is held for at least the holding period set by law. Dividends from certain corporations are not eligible for this new treatment, such as those from tax-exempt charities, farmers' cooperatives, and particular foreign companies.

Businesses

The Act increases the amount of investment that may be deducted immediately by small businesses from $25,000 to $100,000. The amount of this deduction is reduced by the amount that the cost of the business assets exceeds $400,000. Under prior law, this phase-out of the deduction began at $200,000.

The additional first-year bonus depreciation deduction is increased from 30% to 50% for investments acquired and put into service between May 5, 2003 and January 1, 2005. Qualifying property still must be brand new, with a class life of 20 years or less.

Maxine worked in New York for a financial information services provider. When she moved to Florida, her employer agreed to allow her to telecommute. Maxine was responsible for the same tasks that she had handled in New York, only now from her laptop in Florida she logged onto her employer's mainframe computer each workday.

Two years into the telecommuting arrangement, Maxine's company decided to end it. When she turned down an offer to return to New York, Maxine was without a job. She was denied unemployment benefits in Florida following a ruling that she had voluntarily quit her job without good cause. However, the Florida agency advised Maxine that she might be eligible to receive unemployment benefits in New York.

In what may be the first court decision of its kind on interstate telecommuters, New York's highest court also ruled that Maxine was ineligible for benefits, but for a different reason. Under New York law, a threshold requirement for eligibility is that the employee's entire service for the employer, except for incidental work, must be "localized" in New York. Maxine argued unsuccessfully that her services were localized in New York, at her employer's mainframe computer, notwithstanding that she initiated this service on her laptop in Florida.

The court ruled instead that the physical presence of the employee determines in which state a telecommuter is located. For work done while she was located in Florida, Maxine was not eligible for unemployment compensation in New York.

When the new economy met the old unemployment insurance system in Maxine's case, the court stayed with principles that predate the age of computers. The outcome was dictated by two rules that are uniformly recognized: All of an individual's employment should be allocated to one state, which should be solely responsible for paying benefits; and that state should be the one in which it is most likely that the individual will become unemployed and seek work.

Unemployment has the greatest economic impact on the community in which the unemployed individual resides, and benefits generally are linked to that area's cost of living. Legislators and judges from previous generations could not have foreseen today's world of interstate telecommuting, but the rules they created are still valid. For better or worse, Maxine was tied to Florida, where she was physically present, and she could not look to New York for unemployment benefits.

Longer life expectancies and the coming surge in the retirement-age population have increased the demand for long-term care, as well as for insurance as one means of paying for that care. Long-term care encompasses a broad range of services for those with a prolonged illness, disability, or mental disorder. Unlike the focus of traditional medical care exclusively on certain medical problems, the goal of long-term care is the maintenance of an individual's level of functioning.

Types of Care

The two main types of care are skilled care, provided by medical personnel for medical conditions according to a treatment plan, and personal care. Personal care, sometimes called custodial care, is assistance with the activities of daily living that can be provided in many settings, including nursing homes, adult day-care centers, or the individual's own home.

Whether the purchase of long-term care insurance makes sense for a particular individual depends on age, health status, overall retirement objectives, and income. As with any type of insurance, it is critical to understand what is and is not covered among the types of long-term care services that are available. Exclusions and limitations are common. Equally important is knowing where services are covered. Some policies cover care in any state-licensed facility, but others may specifically include or exclude particular types of facilities.

Key Features

Since the amount of coverage is dictated by the type of service, coverage amounts will vary depending on the service. Most policies have a "total lifetime benefit" for the duration of a policy. In addition, benefits are often payable up to maximum amounts per day, week, month, or year.

A provision on when benefits are payable, sometimes called a "benefit trigger," is another key feature that can vary significantly among policies.

Some states have legislated benefit-trigger requirements, making it a good idea to check with state insurance departments. Typically, benefits become payable because of the insured's inability to perform a certain number of the activities of daily living. Policy language on mental incapacity also allows for benefits when the insured fails mental functioning tests. Such a benefit trigger is especially important for those afflicted with Alzheimer's, even though most states prohibit the outright exclusion of coverage for that disease.

Although they can add to the cost of a policy, there are optional policy provisions that can help to tailor a policy to individual circumstances. Third-party notification authorizes the insurer to notify a designated third party, such as a relative or friend, if the policy is about to lapse for nonpayment of the premium. A waiver of premium clause allows the insured to stop paying premiums once he or she is in a nursing home and the insurer has begun to pay benefits. Nonforfeiture benefits return some of the investment in the policy if coverage is dropped. If an insured has paid premiums for a certain number of years, some policies allow a death benefit to the estate consisting of a refund of premiums, minus any benefits the company has paid.

Tax Implications

Premiums paid for long-term care insurance are deductible as a medical expense, as long as all medical expenses exceed 7.5% of adjusted gross income. Since premiums on average increase more than tenfold between the ages of 40 and 70, this deduction increases substantially with age. The maximum long-term care premium you can add to your other deductible medical expenses is based on your age at the end of each tax year.

Employer contributions to long-term care insurance for their employees are tax deductible for the employer, and premium payments are not taxable income to the employees. Benefits from a long-term care plan are excluded from income up to the lesser of the actual costs incurred or $63,875 per year. The annual limitation will increase with inflation in future years.

If you want to stop the flow of unsolicited credit-card offers, there is a way. Under the federal Fair Credit Reporting Act, consumers have the right to stop credit bureaus from providing their names and addresses for marketing lists.

As required in the federal legislation, the major credit bureaus have set up a toll-free number (888-5-OPT-OUT--888-567-8688) that is required to be provided with the offer of credit.

When you call, you can either opt out by telephone for two years or request a form you can use to opt out permanently. By calling the same number, you can also be put back on marketing lists after having been removed from them. In cases of joint credit, both parties may be required to opt out before the solicitations will stop.

Reading and understanding all of the language in a homeowners' insurance policy are not formalities to be skipped over while searching for the signature line. As with any contract, the fine print can have real and lasting consequences, and its contents will control over any contradictory verbal assurances. Taking the time to understand the terms of their policies might have headed off bad outcomes for homeowners in two recent cases.

Business Purposes Exclusion

Joan bought property consisting of a home, two barns, and other outbuildings. She also purchased a homeowners' insurance policy that excluded coverage for any nondwelling structure that was rented out "unless used solely as a private garage." Joan rented the barns to a commercial marina, which used them for winter storage of customers' boats. When one of the barns collapsed due to snow and ice on its roof, Joan submitted a claim for loss of the barn.

The insurer denied coverage, prompting Joan to point out that the rental exclusion should not apply because the marina was using the barn as a "private garage." Her point made sense as far as it went, but the insurer won because of a separate exclusion from coverage for any nondwelling "used in whole or in part for business purposes." Joan's main occupation was as a financial analyst, and she brought in only a few thousand dollars by renting out the barn. But all that was necessary for the business purposes exclusion to apply was that the insured regularly engage in the conduct with an intent to profit.

It was significant for the court that, by failing to disclose her conduct, Joan had prevented the insurer from knowing the risks it was insuring.

The purpose of a business pursuits exclusion, after all, is to rule out coverage for a whole set of risks and liabilities flowing from business activity. It did not matter that the damage to the barn was not caused by the boats that were stored there for profit.

"Household" Defined

At the heart of another dispute over homeowners' insurance coverage was what turned out to be an erroneous assumption by the homeowners that "residents of your household" meant any persons living on the same parcel of land, even if in a different house from that occupied by the insureds. Ken and June lived in one house and their daughter and 10-year-old grandson lived rent-free in another house that was only 20 feet away and had the same mailing address. The close-knit family often shared meals and activities, and Ken and June regularly cared for their grandson.

When the grandson accidentally shot a playmate with a rifle, Ken and June submitted a claim under their homeowners' policy, which covered "residents of your household who are your relatives." The insurance company succeeded in arguing that it had no obligation to defend the grandson in a suit for his friend's injuries because he was not a resident of Ken's and June's household.

In legal terminology, a "household" is a collection of persons living together as a unit under one roof or within a single "curtilage." "Curtilage" is a technical term for the area next to a house that is inside the same enclosure, is used for the intimate activities of the house, and is protected from observation by passers-by. The house where the grandson lived did not meet any of these criteria so as to make the grandson part of Ken's and June's "household." The four individuals in this case probably constituted a household in many respects and for many purposes, but not in the context of interpreting the homeowners' insurance policy.

The free-wheeling give and take in various online forums is leading to more defamation claims by individuals and businesses. Given that so many online speakers are anonymous, however, Internet service providers sometimes become trapped between the speaker and his offended subject. Before the alleged victim can seek redress, the perpetrator must be identified, and providers often resist divulging such information. Courts are still in the early stages of setting rules for these legal contests.

An electronics company brought an action in California against an anonymous individual who allegedly had trashed the company's publicly traded stock on an Internet message board. Among other comments, the secretive critic had said that the company produced "low tech crap" and that its president was manipulating stock prices. In its efforts to identify the speaker, the company discovered that his online name was registered with a service provider with headquarters in Virginia.

When the plaintiff sought permission from a Virginia court to examine the provider's records, the request was met with stiff resistance. The provider argued that it would infringe on the constitutional right to speak anonymously if it were forced to reveal subscriber information.

Citing the principle that the courts of one state generally should respect court orders from a sister court, the Virginia court allowed the review of the provider's records. The right to free speech was not an impediment to the court's ruling, as "the constitutional guarantees of free speech afford no more protection to the speaker than they do to any other tortfeasor who employs words to commit a criminal or civil wrong."

Wounded by disparaging comments posted anonymously on an Internet message board, another company similarly sought to unmask its detractors by forcing information from a provider. In that case, the court saw more merit in the free speech defense raised by the provider, but it did not completely block the request for subscriber information. The court balanced the right to speak anonymously with the right of the injured company to protect its proprietary interests and its reputation.

The result was a compromise of sorts: The company could gain access to the speakers' identities only if it first showed to the court's satisfaction that it could make out a plausible defamation case against them. This meant exactly identifying the offending statements and demonstrating how they harmed the plaintiff. In this case, the critics remained safely in the dark because the company could not substantiate its claims that the comments adversely affected its stock price and its hiring practices.

The combined effects of an aging population and a sluggish economy have led to an increase in lawsuits alleging age bias in the workplace. The Age Discrimination in Employment Act (ADEA) prohibits age discrimination in the employment of persons who are at least 40 years old. The ADEA covers most private employers of 20 or more persons. It forbids age discrimination in advertising for employment, hiring, compensation, discharges, and other terms or conditions of employment. Retaliation against a person who opposes a practice made unlawful by the ADEA or who participates in a proceeding brought under the ADEA is a separate violation.

The ADEA takes into account that sometimes there is a correlation between age and the ability to fulfill the requirements of a job, and that even older workers must comply with employers' rules and requirements that have nothing to do with age. An employer does not violate the ADEA if it takes an otherwise prohibited action where age is a "bona fide occupational qualification" necessary to the operation of a particular business. Nor is it a violation to differentiate among employees based on reasonable factors other than age or to fire or discipline an employee for good cause.

Before suing in court, an aggrieved person first must allege unlawful discrimination in a charge filed with the Equal Employment Opportunity Commission (EEOC) and then wait 60 days to allow the EEOC an opportunity to resolve the dispute informally before taking further legal action. Court remedies include injunctions (court orders stopping a discriminatory practice), compelled employment, promotions, reinstatement with back pay and lost benefits, and an award for attorney's fees and costs of bringing the suit.

If a court finds that an employer's violation of the ADEA was willful, it may also award liquidated damages equal to the out-of-pocket monetary losses of the plaintiff.

It is not essential to an ADEA lawsuit that there be a "smoking gun" in the plaintiff's favor in the form of derogatory age-based comments about older employees. In fact, remarks of that kind will not support liability if they have no connection to the challenged employment decision. In a recent lawsuit brought by an on-air television reporter who was fired, a boss's comment that "old people should die" was an insignificant stray remark because it was made about the boss's own father. On the other hand, it was very helpful to the plaintiff's case that the same boss had stated repeatedly that she wanted to "go with a younger look" and she did not like having an older man appearing on the news.

Employers sometimes select older workers to be terminated as a money-saving measure, given their generally higher compensation and perhaps their being close to vested retirement benefits. There is no ADEA violation in a decision that treats employees differently because of something other than age, such as money. An employer will not be liable under the ADEA for terminating an employee solely to prevent his pension benefits from vesting. (That conduct might very well violate ERISA, however.) Such a scenario is distinguishable from situations in which employers face ADEA liability because they have made decisions based on the stereotype that productivity and competence always decline with old age.

The Telephone Consumer Protection Act (TCPA) prohibits any person within the United States from using a telephone facsimile machine to send an unsolicited advertisement to a person with whom the sender does not have an existing business relationship. A prior business relationship will be treated as consent to a faxed advertisement unless the recipient withdraws that consent.

Court remedies under the TCPA should command the attention of any company giving thought to a fax advertising blitz directed at potential customers. A person receiving an unsolicited fax may bring an action to prohibit violations of the TCPA and for actual damages, or statutory damages of $500 per violation.

For a willful or knowing violation, a court has the discretion to triple the amount of statutory damages. Actual damages may amount to cents per page and the costs of tied-up telephone lines. Statutory damages, however, could reach into the millions for a "blast-faxed" advertising campaign with hundreds or thousands of faxes, with each transmission considered a separate violation.

Not only can the cost of TCPA violations be steep, but in some cases that cost may be extracted from the personal assets of corporate officers, not just the business itself. In one case, the officers and sole shareholders of a small advertising service were found to be personally responsible for statutory damages based upon nearly a million unlawful faxes a month, over five months.

They were personally liable not simply because they held particular offices and sat on the board of directors, but because they actively oversaw and directed the unlawful conduct. With good reason to believe that their actions violated the TCPA, the individual defendants had persisted, as the court put it, "with their eyes and pocketbooks wide open."

The federal estate tax marital deduction is one of the most important estate planning tools available to a married couple. The basic marital deduction rule is that, upon the death of the first spouse, the value of any interest in property passing to the surviving spouse is deducted from the decedent spouse's gross estate. This means that the amount passing to the surviving spouse escapes taxation in the decedent spouse's estate.

There is no limitation on the value of property that can qualify for the marital deduction. By transferring sufficient assets to the surviving spouse in the proper manner, estate tax liability upon the first spouse's death can be completely avoided.

At first view, the estate tax marital deduction may seem to be a government giveaway. It is not. The advantage afforded is not the total avoidance of estate tax on the transferred property but, rather, the deferral of such tax. The marital deduction requires that the transfer of assets to the surviving spouse be made in such a way that those assets are exposed to estate tax liability in the surviving spouse's estate.

The obvious advantage of deferring the estate tax liability is that the surviving spouse will have the use of the tax dollars that would otherwise have been paid to satisfy the tax liability of the first spouse's estate. The deferral of tax liability also postpones the possible need to sell off assets that the surviving spouse might wish to preserve in order to obtain funds to satisfy the tax liability.

Transfer by Will

A key decision is the selection of the type of transfer to be made to the surviving spouse. The simplest form of transfer that qualifies is the outright transfer of assets by will. The problem with such a transfer is that it saddles the surviving spouse with the responsibility of managing the assets and also exposes him or her to possible pressures from relatives, creditors, or charities to transfer the property for their benefit.

Transfer by Trust

The marital deduction law permits, with no loss of the deduction, the transfer to the surviving spouse in trust. There are two basic types of trusts that have become the standard means for taking advantage of the deduction without burdening the surviving spouse with the problems of outright ownership of the first spouse's estate.

The first type of trust is known as a "power of appointment trust." The property is placed in trust under the will, giving the surviving spouse a life interest in the income generated by the trust and a power to give the assets in question to anyone, including to himself or herself or to his or her estate. This power can be restricted so as to be exercisable by the surviving spouse only by will and still qualify for the marital deduction.

The second type of trust, rather than giving the surviving spouse the power to ultimately dispose of the assets, permits the decedent spouse to designate the ultimate recipients of the property qualifying for the marital deduction. This trust is known as the Qualified Terminable Interest Property (QTIP) trust. The surviving spouse must receive a lifetime income interest in the property. No one other than the surviving spouse may have any rights in the trust assets during the surviving spouse's lifetime. The decedent spouse's personal representative must elect QTIP treatment on the estate return. The crucial feature of the QTIP trust is that the decedent spouse retains the ability to control the course of ownership of the assets qualifying for the marital deduction.

Coordination with the Lifetime Credit

It has become standard estate planning practice to coordinate the estate tax marital deduction with the unified credit against the estate tax. The unified credit against the federal estate tax allows an individual to pass a certain amount of assets free from estate tax liability regardless of the identity of the recipients. For decedents who have died in 2002 or who die in 2003, that amount is $1 million; for decedents dying in 2004 and 2005, the amount is $1,500,000; for those dying in 2006 to 2008, the amount that can pass tax-free is $2,000,000; and for 2009, the amount is $3,500,000. In a will, the amount allowed to pass tax-free is normally transferred under what is known as a "credit shelter" or "by-pass" trust. Then, the transfer under the marital deduction rules is made so as to prevent the taxation of the remaining assets.

Clearly, in the case of a married couple owning sufficient assets to make estate taxation a possibility, estate planning must take into account the marital deduction rules and the associated tax savings. Given the complex nature of the many rules involved, you should always seek the guidance of a qualified attorney for any estate planning needs.

As a sales representative for a computer software company, Richard received an annual salary and sales commissions as determined by a compensation plan that was part of his contract. There was a specific formula for how commissions were to be calculated, but language in the plan gave the company broad authority to make a final decision about compensation and to change the plan at any time. For sales commissions, in particular, the employer reserved the right to review any transaction generating a commission beyond a salesman's annual quota and to determine the "appropriate treatment" of it.

When Richard scored an especially large sale, the company decided that its "appropriate treatment" was to cap Richard's commission at an amount that was less than he expected under the usual formula.

The company's position was that the large commission expected by Richard was not justified because it arose from a single transaction on which Richard had not done as much work as he claimed, and because he had only been employed by the company for eight months. Richard quit and sued for breach of contract.

A federal court ruled in favor of the employer. The language in the compensation plan was broad, but it was not ambiguous. The whole thrust of the document was to leave determination of the commissions to the employer's discretion, notwithstanding that the plan identified some forms of appropriate treatment of commissions.

When a contract leaves a decision up to one party's discretion, it is nearly unassailable in court. A court may intervene if that party is guilty of fraud, bad faith, or a grossly mistaken exercise of judgment, but Richard did not make those arguments. Despite the fact that it was arguably unfair, the court ruled that such a decision was "out of our reach."