The Federal Trade Commission's Disposal Rule went into effect June 1, 2005, but affected businesses will have six months from that time to come into compliance. After that, failure to comply could trigger a range of civil enforcement actions by the Government or affected consumers.

While there is room for interpretation of the Disposal Rule's meaning, and how it should be applied as circumstances change, the Rule's essential standard is all in one sentence: Any person who maintains or otherwise possesses consumer information for a business purpose must properly dispose of such information by taking reasonable measures to protect against unauthorized access to or use of the information in connection with its disposal.

What Is Covered?
Consumer information covered by the Rule means any record about an individual, in any form, that is a consumer report or is derived from a consumer report. The definition includes a compilation of such records. If the information does not in some fashion identify individuals, however, such as information in aggregate form, the Disposal Rule does not apply. The obvious ways in which individuals may be identified are names, Social Security numbers, driver's license numbers, telephone numbers, physical addresses, and e-mail addresses. But even pieces of information that, by themselves, do not identify someone can, in combination, be regarded as identifying information.

Who Is Covered?
The Rule was intentionally written broadly to apply essentially to any "person" maintaining or possessing consumer information other than an individual who has obtained his own consumer report. Some entities that commonly obtain consumer credit information include consumer reporting agencies, lenders, insurers, employers, landlords, government agencies, mortgage brokers, financial institutions, and automobile dealers. This is far from an exhaustive list. If an entity can obtain a consumer report for one or more of the business purposes mentioned in the Fair Credit Reporting Act, it is safe to assume that the entity and the information it obtained are subject to the Disposal Rule. Disposal and records management companies also fall under the Rule.

Reasonable Measures
The Rule uses the flexible term "reasonable measures" to describe the duty regarding disposal because perfect destruction of consumer information in every instance is unattainable. Variables that may be taken into account include the sensitivity of the information, the nature and size of the entity's operations, the costs and benefits of different disposal methods, and ongoing changes in technologies. It is also noteworthy that the concept of "disposal" also covers the sale, donation, or transfer of any medium on which consumer information is stored.

The Rule provides a nonexhaustive set of examples of "reasonable measures." To prevent the reading or reconstruction of records in paper form, policies should be adopted, and their implementation monitored, for the burning, pulverizing, or shredding of such papers. The same approach is advisable for policies on destruction or erasure of electronic media. Since simply deleting information stored on a computer is usually insufficient to safeguard the information, use of some low-tech methods of destruction on some high-tech methods of storing information may be in order. For example, the Federal Trade Commission has suggested, at least for small businesses, the nearly cost-free method of disposing of electronic media by smashing the material with a hammer.

A covered person's due diligence also should extend outside the office when disposal of information is contracted out to a provider of such a service. One of the "reasonable measures" mentioned in the Rule refers to taking steps to determine the competency and integrity of the disposal company, such as reviewing an independent audit of the company, getting references, requiring that the company be certified by a trade association, or reviewing and evaluating the disposal company's policies and procedures on information security.

Gifting As An Estate Planning Tool The wisdom of making a will is well settled as sound legal advice, and rightly so. Less talked about, but equally advisable for many people, is the use of gifts during one's lifetime as a method for estate planning. Apart from the intangible benefits that flow from the fact that, as the saying goes, it is more blessed to give than to receive, gifting has favorable down-to-earth, dollars-and-cents ramifications.

Gifts reduce the size of the donor's estate that will be subject to court administration, thereby cutting probate costs and potential estate tax liability. Less obvious, but equally advantageous, is the way that gifts can provide savings on income taxes. This occurs when income-producing property is given by an individual in a high income tax bracket to someone in a lower tax bracket.

Gifts do not trigger income tax liability for the recipient. However, the original cost, or basis, of the gift remains for the recipient what it was for the donor. As a result, if the recipient later sells the property, he generally will owe capital gains tax on the difference between the donor's basis and the sales price. As for the gift tax, the starting point to consider is that the federal Government levies the tax on transfers of real or personal property made during the giver's lifetime where something of similar value is not received in return. For tax purposes, the dollar value of a gift is the fair market value of the property when it is given, less the fair market value of anything received in return. The donor is liable for any gift tax that is due, but if the donor does not pay the tax the donee becomes personally liable. An annual exclusion of up to $11,000 is available for transfers to other persons without payment of the federal gift tax. Rather than pay the gift tax on gifts over $11,000, the donor can choose to exempt as much as $1 million in gifts above this exclusion over his lifetime. The donor does not need to file a federal gift tax return for gift amounts less than $11,000. Because the exclusion amount is per donee, any one donor actually can make gifts in a large total amount, without incurring a gift tax, by giving to many different recipients. For a married couple, the annual exclusion is $22,000 per donee. There is an unlimited marital deduction provision in the federal gift tax law, so that no gift tax is due, and no return need be filed, for gifts between spouses in any amount. Also excluded from the gift tax are amounts paid by a donor to a qualified educational institution for another's tuition, or to a health-care provider for someone's medical services. Gifts to qualified charitable, religious, and educational entities, government agencies, and many organizations with tax-free status are not subject to the gift tax. This article merely introduces the subject of the gifting of property. Estate planning techniques and tax laws are complex. You should always consult with a qualified professional to assist you in such matters.