Healthcare
Exceptions and Alternatives to The Corporate Practice of Medicine
While most states prohibit the corporate practice of medicine, many do have exceptions. Physicians need to understand which working relationships – with hospitals, other physicians, and with non-physicians – are permitted. Health care ventures that do research or provide ancillary medical services need to understand when their work might violate the corporate practice of medicine laws. An experienced health care lawyer will review the current laws and regulations. He’ll also help you explore and develop alternatives that may be permissible. The status of corporate practice of medicine laws Most states allow for corporations to hire physicians if physicians own the corporation – the essence of a professional medical corporation. Some states allow certain government, nonprofit, and corporate entities to hire physicians. According to a California Senate study, 28 states permit hospitals to hire doctors. 30 states give physicians the right to operate a medical practice as a limited liability company. The three states with the most robust bans against the corporate practice of medicine and the prohibition against the hiring of physicians (outside of limited exemptions) are California, Colorado, and Iowa. Many states that do have bans against the corporate practice of medicine include dentists in the ban. Exceptions to the California prohibition against the corporate practice of medicine There are some direct exceptions to the California laws that prohibit the corporate practice of medicine, such as creating a professional medical corporation. There are also strategies that can be used such as the use of a management services organization (MSO) to help ensure that the medical practice meets its financial needs while also ensuring that the care and treatments of patients is the priority. Aside from professional medical corporations, the entities that generally use an exception to the prohibition against the corporate practice of medicine in California are either nonprofits or government organizations. Generally, both nonprofit hospitals and hospitals owned by healthcare districts are subject to the ban. Conversely, medical school health systems, which sometimes compete with nonprofit and for-profit hospitals, are not subject to the ban. What Physicians and Investors Must Know About California Medical Corporations Doctors must comply with California’s Professional Corporation Act. A professional medical corporation provides many advantages over a partnership or sole proprietorship. Exemption for Professional Medical Corporation The California Senate California Research Bureau prepared a document called “The Corporate Practice of Medicine in a Changing Healthcare Environment” in 2016. The research discussed some of the exemptions to the California Practice of Medicine Law. One key exemption many doctors are now using is the Moscone-Knox Professional Corporation Act. Passed in 1968, Section 12400-13410 provides one exemption to the prohibition of the corporate practice of medicine. The exemption is common (though there are differences) in many other states. The law permits physicians, dentists, and lawyers to create professional corporations. Doctors, based on the act, can create professional medical corporations. The law was enacted to comply with the requirements of the Internal Revenue Service. To qualify for professional medical corporation status, the professional corporations must, in general, be engaged in providing medical services for a single profession. For example, doctors and lawyers, still “cannot serve as shareholders, officers, directors, or professional employees of each other’s corporations.” The Moscone-Knox Law, however, exempted medical professions. This means that “license holders in a variety of other health professions can also serve as shareholders, officers, directors, or employees of professional medical corporations. These include podiatrists, psychologists, nurses, optometrists, marriage and family counselors, clinical social workers, physician assistants, chiropractors, acupuncturists, naturopathic doctors, professional clinical counselors and physical therapists.” Exemption for Clinics and Hospitals Operated for the Purpose of Medical Education The Senate research document states that the original law, which was clarified in an appellate court decision, indicates that medical schools are not “subject to the corporate ban even if they are in competition with nonexempt organizations” – since every patient is a teaching case even though the patient may not “be seen by an intern, resident or other trainee.” Exemption for Nonprofit Community Clinics “A community clinic is a clinic operated by a tax-exempt nonprofit corporation that is supported and maintained by donations, grants, and government funds.” Generally, the patient pays for the services according to the patient’s ability to pay. Exemption for Nonprofit research clinics These entities are licensed by the California Department of Public Health. Nonprofit research clinics research medical diseases such as heart disease and prostate cancer. These clinics generally only provide care to patients through the results of their research. Clinics may generally hire doctors and charge for their professional services. A clinic “shall not interfere with, control, or otherwise direct the professional judgment of a physician and surgeon in a manner prohibited by Section 2400 or any other provision of law.” Exemption Licensed charitable institutions, foundations or clinics Pursuant to 16 California Code of Regulations, Section 1340, the Medical Board of California permits any licensed charitable institution, foundation or clinic to employ physicians and surgeons so long as the entity does not charge for professional medical services. In such a case, the physician or surgeon would directly bill the patient or the insurance company. Additional exceptions Other entities that may qualify for exempt status include: County hospitals State agencies Nonprofit research clinics Specialty pediatric hospitals Other medical entities Generally, according the California Senate study, HMOs are exempt from California’s ban on physician employment, (based on the federal Health Maintenance Organization Act of 1973). California’s Knox-Keene Act allowed HMOs to hire physicians if the HMO model was a staff model. Most HMOs are not staff models. Most HMOs are group or independent practice association models. Stark law and the hospital/physician employment exception In states where hospitals can hire physicians (under broad exceptions like many states or limited exceptions such as in California) there is another roadblock to the hospital/physician employment contract that must be addressed. Stark Law was enacted to ensure that patients weren’t being referred to a designated healthcare facility (such as hospital) because the physician was receiving a referral fee or benefit. Referrals should be made to hospitals based on the best interest of the patient and not the financial interest of the doctor. Recent Stark Law and Anti-Kickback Statute Cases Medical providers must abide by Stark Law and the AKS. Referrals must be based on what is best for the patient. If profit is the driver, the providers will often pay a substantial settlement or […] There are many exceptions to Stark Law including the physician employment contract – provided the terms of the Stark exception are met. An experienced Stark Law attorney can help draft the appropriate contracts. Stark law requires that the employment contract between the hospital and physician be a “bona fide employment relationship.” This means that any sums paid by the hospital to the doctor (or an immediate family member) who has a bona fide employment contract with the hospital for services may be allowed if the following conditions are met: The employment is for specific identifiable services The amount being paid under the employment contract should: Align with the fair market value for those services With limited exceptions, should not be based (indirectly or directly) on the volume of any referrals by the referring doctor. The payment/remuneration should be “provided under an arrangement that would be commercially reasonable even if no referrals were made to the employer.” A payment may be acceptable if the payment is in the form of a productivity bonus. Stark law has a separate section which sets forth when and how hospitals can use remuneration payable to the physician in order to recruit physicians to relocate their medical practice to a geographical area serviced by the hospital. The Anti-Kickback Statute and the hospital/physician safe harbor The AKS statute was enacted to ensure the integrity of the healthcare professions. The law prohibits the payments of kickbacks or inducements to encourage or pressure physicians to make referrals based on economic incentives instead of doing what’s best for the patient. In states that permit hospitals or clinics to hire physicians, the hospital and doctor must still comply with the AKS. Violations of the law can result in criminal charges and civil lawsuits. The AKs does have a safe harbor which an experienced healthcare lawyer can explain. One safe harbor that applies to hospital/physician employment is the safe harbor for “personal services and management contracts.” This safe harbor can help protect the hospital/doctor employment contract if: The agreement is set forth in writing and signed by the hospital and physician. The contract covers all the services the physicians will provide to the hospital. The contract provides the details as the length and schedule of services and the charges – if the arrangement is not for full time work, The agreement should be for one year or more. The combined compensation to the physician should be consistent with fair market value and shouldn’t be based on the volume or value of referrals between the hospital and doctor – “for which payment may be made in whole or in part under Medicare, Medicaid or other Federal health care programs.” The contract shouldn’t violate state or federal law The total services shouldn’t be more than what are “reasonably necessary to accomplish the commercially reasonable business purpose of the services.” As with Stark Law, the AKS safe harbor includes physician recruitment issues. The management services organization (MSO) – a practical exception In California, and other states, the managed service organization can be a useful way to address concerns about the corporate practice of medicine, Stark Law, and the Anti-Kickback Statute. An MSO is a way for non-physicians to own a management services organization (MSO) which is specifically designed to run the administrative and non-medical parts of the medical practice. An MSO is a way for physicians to focus on the business side of their medical practice while working to avoid any conflict with the independent medical judgment of the physicians. As we discussed in our article on when an MSO is the right choice for a medical practice, an MSO can “buy the assets of a practice (to provide capital) and then offer the practice essentials such as equipment or space.” The MSO can provide a range of services including: Educating and training staff Payroll and medical coding Managing equipment Office rental Staff credentials The information technology side of the business Marketing and sales Disaster management Insurance Many other non-medical judgment issues It is critical that the doctors not cede too much control to the MSO. If physicians do cede too much control, then these health providers may violate California’s (or another state’s) prohibition against the corporate practice of medicine. When Using a Management Services Organizations (MSO) Is the Right Choice for Your Medical Practice Managed Services Organizations help physicians focus on practicing medicine by freeing doctors from many administrative tasks. Failure to consult with an MSO healthcare lawyer can cause civil and […] An experienced healthcare lawyer can explain what exceptions to the corporate practice of medical laws apply and whether any of those exceptions can be used for your practice or your health venture. Even when health providers can pass the corporate practice of medicine test, there are other hurdles that must be addressed to such as fee-splitting and improper referrals – which are monitored by Stark Law and the Anti-Kickback statute. An MSO is a common strategy for separating the business functions of a medical practice from the business functions. Contact Cohen Healthcare Law Group, PC for legal counsel on healthcare transactions, regulatory compliance, and FDA and FTC law. Our experienced healthcare & FDA attorneys advise healthcare companies and healthcare providers ranging from medical centers, to integrative and functional medicine practices, cosmetics and supplement companies, and medical device manufacturers. Contact our healthcare law and FDA attorneys for legal advice relevant to your healthcare venture.
December 1, 2021
The Weekly Scenario
The Weekly Scenario: 529-ABLE Programs
The 529-ABLE programs have been available nationwide for about 5 years now. With Maryland ABLE, you can contribute up to $15,000 per year (or more if the beneficiary is working) for a wide range of qualified disability expenses. The ABLE to Work Act allows beneficiaries who are employed to contribute an amount equal to their current year’s gross income --up to a maximum of $12,760 in 2021 each year to their ABLE accounts in addition to the annual standard contribution limit of $15,000. The account’s growth is tax-free, and contributions could qualify for an income deduction (for Maryland state income taxes). Contributions can be made up to a maximum account value of $500,000 over the life of the account. Other federal means-tested benefits such as Medicaid, housing and food assistance are not impacted by the balance of the ABLE account. Similarly, ABLE account balances are disregarded for the purpose of determining eligibility to receive, or the amount of, any assistance or benefits from Maryland means-tested programs. Before ABLE accounts, the only way families could save for the future of a disabled child without losing access to SSI and Medicaid benefits was with a special needs trust. That generally involves lawyer’s fees and other costs. While the ABLE isn’t a substitute for a special needs trust, it is a good solution to improve the life of someone with a disability and save some on income taxes. The account works like a 529 college savings account—earnings and withdrawals for qualified expenses are federal and state tax free. 529-ABLEs can be used to save for medical and educational needs, job training, and housing. What’s tricky is the basic rules for the accounts--set by Congress--are the same, but important details vary among plans. All ABLEs are for individuals who were disabled before age 26; An individual can open only one account; The maximum annual contribution is tied to the federal gift tax exclusion amount which is currently $15,000. What’s different? Things like investment choices, fees, and benefits for in-state residents. You must do a little digging on each state plan’s web site and the plan disclosure statements to compare ABLEs. Before you open an account in a state that’s not your home state, check to see if your state will be offering tax incentives for contributions. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
November 19, 2021
Family Law
How to Manage the Expense of a Family Law Case
It is a concern that every client has, but few are willing to discuss with their counsel. So, what are some tips to keeping your fees as low as possible? You can control some of the expenses, but not all of them. What you cannot control is the reasonableness of your spouse or the other attorney. But what you can control may make a significant difference in the expenses associated with your case. Be aware of the fact that divorce cases require disclosure regarding income, expenses, assets and liabilities. The more documents you can locate and provide to your attorney in an organized manner, the better. Generally, we are seeking three years’ worth of records, including tax returns, credit card statements, etc. But it’s also helpful to provide information regarding how and when the assets were acquired. We normally recommend that our clients prepare a chronology of important events, so that we can refer to that document in the future if needed, and we will then be able to fill in some of the blanks that may arise in the future. Because tracing of non-marital funds may be a significant part of a case, documents that trace funds that are premarital, inherited, or gifts from a third party will make a huge difference in educating your attorney in a coherent and organized way. You may not know the value of all of your assets, but you can do some research that will help get the value in the ballpark. Be responsive to requests from your lawyer for documents and information. If your lawyer is looking for the information, it’s because there is a need for it. The sooner you can provide the information, the better. Be aware of the fact that most attorneys rely upon a team, that often includes a paralegal, an administrative assistant and associates. That is often to your benefit, as their hourly rates are generally lower than that of the lead attorney. Show them respect and respond to them just as you would your lead attorney. Listen to your attorney’s recommendations. It’s your case, but there may be opportunities for compromise and settlement that occur early on or later in the case. If you delay considering a resolution until the day before trial, you have incurred substantial fees and costs associated with litigation. Rely upon your lawyer’s advice. That’s why we are often called “counselors.”
November 18, 2021
Family Law
How Long Will I Have to Pay Alimony?
When a couple gets divorced, one party may need to financially support the other party in some shape or form; this divorce-specific monetary support is referred to as alimony. When a client learns that they may be required to pay alimony, they understandably want to know how long they’ll have to make those payments. In order to answer this question, it’s important to first understand that there are three types of alimony in Maryland: pendente lite, indefinite and rehabilitative. The type of alimony a party will be required to pay is discretionary to the judge. Pendente lite alimony is fairly straightforward. Pendente Lite is Latin for pending litigation, and these are payments that a higher-earning party pays to the lower-earning party during the divorce proceedings only. The payments are meant to maintain the family finances at, or as close to, status quo as possible during the legal process of divorce. The definition of indefinite alimony is exactly as it sounds: alimony that has no specific end date. Indefinite alimony is ordered when a dependent party is unlikely to ever become self-supporting. This type of alimony is typically established in cases of long marriages where one spouse did not work outside the home for many years, or when one party is unlikely to acquire a self-supporting income due to age, illness or disability. Indefinite alimony ends if one of the parties dies, or the dependent party remarries. Indefinite alimony may end upon modification of the court or a written agreement between the parties. Rehabilitative alimony is meant to provide support to the lower-earning party for a period of time long enough for him or her to become self-supporting. This is the most common type of alimony awarded, and it usually has an end date. In most cases, this means that the higher-earning party will support the lower-earning party while that person takes the time to acquire the necessary job training or education needed for employment. In some cases, the higher-earning party may need to pay for the lower-earning party’s education to help them become self-supporting. As mentioned, the type of alimony one pays is solely up to the judge; however, if the parties prefer to negotiate alimony amongst themselves, they may come to an agreement as to the terms, but the judge will still have to approve it to ensure that the agreement is fair to both parties. If you have any questions on this topic, please contact Sandra Brooks at sbrooks@offitkurman.com or 240.507.1716.
November 17, 2021
The Weekly Scenario
The Weekly Scenario: Newest Tax Law Updates
My recollection is that Ben Franklin can be credited as saying, “nothing in this world is certain except death and taxes.” Perhaps more apt right now with all the pending tax legislation and the potential changes to the estate tax system is that nothing is certain aboutdeath and taxes! As tax advisors, we have been waiting on pins and needles to see whether a new tax bill will be passed and, if it is passed, what language the final bill would contain. While the proposed legislation failed to include any changes regarding estate taxes, including a reduction in the estate/gift tax exemption amount to approximately $5,000,000 like many thought, that is not to say it may not be added later. Anything can still happen, and we could find ourselves in a situation like 2012, where a significant change was made at the 11th hour. At this time, the main focus is a new 5% tax to be applied to individual taxpayers’ whose Modified Adjusted Gross Income (MAGI) is in excess of $10,000,000 ($5,000,000 if married but filing separately) and high income (really about $200,000) earning trusts and estates. There is also an expansion of the Net Investment Income Tax for individual taxpayers with a MAGI in excess of $400,000 ($500,000 for joint filers) and trusts and estate undistributed income with no income threshold. Should the new proposed tax legislation go into effect on January 1, 2022, high earners will also feel a significant impact on their Net Investment Income Tax, specifically those who use S-corporations and partnerships to shield themselves from higher taxes. Other proposed changes to note include a 100% gain exclusion on the sale of Section 1202 Qualified Small Business Stock would be limited to 50% of the gain for those with an AGI exceeding $400,000 (unless otherwise contracted for prior to September 13, 2021), a requirement that cryptocurrencies be subject to the constructive and wash sale rules, and 15% minimum tax for large corporations on reported income to be calculated based on complex formulas. The proposed legislation did not include (as was originally expected) a removal of the limitation on deductions for State and Local Income taxes paid (SALT Cap). There was no proposal for an increase in personal income tax or capital gains tax rates, no proposal to compress the current rate brackets, and no proposal to deny fair market value income tax basis for estates of individuals who die owning appreciated assets. To recap, some of the best news from the proposal came from what was omitted: There was no increase in personal income tax rates; No increase in capital gains tax rates; No reduction of the estate tax exemption; No elimination of the step-up in basis on death; and No proposals to eliminate the ability to utilize grantor trusts or valuation discounts for non-active trades or businesses. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
November 12, 2021
Labor and Employment
ETS Legal Challenges, Requirements and Omissions
Ok, so now everyone’s heard that – as promised - OSHA’s new Emergency Temporary Standard has been issued and that, in general, employers with 100+ employees must require workers to vaccinate for COVID or be tested weekly starting January 4. (Incidentally, the guidance for contractors is now requiring vaccination by that date, as well.) Important note – don’t pull the trigger yet, if you haven’t already – although the standard took effect on Nov. 5, the U.S. Court of Appeals for the Fifth Circuit stayed the rule the very next day, pending further litigation (which will be expedited, so the question of whether it was validly issued is decided). To be honest, I would not be surprised if this went to the Supreme Court. We’ll see. The biggest question that my clients have asked so far is who pays for testing, given the ETS doesn’t require employers to pay testing fees or compensate workers for the time spent being tested? Employers are not off the hook because other laws may require it. Importantly, the Fair Labor Standards Act guidance reads: “[the] employer is required to pay you [worker] for time spent waiting for and receiving medical attention at their direction or on their premises during normal working hours. … For many employees, undergoing COVID-19 testing may be compensable because the testing is necessary for them to perform their jobs safely and effectively during the pandemic.” Safe advice: pay non-exempt workers if you’re requiring COVID testing. You don’t want the DOL to come calling and assess double damages and a fine for your company’s failure to pay. Stay tuned, I’ll update you further. In the meantime, contact me if you have any questions and as always, I’d love your feedback. What is your company planning to do?
November 11, 2021
The Weekly Scenario
The Weekly Scenario: Portability
As I (and many others) have reported, the estate tax exemption amounts may change this year. Right now, the latest is that it does not look like the House proposal will include a lowering of the federal estate tax exemption this year, but regardless of what happens this year, the rules covering the estate tax exemption are scheduled to sunset after 2025. Estate Tax Portability Depending on inflation, the exemption could drop to between $5- $6 million after 2025. With this prospect in mind, it has become vital for married couples to make the most of estate tax portability. Mistakes can lead to a reduced exemption and a substantial amount of unnecessary tax. Married Couples and Estate Tax Portability With estate tax “portability” in place, a married couple can effectively use both spouses’ estate tax exemptions, passing as much as $23.4 million to other heirs with no federal estate tax liability. Example 1: Mike has $8 million in assets, including a $5 million IRA, and Mike’s wife, Megan, has $6 million in assets (including joint property). Mike dies in November 2021, leaving everything to Megan. Marital bequests don’t generate estate tax, so Megan gets to keep all $8 million from Mike, estate tax-free. Going forward, Megan might die with a $15 million estate, including the assets inherited from Mike. If her estate tax exemption then is $6 million, Megan’s estate would be $8 million over the limit and her heirs could owe $3 million in tax, at today’s 40% estate tax rate. The tax bill could be even higher because of an increased rate or state tax obligations or both. Deceased Spouse’s Unused Exemption (DSUE) Something called “Portability” can prevent this type of scenario because the surviving spouse can use the Deceased Spouse’s Unused Exemption (DSUE) as well as her own. Mike did not use any estate tax exemption at his death, because he left all his assets to his spouse. If Mike dies in 2021, his unused exemption amount — the DSUE — would be $11.7 million, which Megan can claim as part of her own. Thus, if Megan dies with a $6 million exemption, under the law effective at her death, using the $11.7 million DSUE from Mike would raise her exemption to almost 18 million. Megan’s hypothetical $15 million estate, mentioned previously, would generate no estate tax with an $18 million estate tax exemption. Note that the IRS has announced that a deceased spouse’s unused exemption is locked in, even if the estate tax exemption is reduced, the unused exemption amount claimed at the death of the first spouse will remain in effect, assuming all the proper elections are made. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
November 5, 2021
Real Estate
This Week in Real Estate: Title Insurance
This Week in Real Estate (TWIRE) has explored different series in previous editions. TWIRE will now focus on a new series of discussions on a topic that is very important in the world of real estate: title insurance. Over the next several week's TWIRE will discuss what it is, the different types and provisions included in title insurance policies. What is Title Insurance? Title insurance is a form of indemnity insurance that protects lenders and real estate owners from financial loss sustained from defects in the title to a property. When a property is financed, bought or sold, a record of that transaction is generally filed in public archives. Similarly, records of other events that may affect the ownership of a property, like liens or levies, are also archived. When you buy title insurance for your property, a title company searches these records to find and remedy, if possible, several types of ownership issues. First, the title company searches public records to determine the property's ownership status. After this search, the underwriter will determine the insurability of the title. Even the most skilled title professionals may not find all problems associated with a property. Some risks, such as title issues due to filing errors, forgeries or undisclosed heirs are difficult to identify. After the title company finishes its search, it provides a title insurance policy that will help protect the purchaser, borrower and/or lender from a variety of issues that might be uncovered later. Types of Title Insurance Policies There are two types of title insurance policies: a lender’s policy and an owner’s policy. Both types of policies are typically offered as a bundle together. Lender's Policy A lender’s policy is required in just about every purchase and refinance transaction, and the borrower typically pays for it. This insurance typically insures that the lender is in the lien position it has contracted to be. Should there be a potential title issue, this policy protects only the mortgage lender in the amount of the loan. Owner's Policy On the other hand, an owner’s policy protects the buyer. Although it’s not required by law for borrowers to purchase an owner’s policy, it is highly recommended to make sure that you, as the title holder, are protected from any potential legal issues that may come up. Next week, we will begin to discuss the different parts of each insurance policy.
November 4, 2021
Healthcare
What Physicians Need to Know about the Corporate Practice of Medicine
The old days of getting a medical degree and hanging up a shingle by your office are long gone. Most doctors who have a private practice begin their medical career or advance their medical career by considering the best business formation. Formation possibilities include a solo practice, a partnership with other doctors, or working relationships with other hospitals and existing practices. Experienced healthcare lawyers will review the various options. They’ll also review what laws apply. Many states, such as California, prohibit the corporate practice of medicine. Some states allow for exceptions. Physicians also need to consider whether their business and medical relationship might violate Stark Law or the Anti-Kickback Statues. Decisions about business formation and medical practice issues become more complicated as physicians expand their medical service practices and expand who the physician works with. Developing a medical spa or acupuncture practice to complement a pain management practice, for example, may sound like a great idea, but if the employees at the medical spa aren’t licensed physicians, complications can arise. It’s more than just physicians who must understand the corporate practice of medicine issues. Any health venture that wants to set up a clinic or a venture that provides health services needs to understand how corporate practice of medicine applies to them as well. How Healthcare Ventures Can Craft a Corporate Practice of Medicine Legal Strategy Is the corporate practice of medicine a historical anachronism that’s going to be done away with over time or even in the very short term? The corporate practice of medicine concept across the United States The corporate practice medicine laws were designed for many reasons, according to the American Medical Association (AMA). These reasons include the following concerns: If corporations can hire physicians or practice medicine, then the practice of medicine will become commercialized. The obligation of a physician should be solely to his/her patient and not to company profits. Physicians should be able to make patient decisions based on independent medical judgment – what’s best for the patient. Corporations owe a fiduciary duty to their shareholders which may not comport with the doctor’s duties to his/her patients An overview of state corporate practice of medicine laws The AMA states that the corporate practice of medicine laws are generally based on a variety of issues: The individual state statutes Case decisions Opinions of the attorneys general of the various states The positions of the state medical licensing boards While most states prohibit the corporate practice of medicine, states do provide for professional medical corporations. Many states also have exceptions for employment of doctors by specific entities. These exceptions do vary from state to state. States the do permit professional medical corporations do regulate: How the corporation can be structured Who can be a shareholder Who can be on the board of directors Most state laws require that the owners, board of directors, and shareholders must be licensed to render the “same professional service as the professional corporation.” There are some states that permit non-physicians owners and shareholders – provided that the combined ownership interest is in the minority. “For example, Colorado’s statute provides that all shareholders of a medical corporation must be licensed to practice medicine in the state of Colorado except that one or more persons licensed by the board as a physician assistant may be a shareholder as long as the physician shareholders maintain majority ownership of the corporation.” In another example of broader ownership interest, in “Rhode Island; physicians, dentists, registered nurses, podiatrists, optometrists, physician assistants, chiropractic physicians, physical therapists, psychologists, and midwives or nurse-midwives can form a professional corporation in which they engage in a combination of their professions.” There are many states that have an exception for the employment of doctors by certain entities such as hospitals. Some states grant broad permission for hospitals to hire doctors. Some require that the hospital be a nonprofit. Others, like California, mostly prohibit hospitals from hiring doctors. When states do give hospitals the right to hire doctors, there is normally a requirement that the hospital cannot interfere with the “autonomy of the physician’s clinical decision making.” “For example, statutes in Texas allow critical access hospitals, sole community hospitals, and hospitals in counties with fewer than 50,000 people to employ physicians subject to certain protections, including a requirement that physicians must “retain independent medical judgment in providing care to patients at the hospital and other health care facilities owned or operated by the hospital and may not be disciplined for reasonably advocating for patient care.” According to the AMA, California, which has one of the nation’s strongest prohibitions against the corporate practice of medicine provides that some hospitals and clinics can hire doctors provided the hospital or clinic “doesn’t interfere with, control, or otherwise direct the professional judgment of a physician and surgeon.” In California, according to the DHHS Office of Inspector General, “the prohibition does not apply to clinics operated by university medical schools or to public hospitals.” Similarly, Indiana’s laws also permit hospitals and doctors from entering into employment contracts provided the hospitals don’t control or direct the doctor’s independent medical judgment. In Illinois, hospitals can employ doctors if the doctor signs a statement to the same effect – that the doctor’s judgment must be an independent medical judgment as to diagnosis, care, and treatment. Some states set forth the independent judgment in the state statutes and codes. In other states, such as Alabama, the state medical licensing commission and the state board of medical examiners authorized hospital hiring of physicians where the agreement specifically requires that the doctor makes all judgments concerning what medical services the patient should receive. Both doctors and hospitals need to understand that there are dangers in any employment relationship, which should be reviewed by an experienced healthcare lawyer. Professional agreements may also violate Stark Law and the Anti-Kickback statute unless it’s clear than an exception or a safe harbor applies. California’s law on the corporate practice of medicine California’s law on prohibiting the corporate practice of medicine is one of the strictest in the nation. The law on the corporate practice of medicine in California is fairly complex. Even the Medical Board of California has this advisory on its website. “Note: This area of law can be complicated, therefore physicians are encouraged to discuss their medical practices and business enterprises with appropriately knowledgeable legal experts. The Medical Board of California continues to receive complaints and inquiries about the law, and some repeating issues are presented here.” The two governing statutes on the corporate practice of medicine are: The Medical Practice Act, Business and Professions Code section 2052. This statute, provides: “Any person who practices or attempts to practice, or who holds himself or herself out as practicing…[medicine] without having at the time of so doing a valid, unrevoked, or unsuspended certificate…is guilty of a public offense.” Business and Professions Code section 2400, within the Medical Practice Act, provides in pertinent part: “Corporations and other artificial entities shall have no professional rights, privileges, or powers.” As with the other states, the core idea behind the prohibition is that if unlicensed doctors make any medical judgments that would constitute both the unauthorized practice of medicine and the corporate practice of medicine. It’s the link that’s the concern. Corporations shouldn’t be the people deciding medical issues because that would constitute the unauthorized practice of medicine. Decisions that are medical and not business or management decisions Examples of medical judgments that must be made by physicians include: Analyzing which diagnostic tests such as blood tests or MRIs are required for specific medical complaints and disorders Determining when a doctor needs to consult with a medical specialist or refer a patient to a medical specialist – or to another physician Deciding what treatment options are advisable and what overall medical care is required for the patient While the number of patients a doctor must see in a set time (day, week, and month) might seem like a business decision, the Medical Board of California states that the quantity of patients treated by a physician is also a medical decision. There are many decisions which physicians and medical practices make that may seem like they’re more business choices than medical choices. When the choices are clearly business choices, then an independent entity such as a management service organization (MSO) may be qualified to make them. The Medical Board of California requires that only a physician licensed in California make the following decisions: “Ownership is an indicator of control of a patient’s medical records, including determining the contents thereof, and should be retained by a California-licensed physician. Selection, hiring/firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants. Setting the parameters under which the physician will enter into contractual relationships with third-party payers. Decisions regarding coding and billing procedures for patient care services. Approving of the selection of medical equipment and medical supplies for the medical practice.” It “may” be permissible for a doctor to consult with an MSO or non-licensed physician about the above items but ultimately the licensed physician must make the final decision. Additional decisions that may appear business-related that are indeed medical and must be made by a physician include: A business relationship in which someone who is not a licensed California doctor owns or runs a company that provides an evaluation, a diagnosis, care, or treatment to the patient. Physicians cannot operate a medical practice “as a limited liability company, a limited liability partnership, or a general corporation.” While management service organizations (MSOs) can generally provide administrative staff and services for a medical practice, MSOs cannot arrange for medical services, advertise for medical services, or provide medical services. Physicians cannot act as a “medical director” unless the physicians own the medical practice. “For example, a business offering spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its “medical director.” Will Corporate Practice of Medicine Kill Your Healthcare Venture? Whether your healthcare venture involves digital health, mobile health, or a physical health and wellness center, strong vs. weak corporate practice of medicine prohibitions can be deadly. According to the Medical Board of California, “It is important to note that pursuant to Business and Professions Code section 2417.5, a business organization that offers to provide or provides outpatient elective cosmetic medical procedures or treatments that is not in compliance with the ban on the corporate practice of medicine is guilty of knowingly making or causing to be made a false or fraudulent claim for payment of a health care benefit pursuant to paragraph (6) of subdivision (a) of Section 550 of the Penal Code.” All states want to ensure that physicians are doing what is best for the patient. One of the ways states help to regulate a physician’s practice is to ensure that the doctor’s business relationships are managed so that the doctor or the medical practice only has one boss – the patient. The corporate practice of medicine laws generally require that doctors create professional medical corporations and that any working relationship with a hospital be based on helping the patient, not the financial well-being of the hospital. States like California take an aggressive approach that most health care ventures may cross the line into the corporate practice of medicine. Our experienced healthcare & FDA attorneys advise healthcare companies and healthcare providers ranging from medical centers, to integrative and functional medicine practices, cosmetics and supplement companies, and medical device manufacturers.
November 1, 2021
Labor and Employment
Unexpected Long-Lasting Impacts of the COVID-19 Pandemic on Employers
The COVID-19 pandemic has undoubtedly had long-lasting impacts on the workplace as we now enter the twentieth month of the pandemic. Some effects were expected, such as increased safety precautions, layoffs, rehiring, closed offices, and remote work. However, some of the challenges facing employers have been a bit more unexpected and longer-lasting than initially anticipated. In the later months of the pandemic, companies have been navigating vaccine mandates and increases in Americans with Disabilities Act (ADA) requests against a backdrop of worker shortages and continued safety concerns, which weigh heavily on the decisions they are making as it relates to workplace policies. Vaccine Mandates Since vaccines became available earlier this year, employers have been grappling with whether to mandate or encourage vaccination or stay silent. Initially, the lion’s share of employers were opting to remain silent on vaccination or encourage vaccination through incentives or gentle nudging to avoid the hassle of mandating vaccination and providing religious and medical exemptions. Though, as it became clear over the summer that the COVID-19 pandemic was far from over, many employers began to consider mandating vaccination. This change was largely driven by a shift in public opinion, bold moves at the federal level, and the practical need for many employers with in-person operations to keep their workforce healthy and working. However, with many companies struggling to hire and retain enough employees to staff their operations fully, the analysis for many employers has gone well beyond the health and safety of their employees. Ahead of the implementation of the federal mandate through the Occupational Safety and Health Administration (OSHA) issuing an Emergency Temporary Standard, due to industry-agnostic worker shortages, many employers have opted to encourage vaccination over requiring it since they cannot afford to terminate employees for failing to comply with a vaccine mandate. For those who have decided to mandate vaccination, many have faced walkouts and terminations, sometimes resulting in a mass exodus of their workforce. ADA Requests The COVID-19 pandemic has resulted in many business owners and Human Resource (HR) professionals taking a crash course in ADA compliance. While many employers may typically receive a couple of requests per year, the pandemic has led to an increase in these requests, with some being COVID-19 related and many being COVID-19 adjacent. As it relates to COVID-19 specifically, while temporary COVID-19 illness is not a disability, many employers have received leave and accommodation requests related to managing risk around contracting COVID-19 with a pre-existing condition or COVID-19 long-hauler illness. Additionally, companies have seen an increase in employees needing to take time away from work or needing accommodations for mental health conditions. In many instances, these requests have led employers to dig deep into the EEOC’s guidance on these issues and examine the interaction between the ADA and FMLA and determine how accommodating employee needs impact the business's operations. Overarching in both of these issues are the operational burdens of administering these policies and the impact on the company’s workforce based on employees being unavailable to work or terminated or restricted from returning to the office. As employers continue to navigate employment matters related to the COVID-19 pandemic, they will continue to face increased administrative burdens related to keeping their workforce safe and accommodating and retaining employees. There is no shortage of complex issues and legal landmines involved, and employers must stay vigilant regarding legal compliance and consider the practical and legal consequences of their actions.
October 28, 2021
The Weekly Scenario
The Weekly Scenario: Tax Update
As you have likely heard, there are a number of proposed tax rules under Federal law that are working their way through Congress. One potential change could have a dramatic impact on people who own life insurance policies inside of irrevocable life insurance trusts. The House Ways and Means Committee recently released an outline detailing possible tax increases designed to pay for the administration’s infrastructure plan. Of the proposed modifications, one change would cause so-called "grantor" trusts to be included in the taxable estate of the person who made the gifts into the trust. Many life insurance trusts are considered "grantor" trusts and could fall within the scope of this proposed rule. While the details have not yet been released, it appears that the new rule would cause these trusts to be included in a person's taxable estate only if the person made gifts into the trust after the date the law is passed. This could cause problems for those who make cash gifts to their insurance trusts in order to fund insurance premiums. One potential solution may be to make a large gift to an insurance trust now before the law becomes effective. The gift may be retained inside the trust and used to pay premiums in later years -- thereby avoiding future gifts to the trust that would violate the new rule. Right now, this is only a proposal that is part of a larger outline released by the Ways and Means committee. To become law, the outline must first clear the House Ways and Means Committee, be voted on by the full House, have the same rule be proposed in, and voted on, in the Senate, and then have the final bill be signed by the President. If the proposal does become law, then there may be little time for people to preserve the tax-free treatment that life insurance trusts are intended to provide. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 22, 2021
The Weekly Scenario
The Weekly Scenario: Executor of an Estate
An executor of an estate has several duties. Of the many duties, one that is often missed is to ensure that all income tax returns have been filed for the decedent, including filing the final personal income tax return. After a person dies, any income earned prior to their death must be reported to the IRS (and state taxing authorities) on the final income tax return. The deadline is April 15th of the year following death. If a person passed away in 2021 and had income before he died, then by April 15, 2022, the final income tax return needs to be filed or an extension needs to be filed. The filing of the income tax return can sometimes hold up the closing of the estate. An executor would be prudent to wait until the final income tax return is filed to close out the estate. If a decedent was married, keep in mind that the surviving widow or widower may file a joint return. If there is money owed for income taxes, then the executor must make the payment from the estate. If there is a refund, then the executor must claim the refund. In order to claim the refund, an IRS form 1310 must be filed with the final return. Note that there is no requirement they a probate administration be opened to request the tax refund. The form 1310 allows the IRS to pay the refund directly to the executor, therefore, avoiding the need for an estate administration (probate). As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 15, 2021
Healthcare
Legal Compliance Issues For Diagnostic Testing Centers
Diagnostic testing is the lifeblood of the medical profession. Doctors and hospitals constantly refer patients for various types of bodily fluid, imaging, genetic, and other tests. Tests are usually performed at diagnostic centers that are located separately from the physician’s office. Most hospitals have their own diagnostic centers but hospitals may also refer some patients to separate facilities too. Diagnostic tests are usually ordered for purposes of screening, to diagnose whether a patient has a disorder, to evaluate how severe a disorder is, and to monitor how well (or poorly) the patient is responding to treatment. Many disorders are treated after the diagnostic test but some, such as colonoscopies, are treated contemporaneously with the test. Physicians and diagnostic centers should speak with an experienced healthcare lawyer before starting any practice and before developing any new business relationship. There are numerous federal and state laws that regulate medical practices and services. What are the common types of diagnostic tests? Diagnostic tests include: Bodily fluid analysis. These tests include blood tests, urine tests, tests for the fluid that surrounds the spinal cord and brain, and synovial fluid (joint) tests. Physicians may also order tests for saliva, sweat, and gastric tract liquids. Imaging tests. These tests take take pictures of parts of the body. Common diagnostic imaging tests include:X-rays. CT scans (computed tomography) MRIs (magnetic resonance imaging) Other imaging tests such as “ultrasonography, radioisotope (nuclear) scanning, positron emission tomography (PET), and angiography.” This test uses a viewing tube to observe body organs and cavities. The end of the endoscope has a camera and light so the physician can observe through a monitor. Tools can be passed through an endoscope channel. An endoscopy is used to examine, among other organs – the nose, mouth, respiratory tracts, colon, bladder, and uterus. Sometimes the physician needs to create incisions to use the endoscope. Measuring bodily functions. Common examples include examining the electrical activity of the heart – an electrocardiography (ECG) and the brain – electroencephalography (EEG). This test examined tissues simples that are moved and then examined with a microscope. The physician or medical examiner is usually looking for abnormal cells that may show disorders such as cancer. Genetic testing. This type of testing generally involves examining cells (from a patient’s blood, skin, or bone marrow) to check for chromosome abnormalities and gene (including DNA) abnormalities. Genetic testing involves testing a fetus for a genetic disorder and children/adults for whether they are at risk for a disorder, and adults. There are some risks with every test. Test results are normally based on the average values within a healthy population. Physician supervision of diagnostic tests Medicare has different rules and regulations for different types of diagnostic tests. An experienced healthcare lawyer can explain how Medicare monitors and regulates various tests. One of the most common types of tests are imaging tests. The Centers for Medicare & Medicare Services (CMS) generally uses the standards set by the Joint Commission on Accreditation of Healthcare Organizations (JACAHO) for inpatient diagnostic imaging standards. The CMS requires that physicians must supervise imaging tests for outpatient diagnostic services. According to AAPC, only “a doctor of medicine or osteopathy legally authorized to practice medicine in his or her state of practice, as defined by §1861(r) of the Social Security Act,” may act as a supervisory physician. Generally, the following people do not qualify as a “physician” and cannot act in a supervisory physician capacity – for purposes of diagnostic tests: Nurses Physician assistants Clinical nurse specialists Certified nurse midwives There are also rules that your healthcare compliance lawyer can explain about – if and when a radiologist can order his/her own imaging tests. CMS “recognizes three primary levels of physician supervision” for outpatient diagnostic services: General supervision. Here, the medical procedure should be under the doctor’s control and direction. The doctor who orders the test is responsible for maintaining the testing equipment and training staff on how to perform the tests. The physician does not need to be in the room during the procedure. Direct supervision. The term “direct supervision” “varies according to the precise location at which the service is provided:”In the doctor’s office. Here, the supervising doctor must be physically in the office suite and readily available to provide aid and direction throughout the procedure. Hospital outpatient diagnostic services at an independent diagnostic facility. “The supervising physician must be present in the office suite and immediately available to furnish assistance and direction throughout the procedure’s performance.” The doctor cannot be performing another procedure that cannot be interrupted. He/she must be able to provide timely aid. There are additional rules for on-campus health providers. Personal supervision. Here, the doctor must be in the room where the procedure is being performed. The supervision requirements apply “to the technical component (the actual test administration) of a diagnostic service.” Doctors must always provide “the professional component (reading/interpreting of results) for diagnostic services.” If the physician fails to provide the necessary level of supervision, then CMS may not find that the service is reasonable or necessary – and, thus, may not pay the claim. CMS also has diagnostic imaging requirements for determining who can order medical imaging tests and who is qualified to administer the imaging tests. In addition to the CMS physician supervision tests, doctors may be bound by state law and the laws and regulations for their types. Diagnostic centers and Stark Law Physicians and diagnostic centers need to be extra careful when doctors refer their patients to a diagnostic center. It is commonplace for general practitioners and specialists to regularly recommend diagnostic centers to their patients. If, however, the doctor has a financial interest in the diagnostic center, then all sorts of red flags are raised. Stark Law is a civil law that regulates referrals of patients who use Medicare to any designated health service (DHS) where the physician (or an immediate family member) has interest in that DHS. A diagnostic center is a designated health service. CMS prohibits the DHS from presenting claims to “Medicare (or billing another individual, entity, or third-party payer) for those referred services.” Designated health services include: Clinical laboratory services. Radiology and certain other imaging services. Radiation therapy services and supplies. Durable medical equipment and supplies Other services. The core principle behind Stark Law is that doctors should refer patients to a DHS based on what is in the best health interests of the patient – and not what is financially beneficial to the doctor or the diagnostic center. CMS has numerous rules about referrals to a DHS. CMS also regularly publishes an updated list of codes in the Physician Fee Schedule for a relevant DHS “because our regulations define certain DHS by CPT and HCPCS codes.” An experienced diagnostic center lawyer can explain what services qualify as a designated health service. Some services may not be included. Stark law also provides many exceptions that have very precise definitions. Skilled healthcare lawyers help physicians, medical practices, and diagnostic centers understand when these exceptions may apply and what the requirements are. A general principle is that any financial arrangements between the physician and the DHS cannot be based on the volume, percentage, or amount of any referrals. What Stark Law exceptions may apply to the relationship between a physician/medical practice and a diagnostic center? Stark Law provides for different types of exceptions including ownership/investment arrangements, compensation arrangements, and exceptions involving both ownership/investment and compensation. Several of the combination (both compensation and investment) exceptions include the following. consider for referring patients to a diagnostic center. Physician services In-office ancillary services Preventive screening tests, immunizations, and vaccines Eyeglasses and contact lenses following cataract surgery Intra-family rural referrals Compensation exceptions (for Stark Law) include: Rental of office space Rental of equipment Bona-fide employment relationships Personal service arrangements Physician recruitment Non-monetary compensation Fair market value exception Medical staff incidental benefits Risk-sharing arrangements Compliance training Many other exceptions The in-office ancillary services exception is often considered for heart doctors, orthopedists, and other professionals who conduct their imaging tests in their office. Stark Law Exceptions that Might Apply to You In today’s video, we discuss some exceptions to Stark Law, which deals with improper referrals by physicians and healthcare practitioners. The Anti-Kickback Statute and diagnostic centers The AKS is a federal law that imposes criminal penalties for unauthorized referrals. Illegal referrals generally include any inducement – by an entity such as a diagnostic center that is made to a physician – to include the physician to refer patients to the center. Most doctors provide a list of centers the doctors work with to their patients and let the patient choose which one the patient likes best. When diagnostic centers provide the doctor/medical practice with a benefit, the referral is tainted – because the referral is based on the financial well-being of the doctor and not by what is healthy for the patient. Illegal inducements include financial payments, expensive meals, vacations, positions on various medical boards or organizations, and virtually anything of any value. Violations of the AKS may result in a criminal conviction, imprisonment, fines, and other consequences. Both violators of Stark Law and the AKS may be precluded from the ability to submit any future bills to Medicare or Medicaid. The AKS has “safe harbors” which can be implemented to help show a medical practice or diagnostic center is not in violation of the AKS. These safe harbors include many transactions and arrangements that are similar to the Stark Law exceptions. Experienced California healthcare lawyers explain how safe harbors work and when safe harbors should be considered for your medical practice. Additional legal compliance issues for diagnostic centers? Physicians and doctors need to be careful that the center does not order or provide tests that suggest the center is providing any medical advice or treatment. Doctors, health providers, and staff members must understand what actions may result in an unauthorized practice of medicine complaint. HIPAA (Health Insurance Portability and Accountability Act) is a federal law that generally regulates how electronic health records are handled. Physicians regularly submit electronic requests to diagnostic centers to perform blood tests, imaging tests, and other tests. In return, the diagnostic centers regularly send the results of these tests to the physicians that ordered them. An experienced healthcare lawyer can explain when HIPAA applies and what conditions (including obtaining consent from the patient) must be met – when exchanging patient health information. A failure to follow the strict legal compliance issues governing diagnostic centers and physician practices can result in fines, bills that will not be approved by Medicare and other healthcare agencies/entities, possible imprisonment, loss of license, and other consequences. Skilled diagnostic center compliance lawyers advise both physicians and diagnostic centers about Stark Law, the Anti-Kickback Statute (AKS), state anti-referral laws, Medicare requirements, the unauthorized practice of medicine, the corporate practice of medicine, the (HIPAA), the Medicare Anti-Markup Rule (AMR), and other compliance issues.
October 15, 2021
Intellectual Property
Trademark Trial and Appeal Board Finds Reckless Disregard for the Truth Equals Fraud, Cancels Trademark Registration
The U.S. trademark law provides that a trademark registration may be canceled if it was obtained fraudulently. A registration may also be canceled if the registrant commits fraud in post-registration filings, including a Section 15 Declaration of Incontestability. Often filed in combination with the Section 8 Declaration of Use due in the 6th year of a registration, the Section 15 Declaration of Incontestability may be filed if the registrant has been using a registered mark continuously for the previous five years. However, certain other conditions are met, including that there are no pending proceedings, such as a lawsuit in federal court or a cancellation action before the US Patent and Trademark Office (USPTO) or Trademark Trial and Appeal Board (TTAB). This was the issue in Chutter, Inc. v. Great Management Group, LLC and Chutter, Inc. v. Great Concepts, LLC, 2021 USPQ2d 1001 (TTAB 2021). In 2010, when Great Concepts was submitting a combined Section 8 and 15 Declaration of Use and Incontestability for its trademark DANTANNA’S, the attorney for Great Concepts signed the declaration. He was aware that there were pending proceedings involving the trademark registration but, he later admitted, he did not read the declaration before signing it, and he was not familiar with the requirements of the Section 15 declaration. Years later, Chutter, Inc. filed a cancellation action against the registration, claiming that the Section 15 Declaration was fraudulently filed. In its decision, the TTAB noted that fraud requires an intent to deceive; false statements made with a reasonable and honest belief that they are true do not result in a finding of fraud. The TTAB went on to find that the attorney who signed the declaration acted with reckless disregard and held that this reckless disregard rises to the level of intent to deceive needed to find fraud. Moreover, although the trademark law allows for the opportunity in certain circumstances to correct misstatements once they are discovered, the attorney who signed the declaration did not take any corrective steps once he discovered that he had made false statements in the declaration. “By failing to ascertain and understand the import of the document he was signing, far from conscientiously fulfilling his duties as counsel, [the attorney] acted in reckless disregard for the truth; nor did he take any action to remedy the error once it was brought to his attention.” Stating that the attorney’s reckless disregard was “the legal equivalent of finding that Defendant Great Concepts had specific intent to deceive the USPTO”, the TTAB granted the petition to cancel the DANTANNA’S registration. Why does this decision matter to trademark owners? It’s a reminder to review carefully the statements in the documents you are signing and to ask questions if you do not understand something and speak up if something does not sound right. Although there is generally a high bar to a finding of fraud leading to the cancellation of a trademark registration, this case shows that a lack of attention to reviewing and understanding the statements being made in trademark declarations can constitute “willful blindness” that rises to the level of reckless disregard and cancellation of one’s trademark registration could be the result.
October 14, 2021
Business
Skeletons in the Closet: The 5 Biggest Undiscovered Issues that Can Halt the Sale of a Business
You have an interested buyer and they have submitted an exciting letter of intent for the purchase of your business. What could possibly derail the sale? Well . . . the golden rule for a seller is that the business is not “sold” until the closing and the monies hit the account. Before receiving your monies and having the business sold, be aware of a number of issues that could cause problems. By the way, with proper advanced planning these issues can be alleviated/mitigated prior to going to the market. Proper documentation of owner relations. Nothing ices a sale transaction like equity owners not on the same page. Ownership disagreements on the terms of a sale will quickly sour any potential buyer. However, with a proper stockholders’ agreement or operating agreement, the sale of equity can be controlled and “dragged” along into a transaction. Locking up key employees. Too often key employees are not properly locked up. All buyers will compel sellers to lock up their key persons, making such requirement a condition to closing. Going to a key employee on the eve of a sale is a very bad place to be if you are the seller. Poor financials. One of the first intersections a buyer will have with your business is the review of your financial data. Too many sellers have a mess for their financials. A buyer cannot evaluate the value of your business if it cannot review financial statements that are prepared to standard. Wrong corporate form. Many buyers have corporate structures that are not friendly to investors to maximize gains. The form a seller operates their business during normal times (an S corporation for example) may not be the corporate form desired by an acquirer. Uncertain ownership of key assets. Too many sellers rely upon the assumption that they own the assets of their business. This rings especially true with technology and intellectual property. The time to learn that you do not own the source code to your software is not in the middle of your sale transaction. These are a few of the most common pitfalls that many sellers experience during the sales process. Many times a seller is not aware of these items until a buyer brings it up in diligence as part of a larger conversation regarding the path to closing. All M&A transactions spin on leverage. Sellers should be careful to give over leverage to a buyer by falling into one of the traps.
October 13, 2021
The Weekly Scenario
The Weekly Scenario: Naming a Trust as Beneficiary of an IRA
There are certainly valid reasons for naming a trust as beneficiary of an IRA. But if an adult beneficiary is otherwise healthy and responsible, and if there is no desire to control assets after death, then naming a person directly as an IRA beneficiary may be a better option. In cases when a trust is necessary, be sure the trustee – the person responsible for following the provisions of the trust and dispersing its assets — understands the trust and IRA rules. Putting an inexperienced trustee (often an unwary family member or friend of the family) on such a task can lead to a number of egregious mistakes. I’ve reported on botched IRA trust beneficiary articles in the past. In a recent Private Letter Ruling (202125007) relayed a few months ago by the IRS, an IRA owner named a trust as an IRA beneficiary. After her death, the IRA assets were properly moved into a trust-owned inherited IRA. In this case: The adult children of the original IRA owner, as trustees and trust beneficiaries, had total control of the assets. The children wanted to do their own investing in the IRA. They were informed by the custodian that the existing account could not accommodate their request. So, the trustee children decided to transfer the stocks held in the inherited IRA assets to a non-qualified (non-IRA) brokerage account, owned by the trust. This action resulted in a taxable distribution — at trust tax rates of most of the IRA assets. When inherited IRA dollars are withdrawn by a non-spouse beneficiary, there is no putting the genie back in the bottle. Even if the error is discovered within 60 days of the original transaction, a rollover is not allowed, and the distribution is likely going to result in the entire account being subject to tax. Even though the trustees identified their error several months later and requested that the former IRA dollars be returned, there was no remedy that could be done here. The IRS concluded that: “…once the assets have been distributed from an inherited IRA, there is no permitted method of transferring them back into an IRA.” The moral of the story is to be sure that there is a good and legitimate purpose of having a trust that will inherit the IRA account, and if there is a good reason, be sure there are safeguards put in place so mistakes are not made by the Trustee along the way. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 8, 2021
Healthcare
Legal Compliance Issues for Various Types Of Integrative Medical Practices – Acupuncture
Integrative medicine (also called complementary or alternative medicine) is the name for medicine that is not part of traditional standard care. Alternative medical therapies are currently being used in combination with traditional medicine as the safety and efficacy of these alternative therapies become clearer. Integrative medicine is often used with people who have cancer, fibromyalgia, chronic fatigue, and chronic pain. Common types of integrative medicine include: Acupuncture Aromatherapy Animal-assisted therapy Massage therapy Music therapy Dietary supplements Meditation Functional medicine Spiritual healing Ayurvedic medicine Coaching Generally, integrative medicine is offered to supplement conventional medical care – not to replace traditional medical care. Some types of alternative medicine are not advisable for certain conditions or people. The National Center for Complementary and Integrative Health (NCCIH) is a US agency that conducts scientific research on complementary and integrative health approaches. This research includes examining the usefulness and safety of these therapies in improving people’s lives. Some of the legal issues acupuncture practitioners and the doctors who work with them need to understand Integrative medicine providers usually operate independently from hospitals and medical practices. However, many physicians do recommend integrative medicine for certain patients with certain medical disorders. For example, an orthopedist surgeon may recommend that someone who just received a new hip may benefit from treating with an acupuncturist to help manage the pain while the hip heals. Many medical spas and chiropractors work with integrative medicine practitioners. How closely physicians and other medical practices work with integrative medical practices such as acupuncture can be problematic. If the relationship is too close or if there are improper incentives for referrals, the physicians and the integrative medication practitioners may be in violation of Stark Law or the Anti-Kickback Statute. Acupuncture practitioners and other integrative practitioners need to understand California’s or their own state’s laws on the unauthorized practice of medicine. Doctors who also have acupuncturists need to understand what duties they need to perform and what duties they can assign to any medical providers who are not physicians. California also has specific requirements on who can have an interest in a medical practice. An experienced healthcare lawyer can explain whether integrative medicine qualifies as the practice of medicine. Other legal issues for integrative practitioners including acupuncture practitioners include: Medicare and Medicare coding requirements FDA laws and regulations HIPAA compliance State licensing requirements State licensing requirements Every integrative practitioner needs to review with their healthcare lawyer the state licensing requirements for their practice area. Many professions such as acupuncture and chiropractic medicine do have state licensing requirements. All professions should have education and certification requirements. A license to practice a specific type of medicine may be valid in California may not be valid in another state – and vice-versa. Integrative medicine providers need to review the scope of their license. The providers need to understand when their services may cross over into unauthorized services – to the extent the providers could be charged with practicing a profession – such as psychology, medicine, or nutrition – without a license. Your healthcare lawyer will review which statutes apply to your practice, whether any medical boards regulate your practice, and whether any other rules apply. Your lawyer can also explain whether any exceptions apply. Generally, an integrative medical practitioner cannot make a diagnosis or order treatments for any disease, injury, physical, or mental condition – and cannot recommend any products to treat any disease or disorder. Integrative medicine providers also need to be careful when they order lab results or review the lab results – or that could be considered the practice of medicine too. For example, the California Board of Acupuncture regulates “the practice of Asian medicine through acupuncture in California and is the sole issuer of acupuncture licenses in the state.” The Board determines the standards for qualification – mainly through its licensing authority. As of 2021, there are more than 12,000 registered acupuncturists. The Board has the authority to investigate criminal conviction histories of applicants and licensees and to discipline licensees who “may jeopardize the health, safety, and welfare of consumers.” The unauthorized practice of medicine is a crime. Compliance with the Health Insurance Portability and Accountability Act (HIPAA) HIPAA regulates the disclosure of personal health information in electronic form by covered entities. Covered entities include: Healthcare providers. Health providers include any healthcare provider “who electronically transmits health information in connection with certain transactions. These transactions include claims, benefit eligibility inquiries, referral authorization requests.” Healthcare providers such as health insurance companies, Medicare, Medicaid, long-term care insurers, and other entities Health clearinghouses Business associates (other than a covered entity’s workforce) If an integrative healthcare provider is required to comply with HIPAA, it is normally because they fit into the “health provider category.” Your healthcare lawyer can explain if your integrative medical practice is considered a “health provider.” Part of the answer may depend on how the integrative healthcare provider bills his/her client. Many acupuncturists and other healthcare providers do not submit bills to insurance companies because the insurance often doesn’t cover the services. We have discussed whether HIPAA applies to acupuncturists before. There’s currently no clear-cut answer but there are many U.S. Department of Health & Human Services guidelines and discussions that suggest (again, there is no absolute answer) that acupuncturists are considered health providers who should comply with HIPAA – if and when they submit electronic health records. Your lawyer can also explain whether any state laws protect the disclosure of healthcare information. In California, the disclosure of healthcare information is governed by the California Confidentiality of Medical Information Act. Do acupuncturists have to comply with HIPAA when they share an electronic medical record? Whether HIPAA applies to acupuncturists who share a medical record, is one of those arcane questions our healthcare lawyers get. The answer isn’t all that easy to obtain. Like many healthcare & […] The corporate practice of medicine and integrative medicine California, like most other states, provides that corporations or related business entities cannot conduct the practice of medicine. The reason laws regulate the corporate practice of medicine is to ensure that the physicians are making decisions based on the best needs of the patient and not the financial needs of the business. Corporate directors should not be able to tell doctors how to treat their patients. The law is formally known as the Moscone-Knox Professional Corporation Act. The Moscone-Knox Professional Corporation Act requires that only state-licensed physicians are permitted to own a medical practice. The law also provides that non-physicians (for example nurses and medical technicians) cannot own a medical business. Non-physicians may generally own an interest in a medical corporation provided that the majority ownership of the corporation is in control of the physicians. Your California healthcare lawyer can explain whether an integrative medical practitioner can own shares in a medical corporation. Additional corporate practice of medicine issues include when a physician can act as a medical director of the corporation and when they can’t. The issue of who can own shares becomes more complicated when physicians and integrative health providers (licensed or unlicensed) work together. There are also issues that you need to review with a healthcare lawyer involving what acts constitute the practice of medicine. The lawyer will work to explain what boards and laws regulate the definition of the practice of medicine. One specific type of medical practice that can be especially problematic are medical spas. Medical spas often work with acupuncturists and other integrative healthcare providers. If you run or work for a medical spa, you need to review the proper boundary lines and regulations. The California Acupuncture Board’s – Laws and Regulations Relating to the Practice of Acupuncture. The Board Defines Acupuncture Corporations. “An acupuncture corporation is a corporation which is authorized to render professional services, as defined in Section 13401 of the Corporations Code, so long as that corporation and its shareholders, officers, directors, and employees rendering professional services who are acupuncturists are in compliance with the Moscone-Knox Professional Corporation Act, this article and all other statutes and regulations now or hereafter enacted or adopted pertaining to that corporation and the conduct of its affairs.” Regulates acupuncture corporation income. “The income of an acupuncture corporation attributable to professional services rendered while a shareholder is a disqualified person (as defined in Section 13401 of the Corporations Code) shall not in any manner accrue to the benefit of such shareholder or his or her shares in the acupuncture corporation.” The name of the acupuncture corporation. “The name of an acupuncture corporation and any name or names under which it may render professional services shall contain words ‘acupuncture’ or ‘acupuncturist’ and wording or abbreviations denoting corporate existence.” Referrals and financial relationships with integrative medical providers There are two federal laws that govern referral arrangements between medical practices and integrative medicine providers. Stark Law is a civil law. The Anti-Kickback Statute is a criminal law. Stark Law. Stark Law applies to physicians who treat patients on Medicare or Medicaid. The law prohibits physicians from referring Medicare or Medicaid patients to designated health services (called ancillary services) in which the physician (or a member of the physician’s family) has a financial interest. Doctors must work on behalf of the patient and not their own financial interests. Essentially, the doctor must recommend ancillary services based on what is best for the patient’s health – without consideration of any financial arrangement between the doctor and the service. Doctors need to be particularly careful when they align themselves with medical spas who often use a variety of integrative health services. There are numerous exceptions to Stark Law. These exceptions, in large part, center around the requirement that the relationship between the physician and the ancillary service should – not consider the volume or value of the physician referrals or business generated by the physician and the service. The exceptions also require that the financial arrangements be based on fair market value and commercial reasonableness. Some of the Stark Law exceptions include: Leasing office space Renting medical equipment Bona-fide employment relationships Doctor recruitment Personal service arrangements Other statutory exceptions The Anti-Kickback Statute (AKS). The AKS is a criminal statute the forbids inducements in order to obtain referrals from physicians. Inducements can include cash, vacations, meals, appointments to directorships, and other benefits that would not be paid or provided – except for the desire to obtain the referral. The AKS generally applies to any claim submitted to the federal government for payment including Medicare, Medicaid, and TRICARE. Violations of the AKS include civil and criminal penalties. Both the person or entity providing the inducement and the person or entity receiving the inducement can be charged under the AKS. The AKS does have “safe harbors” which can justify a financial relationship between a physician and an integrative health service. These safe harbors are comparable (but not identical) to the Stark Law exceptions. An experienced California healthcare lawyer can explain how safe harbors work and how they differ from Stark Law. Experienced healthcare lawyers will also explain how the Anti-Kickback Statute is similar to Stark Law and how it differs. In addition, the attorney will explain what state anti-referral laws apply to a medical spa practice. Skilled healthcare lawyers will also review whether the violations of Stark Law or the AKS can lead to charges the physician or practice violated the False Claims Act. We discuss Stark Law, the AKS, and California’s anti-referral (the Physician Ownership and Referral Act of 1993 in our article titled Quick Summary of Federal “Stark” Self-Referral & Anti-Kickback Law and California Self-Referral and Fee-Splitting Prohibitions. Additional integrative medicine compliance issues A few other of the many compliance issues integrative healthcare provides such as acupuncturists should review with their health care provider are: The informed consent requirements for procedures How the FDA regulates drugs, medical devices, cosmetics, dietary supplements, and other products How the FTC regulations the marketing and branding of your integrative healthcare practice Crucial Issues for Aesthetic Medical Practices – Part One The various California laws including the California Labor Code Integrative health practices include many different professions. Each profession needs to understand the applicable healthcare compliance issues. The doctors who work with integrative health practices also need to understand the full range of healthcare compliance issues. These issues include licensing, the corporate practice of medicine, the unauthorized practice of medicine, HIPAA, anti-referral laws, and other federal and California laws.
October 8, 2021
The Weekly Scenario
The Weekly Scenario: Legislative Tax Update
About two weeks ago, the House of Representatives Ways and Means Committee released an agenda as part of a $3.5 trillion spending and tax bill that Democrats hope to pass. Many of the details will likely change as the bill makes its way through a series of deliberations and votes. But the initial draft provides a good deal of insight about what we can expect. Below is a summary of the proposed changes in the estate tax and some key takeaways: Lowers lifetime gift/estate tax exemptionto $5.85 from $11.7 million, effective January 1, 2022. Clients looking to maximize exemptions should make their gifts as soon as possible, especially gifts to grantor trusts, in case the date of enactment is moved up. Irrevocable grantor trusts in estates, effective upon enactment. A grantor trust is a common estate planning tool which allows an individual (or ‘grantor’) to establish a trust for another (typically a family member). The new provision pulls the assets held in a grantor trust into a decedent’s taxable estate when the decedent is the deemed owner of the trusts. Prior to this provision, taxpayers were able to use grantor trusts to keep assets out of their estate while controlling the trust closely. Establishes an income tax on sales to grantor trustby grantor, effective upon enactment. Currently, a sale to a grantor trust would not trigger an income tax. Clients looking to sell assets to a grantor trust may wish to consider doing so now. However, the proposal maintains stepped-up basis at death. In conjunction with reducing their taxable estates, clients should continue to keep highly appreciated assets in their taxable estates to the extent possible. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
October 1, 2021
Immigration Law
COMING TO AMERICA How The United States is Changing Travel Restrictions
It’s a slogan that’s been ingrained in us: “fly the friendly skies.” But let’s face it, for the past eighteen months, flying has been anything but friendly, and when it comes to the majority of foreign nationals hoping to enter the United States, well, the sky hasn’t been the limit. In fact, the sky has been nearly non-existent for them. Last spring, as COVID-19 enveloped the globe like an iron fist, the Trump administration clamped down on international travel to the U.S., hoping to slow down the spread of the virus here. On March 13, 2020, President Trump’s proclamation banned travel into the United States from more than 30 countries, and that list of nations quickly expanded. Although there were specific exceptions, such as foreign diplomats or certain family members of U.S. citizens who were allowed to fly into the U.S., most international travel bound for America came to a halt. For instance, flights from the U.K. to the U.S. were down 76% from pre-pandemic times. And while there was a change of administration in early 2021, that didn’t translate to a change in policy. However, as the worldwide vaccination rate has continued to rise, with roughly six billion shots having been administered globally, the Biden administration recently modified the restrictions that have been in place for the past year and a half. The focus is now on individuals rather than the broad restrictions that had been in place for entire countries or regions. So, what does that mean if you are a foreign national hoping to come to the United States for employment, vacation, or to see family? Starting in early November, in nearly all instances, all foreign nationals must show proof of full vaccination as well as proof of a negative COVID-19 test taken within three days of boarding a flight to the United States. Failure to provide proof of both full vaccination and a negative COVID-19 test will preclude a foreign national’s entry to the U.S. Also, all passengers must remain masked for the duration of their flight unless they are eating or drinking. Expect this mask mandate to stay in place at least through early 2022. There are a few exceptions to the new vaccination requirements, including children who are not yet old enough to be vaccinated, COVID-19 vaccine clinical trial participants, and people traveling for an important humanitarian reason who lack access to vaccination in a timely manner. However, if you are exempted from the vaccine requirement, it is important to note that you may be required to be vaccinated upon your arrival in the U.S. Similar to the requirements for foreign nationals, vaccinated U.S. citizens returning to the United States must show proof of vaccination as well as proof of a negative test taken no more than three days before departure. Unvaccinated U.S. citizens are required to provide their airline proof of a negative test result taken within one day of departure. Additionally, unvaccinated U.S. citizens must present proof of having purchased a viral test to be taken after arrival in the U.S. No matter what your vaccination or citizenship status is, the Centers for Disease Control (CDC) is in the process of developing a Contact Tracing Order that will require airlines to collect comprehensive contact information for every passenger coming into the United States and to provide that information promptly to the CDC upon request. This will allow the CDC to follow up with travelers who have been exposed to COVID-19 variants. Airline carriers initially resisted contact tracing measures, but over the last several months, several airlines have taken steps to collect more contact information from customers on a voluntary basis. Expect this to no longer be “voluntary” soon. While airlines have hailed the travel restriction changes, regarding them as “a major milestone that will help spur an economic rebound,” the decision to implement the changes was not fueled by economics for the Biden administration. Instead, the decision was fueled by science, given the rising worldwide vaccination rate and increased availability of testing. These new travel policies will go into effect in early November, and I’m sure there will be more changes coming down the road, or should I say “through the air,” sooner rather than later. We’re dealing with a very fluid situation, both scientifically and politically. But with more than twenty years of experience as an attorney at Offit-Kurman specializing in international law, I’m here to help you with any questions and situations that arise...and to make this a smooth flight...both figuratively and literally.
September 30, 2021
The Weekly Scenario
The Weekly Scenario: Roth Conversion Planning Review
As we all have heard, Congress is targeting apparent tax loopholes used by wealthy people with the goal of raising taxes to help finance proposed spending. Retirement plans happen to be in their scopes too. The way this may have come about is a widely publicized story of a guy who managed to amass $50 million or so in a Roth IRA. Forget that the story was made public due to an illegal release of his confidential tax return information from the IRS! The following proposed changes to personal retirement plan accounts apply, for years after 2021, to a person who: Is a “high income” individual, that is, a married filing jointly taxpayer with taxable income in excess of $450,000 or a single filer with taxable income over $400,000. This appears to line up with President Biden’s campaign promise not to increase taxes on anyone making less than $400,000 a year. The combined balance of a person’s IRAs, Roth IRAs, and other defined contribution plan accounts (e.g., a 401(k) plan) exceeds $10 million in value as of the prior year-end. Here are the tax consequences inflicted on such as person: He/she may not make a regular contribution to an IRA. Since the maximum annual IRA contribution is in the range of $7,000, this is not such a problem for someone who already has over $10 million in plans. The rest are more consequential: He/she must take a “required minimum distribution” equal to half the excess over $10 million. And.... If this person has more than $20 million in combined value in such plans, he/she must take an RMD equal to 100% of the excess over $20 million! And such excess must be taken from Roth accounts first! Note that these new RMD requirements have no age component. There’s one change in the mix that may cause some 2021 action. They propose to outlaw the Roth conversion of after-tax money whether in an IRA or in a qualified plan, and this new prohibition would not be limited to higher-income individuals. The Roth conversion of after-tax money is a true “loophole” and it makes sense for them to close it, but it will also make sense for a lot of individuals to take advantage of the loophole while it still exists and complete conversions of their after-tax money (if possible) this year. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
September 24, 2021
Healthcare
Do Health & Wellness Online Authors Risk Lawsuits?
If you’re someone who is publishing a book or e-book on health and wellness and you’re looking at a lot of media opportunities, and you’re concerned about your potential liability, then this video is for you. I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group. We help healthcare industry clients navigate healthcare and FDA legal issues and launch or successfully continue to grow their health and wellness product or service. Today, I’m going to explain some of the key legal mis-steps that authors make when they put content out into the marketplace on health and wellness. By author, I mean someone who puts out content. You could be writing a book or e-book, PDF, broadcasting a podcast or hosting a YouTube channel, appearing on someone else’s website, blog or video series; or you could be a hologram emanating from the skull of Princess Leah- Virtual reality, whatever the technology brings. Whatever the format, here’s the deal: you’re the creator. You’ve gone on the hero’s journey. Maybe it was your health you saved, maybe the health and wellness of a loved one. You used a certain therapy, a certain method of healing, you followed some protocol, or you discovered or designed your own magical blend. Remember the movie, Lorenzo’s Oil? It came out a long time ago. But worth watching Susan Sarandon battle the doctors and motivate an industry to research and validate a therapy she pioneered to save her son. So, maybe that’s your story, and it’s the story of a lot of our clients and maybe you put this information out to the public. Can you do it without incurring too much legal exposure? What can you do to manage your liability risk? At first, this seems like a fairly simple question. Don’t engage in unlicensed practice of medicine. But, the question is how you will put it all together? That is the question. Are you embarking on a purely educational venture, or are you giving specific advice to individuals about their health and journey back to health? In the old days, a book was this physical thing you received in the mail. There was a lot of distance between the author and the reader. The point of the book was to draw you into the page, so you could forget that someone else had spent a lot of time in another space putting it together. These days, technology narrows the gap. You can be right there doing a Zoom call, or some other platform virtually alongside your client or customer. So, going back to my question, how are you going to put it all together without incurring undue liability? Consider these three points to help manage legal risk. First, in the eyes of the law, there is a difference between a purely educational venture, on one hand, and, clinical services on the other. The difference is super obvious if you think about a book on one hand, and a doctor’s visit on the other. Where the boundaries get blurred is where you use an online platform to access the customer. For example, if I text my therapist, clearly that is a clinical encounter. If I attend her webinar and raise my hand in the Chat box and ask about whether glucosamine is good in general for joint health, that is usually going to be considered education. But again, it depends on the facts and circumstances. Second, disclaimers are useful. You are not providing medical advice, you are not diagnosing and so on. But, disclaimers don’t tell the whole story. You need to make sure that what you are doing, is congruent with the disclaimers. You can’t put in a disclaimer saying, “this is not medical advice” and then give medical advice. For example, reviewing someone’s lab test would be considered clinical advice. Third, there is a lot of other legal language you can put in that could be protective. For example, a clause limiting your liability in case your general educational content doesn’t solve the customer’s health problem – General Liability Disclaimer. Beyond these three key points, there are a lot of nuances. For instance, do you take a medical history? In the eyes of prosecutors looking for unlicensed practice of medicine, the intake form itself could be a red flag, it could be evidence. And, different people have different risk profiles. Some want to take a lot of risk, some of our clients want to take little bit or risk, some are like goldilocks – it’s got to be just right. If you have a health and wellness startup, let’s say a telehealth or telemedicine app that connects patients to medical doctors or therapists digitally, you’re likely to have a different risk profile than, say, a lone MD who wants to style themselves a health coach. One thing that I enjoy about our practice at Cohen Healthcare Law Group is that we’re not only familiar with the legal essentials, we’re also very experienced at the nuances, and we’ve been at this since 1999. We understand the variations when it comes to these fines lines (and wrinkles) between putting out educational content as commercial free speech, and engaging in the kinds of professional encounters that do require a healthcare license. Thank you so much for watching. If you still have questions, click on the link below, cohenhealthcarelaw.com/contact, to send us a message or book an appointment. Here’s to the success of your healthcare venture, we look forward to speaking with you soon. Testimonials
September 23, 2021
Family Law
What’s the Deal with Adultery in Maryland?
Adultery is a misdemeanor in Maryland, punishable by a $10 fine. It’s doubtful that a prosecutor would ever prosecute that crime, but it may have a consequence in a divorce case. So what’s the big deal? There are two areas where an allegation of adultery has a role in the family law arena. First of all, there are the emotional or psychological considerations. The one who has committed adultery may be embarrassed and may not want those allegations to appear in a pleading that is filed in Court. These pleadings are public record, and, even if no one in the press is interested, children, grandchildren, friends and neighbors may, at some time in the future, access those pleadings. The “innocent” spouse may believe that he/she has a “leg up,” and use the possibility of relying upon those formal allegations in negotiations. The allegation of adultery, however, does not have the same stigma that it did when I began practicing law, many years ago. The “legal” consequences of an allegation of adultery is that, should the case be litigated, the Court is to consider fault as one factor of many in determining both an award of alimony and a division of the marital property. Generally adultery that occurs subsequent to a separation, but while the parties are still legally married, is not nearly as concerning as an adulterous relationship that caused or contributed to the separation. Since even if proven to be true, the allegation of fault is only one of many factors to be considered. And, since that Court has great discretion in making those decisions, the impact of the fault grounds can be significant or minimal. There’s a risk, and that’s the concern/consequence that the parties and their counsel must consider.
September 22, 2021
Healthcare
Health Compliance Issues for Dentists and Orthodontists
According to Colgate.com, dentists are professionals who complete four years of undergraduate school and four years of dental school. Dentists must then pass a written test and a clinical licensing exam before they can become qualified to practice. Dentists generally use one of the following designations. DDS (Doctor of Dental Surgery) DMD (Doctor of Medicine in Dentistry or Doctor of Dental Medicine) Orthodontics is a dental practice specialty that requires additional training. About six percent of all dentists are orthodontists. Orthodontists normally have to complete a two/three-year residency program. According to the American Association of Orthodontists (AAO), dentists: Provide regular checkups Diagnose and treat cavities Treat mild gum disease and oral hygiene problems. Extract teeth that cannot be saved Work on teeth by “applying bonding, veneers or crowns to teeth that are broken, chipped, misshapen or severely decayed.” Look for signs of oral diseases Give advice on oral health According to the AAO, orthodontists “specialize in aligning the jaws, and moving the teeth.” These professionals “correct crowded teeth, gaps between teeth, teeth that stick out, and jaws that don’t align properly.” Dentists use various medical products including “braces, lingual braces, and clear aligners.” Dentists usually work with X-rays and photographs. Dental practices usually include the dentist, dental assistants, dental hygienists, and dental technicians. While most dentists work in private practice, dentists also work in dental hospitals, the military, and prisons. Dentistry/orthodontist practice and illegal referrals. Kickbacks, and improper fee-splitting Professionals who work in dentistry, orthodontics, and other medical-related fields often work with other professionals. For starters, dentists often refer patients to orthodontists. Orthodontists work with various medical device companies. Dental professionals may work with diagnostic labs, medical suppliers, cosmetic companies, and other businesses. Dental professionals need to understand what financial relationships are permissible and what relationships may lead to charges the professional relationships violate Stark Law, the Anti-Kickback Statute (AKS), or other related laws. Many of the cases that the US Department of Justice settles in civil fraud cases involve the healthcare profession. These cases include hospitals, drug manufacturers, and many different types of healthcare practices. The best course for any type of dental practice is to consult with an experienced California health lawyer before starting the practice or starting any new professional relationships. Your lawyer will review which compliance laws apply to the dental profession. He’ll explain that referrals of patients to any entity the dental practice has a financial relationship or stake in – are especially suspect. The lawyer will also explain what exceptions and “safe harbors” to these laws can help protect your professional relationships – when the fees for services or products are paid by federal or state government programs. Many dental patients, for example, use Medicare or Medicaid to pay for their dental care. Your lawyer will review, among other compliance issues: What types of referral arrangements are permissible What marketing strategies can be used to entice patients to use your dental or orthodontist practice How a properly managed service organization (MSO) can be used to protect your practice. What do dental practices need to know about Stark Law? Stark Law prohibits doctors from referring patients who use Medicare from referring that patient to a “designated health service” with which the dentist has a “financial relationship.” The idea behind the law is that dentists should refer patients based on what is best for the patient’s health – and not what is best for the dentist’s finances. Stark law does provide numerous exceptions which we have discussed in many articles. There are specific requirements for each type of exception. Some of these exceptions include: In-office ancillary services Office space rental Preventive services Equipment rental Physician recruitment Many other relationships Dentists and dental practices who violate Stark Law can be held civilly liable. Civil liability means paying back to Medicare any improper payments. Civil liability also the possibility of statutory fines and exclusion from Medicare. Dentists need to understand that Stark Law is fairly strict. There’s no formal requirement that the government needs to show the dentist intended a violation of the law – in order for the dentists to be found liable. The establishment of the referral through Medicare and the designated health service is enough to hold the dentist liable. Stark law does apply to dentists – though there is a practical concern. Medicare generally does not cover dental payments which means most dentists do not submit bills to Medicare. What Medical Practices Should Know about the Stark Law The Stark Law is named after California U.S. Congressman, Peter Stark. It seeks to regulate how physicians refer Medicare and Medicaid patients. The law is part of the Omnibus Budget […] Exceptions to the Stark Law Prohibition of Medical Referrals The Stark Law governs what types of referrals doctors can make if they bill for Medicare and Medicaid. The presumption is that that referrals made by a doctor to a designated health service are […] What do dental practices need to know about the Anti-Kickback Statute The Anti-Kickback Statute also regulates the referral relationship. Generally, the AKS prohibits referrals that are based on providing anything thing of value to induce the referral – such as cash, free vacations, speaking engagements, and other items dentists might consider valuable. There are many similarities but also critical differences between the AKS and Stark Law. The AKS uses the term “safe harbors” instead of exceptions. The AKS applies to referrals of patients covered by Medicaid and other federal programs – in addition to Medicare. While Medicare generally does not cover dental services, most state Medicaid programs do cover dental services. The AKS is a criminal statute unlike Stark Law which is civil in nature. The AKS requires that the government show criminal intent. If convicted, a dentist or any physician can be sentenced to prison and ordered to pay substantial fines and penalties. Dentists who violate Stark Law or the AKS may also be in violation of comparable state laws. Dentists may also lose their license to practice dentistry or their dental specialty. Some of the AKS safe harbors include: The use of a Managed Service Organization (MSO) Renting space arrangements The sale of a medical practice Equipment rentals Personal service contracts Group purchase organizations Incentives for rural practitioners Use an MSO to Comply with Federal Anti-Kickback Safe Harbors What can an MSO, a Management Services Organization, do to augment your healthcare compliance? How are referrals between dentists and orthodontists reviewed? As a practical matter, many dentists refer their patients who need specialized dental care to orthodontists. Dentists and orthodontists should review their relationships with an experienced healthcare lawyer. The relationship may cause legal compliance issues if there is a financial relationship between the dentist and the orthodontist. It is generally permissible to refer patients to each other if the referral is based on merit and neither the dentist nor the orthodontist has a financial stake in the other’s business (which may indicate a Stark Law compliance violation)– and there is no quid pro quo or exchange based on the referral (which could indicate a violation of the Anti-Kickback Statute. Some of the issues that may indicate a Stark Law or AKS problem include: If one practitioner has an employment relationship with the other practitioner If one practitioner leases dental office space from the other practitioner These two examples and many other relationships may be more likely to be considered in compliance with these laws if the relationships are structured, with the help of a skilled healthcare compliance lawyer, to meet a Stark Law exception or an AKS safe harbor. HIPAA and dental care compliance issues Dental practitioners, orthodontists, and all other types of related practices need to consider HIPAA compliance requirements. All dental professionals need to ensure that they comply with HIPAA (Health Insurance Portability and Accountability Act of 1966). This includes understanding what records can and cannot be exchanged (and how the records can be exchanged) – if a dental practitioner refers a client to an orthodontist, diagnostic center, or other dental practice – or even if there is no referral. It is also a violation of HIPAA for a dental practitioner or dental specialist to offer an incentive (such as a discount) to a patient who uses Medicare or Medicaid – with the aim of influencing that patient to recommend the dental practitioner/dental specialist to other patients who use Medicare or Medicaid. The penalties include civil monetary penalties of $10,000 for each violation. An experienced healthcare compliance lawyer can explain the limitations of any type of incentive program. There are exceptions to the Medicare incentive law that your lawyer can explain. These include: Some inexpensive gifts with limited value Some items or services that fit within the statutory exceptions:Waivers of cost-sharing amounts based on financial need Properly disclosed copayment differentials in health plans Incentives to promote the delivery of certain preventive care services Any practice permitted under the federal Anti-Kickback statute pursuant to 42 CFR 1001.952 Waivers of hospital outpatient copayments in excess of the minimum copayment amounts. A skilled California healthcare lawyer will explain whether any of the referrals, incentives, or other transactions that may be permissible under a federal law exception or safe harbor – violate any California laws. Additional dental care compliance issues Some of the many other healthcare compliance issues dental practitioners need to review with a seasoned healthcare law are: FDA violations The Food and Drug Administration regulates: Drugs Medical Devices Food and nutritional products Cosmetic products Other products The regulations include determinations about: Whether the products are adulterated or misbranded Current good manufacturing compliance Introduction of unapproved drugs into interstate commerce Other regulations Dentists, orthodontists, and other health practitioners need to understand how FDA regulations apply to their practice. This understanding applies to different parts of their practice such as: The drugs, medical devices, and other products dentists use for their patients. The statements dentists make online and offline about the merits of any of these products to help patients with their oral health problems. FTC violations The Federal Trade Commission monitors the representations dental practitioners and dental supply companies make about the services and products they perform or use. These days, most dentists use websites, social medial, and print marketing to help promote their practice. The FTC has the authority to review your marketing and branding. If the FTC believes your promotions violate the Federal Trade Commission Act and FTC regulations or rules, the FTC can send a warning letter and take other appropriate action. The corporate practice of medicine In California, decisions about the practice of medicine (including dentistry) must be made by the physicians and not by the business. In California, a medical corporation can be formed by complying with the California Moscone-Knox Professional Corporation Act. The medical corporation is a separate legal entity that must be owned by one or more physicians. Non-physicians can have a minority stake in a professional medical corporation. Dentists can also practice as sole proprietors or in partnership with other dentists. An experienced healthcare lawyer can explain the pros and cons of each type of business structure. The unauthorized practice of medicine Dentists need to ensure they fully understand what tasks dentists can assign to their staff, which tasks dentists must perform themselves, and which tasks staff members can perform under their direct supervision. Dentists must also ensure that they and the people the dentists work with are properly certified and their continuing medical education requirements are being met. Generally, the Dental Board of California licenses and regulates over 100,000 dentists, registered dental assistants, and registered dental assistants in extended functions (RDAEF). The Board “has the responsibility for setting the duties and functions of unlicensed dental assistants.” Dentists, like other physicians, need to understand how Stark Law and the Anti-Kickback Statute apply to their practice and business relationships. Dentists need to understand their HIPAA compliance duties, and many other compliance issues such as FDA requirements, FTC requirements, and various California laws.
September 22, 2021
Family Law
I Received an Inheritance – Will I have to Share the Money with My Ex-Spouse?
The answer to this question can go in two different directions, depending on what the recipient did with the money. When evaluating a divorce, most states view inherited funds as separate property, whether those funds were received before or after the marriage. In Maryland (and in the vast majority of states), inherited funds are considered separate, or non-marital property. Here is the catch, though: the designation of “separate” can change based on what the recipient did with the funds. Generally, marital property is subject to division in a divorce, while separate property is not. However, inherited funds that start out as separate property can become marital property if they are “commingled”—i.e., turned into marital property by using the money for things like remodeling the marital house, paying for a vacation, paying off bills, or other similar things that benefit both spouses. Here are some other specific examples of comingling: If one spouse inherits a house and then adds the other spouse’s name to the deed, the inherited house then becomes a comingled asset. If one spouse receives funds and then puts the money into a savings account for a significant period of time under both their name and their spouse’s names, those funds are now comingled and considered marital property. If one spouse uses inherited funds to renovate the marital home, which is titled in both spouse’s names, the inherited funds become commingled. Because comingling can happen so easily and unintentionally, some couples opt for a postnuptial agreement when they inherit funds. This is an agreement that happens after marriage, wherein the parties agree that the inherited funds used for the renovation, vacation, or other mutually beneficial activity shall be and remain the inherited party’s sole and separate non-marital property, free and clear of any interest of the other spouse. It’s wise to consult with an experienced family law or divorce attorney when one receives a large sum of money from an inheritance. Even if the recipient decides not to pursue a postnuptial agreement, being aware of what actions would be classified as comingling can be extremely helpful when deciding how to use the funds. If you have any questions on this topic, please contact Sandra Brooks at sbrooks@offitkurman.com or 240.507.1716.
September 20, 2021
The Weekly Scenario
The Weekly Scenario: How Can a Trust Protect My Children’s Inheritance?
One of the main reasons for estate planning is to provide loved ones with protection from claims of future creditors and divorcing spouses or lawsuits. If you leave your property to your child as an outright distribution, the property will not necessarily be protected. 'Spendthrift' Protection There is a longstanding concept in trust law known as ‘spendthrift’ protection. These provisions state that the Trustee will have sole control to make distributions from the Trust without interference from others. The spendthrift clause prevents a third party (e.g., creditor) from being able to compel the Trustee into making distributions of trust property for the benefit of the third party. Protection from Creditors Under the spendthrift rules of most states, a person is free to leave assets in the trust for another person, with specific language in the trust specifying who, besides a trust beneficiary, can have access to the trust assets. If the trust includes a ‘spendthrift’ clause that specifically states that trust income and principal is not to be available for payment to a trust beneficiary’s creditors, then as a general rule the trust would be immune from attack by a beneficiary’s creditors. This strong protection would apply regardless of the amount or nature of a beneficiary’s liabilities and would include protection of the trust assets if the child were to go through a divorce. Variation Between States However, the extent of protection offered by a trust with a spendthrift clause will depend upon state law. In some states, certain creditors are still permitted access to the trust. This might include obligations for alimony, child support or payments to creditors who have provided certain ‘essentials of life’ to the beneficiary. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
September 17, 2021
Real Estate
This Week in Real Estate: Fifteen Football Historical Fun Facts
This Week in Real Estate paid homage to Major League Baseball’s Opening Day. Therefore, This Week in Real Estate would be remiss to take the opportunity to honor the National Football League’s Opening Weekend of the 2021 football season and must take a time out from its regularly scheduled program to discuss some historical football Fun Facts (courtesy of mentalfloss.com). Football was essentially rugby until 1882, when new rules were established that gave each team three tries to advance the ball five yards. That’s also why the field looks like a gridiron. Lines had to be established so teams knew how far they had to go. Kickers got more respect in those early days. Originally, touchdowns were only worth four points, while field goals were worth five. In football’s early days, the forward pass was illegal, so most plays were variations on a theme of “ball carrier smashes into the line of scrimmage.” Unsurprisingly, this limited playbook led to a lot of injuries. As president, Teddy Roosevelt threatened to ban football unless new rules were established to ensure player safety. The revised rules introduced the forward pass. The new rules also cut the time of the games by ten minutes. Games were originally 70 minutes long. The huddle was first used in the 1890s by quarterback Paul Hubbard, who was deaf. Hubbard was concerned the other team could interpret his hand signals, so he brought his teammates into a round formation to call plays. The first professional football player was William “Pudge” Heffelfinger. He was paid $500 to play in a game in 1892. The first televised professional football game took place in 1939. It wasn’t quite the huge spectacle that pro football has become—that first broadcast only appeared on approximately 500 TV sets. If you’re talking to a mathematician, the shape of a football is best described as a “prolate spheroid.” But everyone will know what you’re talking about if you just say “football-shaped.” Fans who pay attention to the ball itself will notice a subtle difference between the pro and college balls. While both levels use identically sized balls, college games are played with balls that have white stripes painted on either end. These markings supposedly make a passed ball easier to spot while it’s in flight. The longest field goal made in pro football history was 64 yards. The longest attempted field goal in pro football history was 76 yards. It missed. The name “football” was originally fitting since the game was largely played with players’ feet. The first college game took place in 1869, but modern fans likely wouldn’t have recognized the action. Each team had 25 men, and players weren’t allowed to pick the ball up. Instead, they advanced towards the goal by kicking it or swiping at it with their hands. When future president Herbert Hoover attended Stanford in the early 1890s, he was a student manager of the football team. According to team lore, when Stanford and the University of California met on the field for the first time in 1892, there was a delay after Hoover forgot to bring the ball. Modern games don’t have this problem: Pro rules dictate that the home team has to have 36 balls (for outdoor games) or 24 balls (for indoor games) ready for inspection by the referee two hours before a game’s starting time.
September 16, 2021
Intellectual Property
A Checklist for University Policies Addressing Student-Athlete Name, Image and Likeness (NIL) Issues
In the wake of the Supreme Court's decision in Alston v. NCAA, the National Collegiate Athletic Association ("NCAA") issued an interim policy announcing that it will no longer enforce its rules prohibiting compensation for the use of a student-athlete's name, image and likeness ("NIL"). Other athletic associations have like-wise amended their bylaws to allow student-athletes to profit from the use of their NIL. Additionally, new laws recently enacted by many states, such as Pennsylvania, now require institutions of higher education to publish policies on these issues. To comply with NCAA rules and state law, universities face a range of somewhat complex considerations in forming and implementing NIL policies and procedures. Here are some of the key issues in the form of a practical checklist: Know the NCAA policy or the policy of the athletic association that governs your institution's teams. The NCAA has a Division Manual for each of its three divisions. The Manuals are several hundred pages long and include at least several dozen policies that address issues that may be impacted by NIL activity. These manuals and policies have not yet been revised. Instead, the NCAA's interim policy states simply: "Individuals can engage in NIL activities that are consistent with the law of the state where the school is located. Colleges and universities may be a resource for state law questions. Individuals can use a professional services provider for NIL activities. College athletes who attend a school in a state without a NIL law can engage in NIL activity without violating NCAA rules related to name, image, and likeness. State law and schools/conferences may impose reporting requirements." https://www.ncaa.org/about/taking-action Know what hasn't changed in the NCAA manuals. Subject to state law, the NCAA still prohibits a "NIL agreement without quid pro quo (e.g., compensation for work not performed)." Subject to state law, the NCAA prohibits "NIL compensation contingent upon enrollment at a particular school." Subject to state law, the NCAA still prohibits "compensation for athletic participation or achievement. Athletic performance may enhance a student-athlete's NIL value, but athletic performance may not be the 'consideration' for NIL compensation." Subject to state law, the NCAA still prohibits "institutions providing compensation in exchange for the use of a student-athlete's name, image or likeness." https://ncaaorg.s3.amazonaws.com/ncaa/NIL/NIL_QandA.pdf (See Q. 11) Know your state's NIL law. A majority of states have enacted brand-new NIL laws, and the requirements vary considerably. Some states even require that institutions create funds from ticket sales or other promotional activities to benefit athletes. Pennsylvania's new law contains many provisions similar to those in other states. For example: Pennsylvania's law applies to institutions within Pennsylvania and to students participating in intercollegiate athletics at those institutions. The laws of other states may also apply to their residents regardless of where they attend school. 24 P.S. §20-2001k, et seq. Pennsylvania's law permits college athletes to earn compensation for the use of the athlete's NIL and provides that the compensation must be commensurate with the market value of the athlete's NIL. Pennsylvania's law prohibits college athletes from accepting compensation in exchange for their attendance, participation, or performance at the institution ("pay-for-play"). Pennsylvania's law prohibits college athletes from earning compensation for NIL use "in connection with a person, company or organization related to or associated with the development, production, distribution, wholesaling or retailing" of the following: Adult entertainment products and services. Alcohol products. Casinos and gambling, including sports betting, the lottery, and betting in connection with video games, online games, and mobile devices. Tobacco and electronic smoking products and devices. Prescription pharmaceuticals. A controlled, dangerous substance. Other products or activities prohibited by the institution. Pennsylvania's law also permits institutions to prohibit student NIL use more broadly: (i) in activities that conflict with existing institutional sponsorship arrangements and (ii) based on other considerations that conflict with institutional values, as defined by the institution. The Pennsylvania law requires institutions to have policies that "specify the name, image or like-ness activities [in] which the college student may not engage." Pennsylvania's law requires students to disclose proposed NIL contracts to a designated official of the institution at least seven days before the execution of the contract. Pennsylvania's law prohibits institutions (i) from preventing student-athletes from earning compensation through the use of the student's NIL or (ii) from obtaining professional representation in relation to NIL use. Pennsylvania's law prohibits institutions from arranging third-party compensation for a student-athlete relating to NIL use as an inducement to recruit prospective students. Pennsylvania's law requires any person producing a college team jersey, video game, or trading card for profit to make a royalty payment to each athlete whose NIL or "other individually identifiable feature" is used. Pennsylvania's law does not require institutions to facilitate or enable NIL opportunities for athletes. The law specifically states that it does not require an institution to permit athletes to use the institution's marks, logos, mascots, or other intellectual property. Know your state's student-athlete agency law. Many states, including Pennsylvania, require registration, which may include payment of fees and posting of bonds. See, e.g., 5 Pa.C.S. §3301 et seq. Tell the students where to find a list of "banned products." Pennsylvania's law requires that institutions disclose to students the types of deals that the institution prohibits. Therefore, institutional policies should let students know which products and activities are prohibited by state law and by institutional decree. For example, should student-athletes be permitted to engage in NIL activity for CBD and hemp products? Nutritional supplements? Guns? Professional sports teams? Gambling? Broadcasters? Can they contract with university entities, such as a meal service? Institutional policies should also specify products that conflict with school contracts, such as institutional sponsorship deals that include exclusivity promises. Policies should let students know whether all teams have a conflict or just certain teams. Is certain activity prohibited on social media? Tell students whether and how they can use the school's copyright materials (including game footage, logos, nicknames, mascots, etc.), and if appropriate, how to get permission to do so. Consider requiring all vendors, whether involved through the student NIL process or otherwise, to seek approval in the same way for the use of school marks. Tell students whether they can use the school's facilities and fields for NIL purposes, and if so, how to get permission to do so. Tell students whether NIL activity can interfere with class time or team activities. Warn students of other potential hazards, including: The need to consult with the designated school official for international students (because many students are in the United States on visas that prohibit employment), and The need to consult with the financial aid office (because a successful NIL venture may result in income, which may need to be included in determining income-based financial aid eligibility and awards). Indeed, before rolling out an NIL policy, it might be a good idea to coordinate with the university's financial aid office and international student office. Require disclosure of student-athlete NIL contracts. Pennsylvania law requires disclosure to the institution of all NIL contracts at least seven days prior to the execution of the contract. In other states, some institutions are establishing dollar amount thresholds. Your policy should clarify what happens in the event the institution is unable to respond in a timely manner. Does a failure to respond mean that the student has the institution's approval to proceed? Create a formal process for disclosure of NIL deals by student-athletes and review by the school. Many schools may find it helpful to designate an NIL coordinator. Consider requiring all agents representing student-athletes for NIL activities to register with your school and to provide basic information. Consider advising students of the need to comply with NCAA rules regarding agents, including that students "shall be ineligible… if the individual enters into an oral or written agreement with an agent for representation in future professional sports negotiations that are to take place after the individual has completed eligibility in that sport." NCAA Manual, Div. 1, 2021-22, bylaw 12.3.1.3. Consider providing education to students about (a) the NIL and agent registration laws, (b) protecting intellectual property, (c) financial acumen, and (d) university policies and procedures. Consider an internal appeal process or grievance process for NIL issues. Consider other policies and documents that may require review and revision: School contracts containing licensing provisions. Will the school be responsible for student NIL disputes with a university vendor? Insurance policies. Will the university's insurance respond if there are disputes? Social media policies. Student forms granting the university permission to use the student's NIL in connection with university promotional activity. Student discipline policies which may need to specifically identify the types of discipline that may be assessed on students who violate NIL rules. Student grievance policies. Do existing policies allow students to file complaints if the institution prohibits a proposed NIL contract or fails to respond to a proposed contract? Takeaways. Institutions of higher education must create policies to inform student-athletes of their rights and responsibilities and consider updating related rules across the full range of inter-connected issues within the institution. Institutions must be prepared to make further updates as additional guidance becomes available and as rules change.
September 13, 2021
Intellectual Property
Navigating the New NIL Landscape: A Checklist for Athletes Looking to Profit
On June 30, 2021, the college athletics landscape was significantly altered, as the NCAA announced an “interim policy” concerning the commercialization of college athletes’ names, images and likenesses (“NIL”). NIL includes an athlete’s name, appearance, signature, nicknames and any other signs, slogans, sayings or symbols that can be used to identify that individual. Here is a basic step-by-step guide to help college athletes profit from their own NIL while complying with NCAA, state and school rules: (1) Know the interim NCAA policy. Athletes can now profit from NIL. State law where the school is located will apply. The school’s rules will also apply, even if there is no state NIL law. You can hire professional representation (attorneys, agents) with certain limitations. You must report NIL activities consistent with state law and school rules. Avoid NIL affiliation with NCAA’s banned sub-stances (drugs, performance-enhancing drugs, etc.). (2) Does your state have an NIL law? If so, know it. In order to play the game, you have to know the rules. Therefore, start by learning about your state's NIL law. If you are unsure, contact your athletic department or a local attorney for guidance. What are the “banned categories” in the state (drugs, alcohol, gambling, etc.)? What are the reporting requirements? What makes someone eligible to help you with NIL deals (state agency requirements)? (3) Know your institution’s NIL policy. You must know what your school does and does not allow. Can you use the school’s logo or facilities in your NIL activities with or without pre-approval? Is there a process to request approval to use school logos and facilities? Can you conduct NIL activities during team-sanctioned events? What are your school’s “banned categories”? Are there special NIL social media rules? Does your proposed endorsement conflict with the school’s existing product agreements? What are the school’s NIL reporting requirements? Does your school have a designated NIL administrator to help you? What is the enforcement mechanism and ap-peal procedure if you make an alleged NIL mistake? (You should consider hiring professional representation to help avoid this.) (4) Protect your NIL. If you are in the market for significant NIL deals, you should consider protecting your intellectual property (“IP”). Seek legal counsel with experience in both IP and sports law. The initial consultation will typically be at no cost. Beyond that, a small expense up front can pay off down the road. Register your IP. Register your name, nickname, or slogan as domain names. Protect your right to use your own NIL and prevent unauthorized third-party use by filing for trademark protection. What is a trademark? It is a word (name or nickname), symbol, design or slogan that can specifically identify you in commercial activities. Consider hiring a trademark attorney to assist you. How do I determine if it is cost-effective to take these steps? The NIL market is extremely new and, therefore, tough to judge. However, the more substantial contracts are being executed by players with larger social media followings and on-field presence. Regardless, do NOT sell yourself short. Test the market and see what deals you may attract. (5) Understand the impact of any earned income. Earning income from NIL may affect your personal financial situation, including your tax status and liabilities, your immigration status, and/or your financial aid package. (6) Seriously consider hiring professional representation. In accordance with NCAA, state and school guidelines, consider obtaining professional representation, such as an attorney or agent registered in the state. Also, consider whether obtaining financial, tax, immigration or other professional advice would be helpful. At the end of the day, no NIL deal is worth your NCAA eligibility or institutional good standing. This summary of legal issues is published for informational purposes only. It does not dispense legal advice or create an attorney-client relationship with those who read it. Readers should obtain professional legal advice before taking any legal action.
September 13, 2021
The Weekly Scenario
The Weekly Scenario: Dynasty Trust planning
The reasons for creating a dynasty trust vary depending upon the needs and desires of the trust settlor. Dynasty trusts can be created to provide creditor and so-called ‘predator’ protection for the beneficiaries of the trust generation after generation. Such trusts can shield against divorce proceedings initiated against a beneficiary of the trust or creditors of a beneficiary arising out of a business failure. The dynasty trust can also provide a pool of assets to be managed by a trustee for the benefit of all the beneficiaries, thus preventing individual beneficiaries from squandering their inheritance by misusing the funds or investing poorly. The dynasty trust can also be used to encourage participation in certain worthwhile causes or discourage behavior that is unacceptable. One of the greatest way’s dynasty trusts are used by families who value education is to establish a fund that will pay for the secondary and graduate education of many future generations. When you ask most people to name their great -great grandparents, they are unable to do so. But providing full college tuition and other educational perks for future generations could be helpful to establish a family legacy. The generation skipping transfer tax exemption can be utilized to plan for several generations and build significant wealth. One of the reasons Congress enacted the generation skipping transfer tax is to curb the wealth building effects of dynasty planning. The concept of dynasty planning is to pass the maximum amount of wealth one can to their grandchildren (and subsequent generations) without subjecting the transfer to the tax. In so doing, one can exempt the trust property from future generations skipping the transfer tax. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
September 10, 2021
The Weekly Scenario
The Weekly Scenario: Items that an Estate Plan Should Provide for a Spouse
The objectives that we hear most often from clients regarding a spouse include: I want my spouse to be able to maintain the lifestyle that we currently enjoy after I’m gone. I want to protect what I leave my spouse from people who might otherwise take advantage whether family members or strangers. I am in a second marriage and I want my spouse cared for after I am gone. But I also want to ensure that my estate goes to my children after my spouse passes away. I have handled most of our investments throughout our married life and my spouse has not been involved. I would like my spouse to maintain control, but I’d also like to provide investment guidance. I want to be sure my spouse can, while still benefiting my children, make adjustments in my bequests in order to address changes in the circumstances of my children and grandchildren that occur after I am gone. I want to get any tax protections that are available to my spouse. But what if my spouse remarries? One of the ways to protect a spouse’s assets is to have the estate plan require the surviving spouse sign a prenup if they desire to maintain control of the assets if and when they remarry. The plan could even remove the spouse as trustee or as a beneficiary of the trust if specific criteria are not met. As always, if you have any questions or would like to learn more, please contact Steve Shane at sshane@offitkurman.com or 301.575.0313.
August 27, 2021
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