What’s All the Buzz About? The Diary of an Estate Planner

What’s All the Buzz About? The Diary of an Estate Planner

By Jeffrey G. Moore

Two significant developments in the estate planning arena, the Health Insurance Portability and Accountability Act (“HIPAA”) regulations and the new Oregon Inheritance Tax, have created quite a buzz. However, the buzz has often fallen on deaf ears. It must be an election year. But election year or not, a personal experience illustrates why we may want to tune in.


Just the other day I was picking up a prescription for a family member and overheard the pharmacist’s assistant bemoan to the customer ahead of me, “The new law says we can’t even share information with a spouse!” When I approached the counter I began to explain, “Well, actually, the law does not prohibit a spouse from obtaining health care information…” I quickly realized from the assistant’s emphatic shaking of his head in the negative that there was no use in belaboring the point. His employer had already made up his mind. And his employer is not alone.

The HIPAA regulations were finalized in May of this year and affect every estate plan regardless of the size of the estate. One of the primary purposes of HIPAA is to ensure the privacy of an individual’s health information. Medical service providers, such as doctors and pharmacists, are under strict regulation to maintain this privacy and the failure to do so carries stringent civil and criminal penalties. As a result, it has become more and more challenging for people (yes, even spouses) to access or obtain your medical information when you are unable to do so for yourself. A positive result for unwanted intruders or marketers, but a challenging result for family or friends asked to assist with a client’s health care.

However, the finalized HIPAA regulations allow you to appoint in your Advance Directive a “personal representative” who is then able to stand in your shoes and access your medical information so as to make any necessary medical decisions on your behalf. In addition, a separate HIPAA Authorization or Medical Release can be signed to entitle your health care personal representative and other health care agents to obtain medical information on your behalf. Such an Authorization should cut through most red tape—even at the pharmacy.


Speaking of red tape, it was about a year ago that the Oregon State Legislature passed the Oregon Inheritance Tax. Although not as significant as the federal Estate Tax that boasts a 37% to 48% marginal tax rate, the Oregon Inheritance Tax is still something to watch out for at a roughly 6% to 16% marginal tax rate. The Oregon law can be summarized as follows:

  • For deaths in 2004 – The State Death Tax Exemption is $850,000. (The amount of the estate in excess of this Exemption is subject to the Oregon Inheritance Tax.)
  • For deaths in 2005 – The State Death Tax Exemption is $950,000.
  • For deaths in 2006 and after – The State Death Tax Exemption is $1 million. (The Exemption is capped at $1 million for 2006 and all years subsequent. There is no inflation adjustment.)

The Oregon Inheritance Tax therefore affects any individual or married couple with an estate that exceeds $850,000 in 2004 or $950,000 in 2005. The problem with many existing estate plans is that those plans were drafted when no separate Oregon Inheritance Tax existed. Unless these plans are amended, an unwanted Oregon Inheritance Tax can result. For example, a person who dies in 2004 with a $1.5 million estate will not incur any federal Estate Tax, but will incur a surprising $64,400 in Oregon Inheritance Taxes.

With the new Oregon Inheritance Tax, estate plans should be reviewed to address the changes in both federal and state laws. In many cases it may be appropriate to amend the estate plan to provide flexibility by postponing until the time of the first spouse’s death the decision of the amount to place in a tax-savings credit-shelter trust. With the appropriate language one can still use the full federal exclusion amount while deferring the Oregon Inheritance Tax until the surviving spouse’s death.

Although the HIPAA regulations have nothing to do with taxes, the ramifications are equally important with respect to health care issues. As a result of the finalized HIPAA regulations, our Estate Planning attorneys have also drafted new language for the Advance Directive that appoints a health care personal representative under HIPAA. We are also drafting separate HIPAA Authorizations to ensure that a client’s health care agent can obtain the necessary medical information on the client’s behalf.

Now that the election is over, if these changes have buzzed by you once before, give us a call to see how the changes may affect you.