New Executive Order Targets NIL and College Sports Reform

New Executive Order Targets NIL and College Sports Reform

On July 24, 2025, President Trump issued an executive order aimed at addressing recent legal developments that have changed traditional college sports structures, particularly regarding athlete compensation, transfer rules, and the proliferation of state-level name, image, and likeness (NIL) laws.

The executive order includes six key policy directives:

1. Protection and Expansion of Women’s and Non-Revenue Sports

  • Athletic departments with more than $125 million in revenue are directed to increase scholarship opportunities and maximize roster spots in non-revenue sports compared to the 2024-2025 season.
  • Athletic departments with revenues between $50 million and $125 million must maintain at least the same level of scholarship opportunities and roster spots in non-revenue sports as the previous year.
  • Athletic departments with revenue below $50 million, or without revenue-generating sports, are instructed not to disproportionately reduce opportunities based on a sport’s revenue.

2. Prohibition of Third-Party Pay-for-Play Payments

  • The order states that third-party pay-for-play payments to collegiate athletes are improper and should not be permitted by universities. However, it allows for fair market value compensation for legitimate endorsements and services.

3. Federal Agency Action and Regulatory Enforcement

  • The Secretary of Education, in consultation with other federal agencies, is tasked with developing a plan within 30 days to advance these policies through regulatory, enforcement, and litigation mechanisms. This may include leveraging federal funding, enforcing Title IX, and addressing unconstitutional state actions affecting interstate commerce.

4. Clarification of Student-Athlete Status

  • The Secretary of Labor and the National Labor Relations Board are directed to clarify the employment status of collegiate athletes, with the goal of maximizing educational benefits and opportunities.

5. Legal Protections for College Athletics

  • The Attorney General and the Federal Trade Commission are instructed to review and revise litigation positions and policies to help preserve the long-term availability of collegiate athletic scholarships and participation opportunities, particularly when challenged under antitrust or other legal frameworks.

6. Support for U.S. Olympic Development

  • The order calls for consultation with the United States Olympic and Paralympic Committee to safeguard the role of collegiate athletics in developing athletes for international competition.

Impact and Outlook

It remains unclear how much practical change the executive order will bring to college athletics since it does not create enforceable rights for private parties. Key terms such as “fair market value” or “student-athlete status” remain undefined. Many open questions are likely to be addressed through subsequent agency action.  

Interested parties should monitor developments across federal agencies in response to the executive order. However, lasting changes to the college sports regulatory landscape will likely require congressional legislation.

The college athletics environment continues to evolve rapidly. For questions or guidance, contact Varnum’s NIL Practice Team to ensure compliance with applicable rules and regulations.

Legal Documents Your Child Needs When They Turn 18

Legal Documents Your Child Needs When They Turn 18

When a child turns 18, they’re legally considered an adult, which means parents no longer have automatic access to their medical information. Even if a parent or guardian has been managing their child’s health care for years, privacy laws like HIPAA (Health Insurance Portability and Accountability Act) prevent providers from sharing details without the child’s consent.

Without the proper legal documents in place, parents may find themselves unable to access crucial medical information or make decisions during an emergency. To avoid this, it is essential for young adult children to complete a few key forms as soon as possible after they turn 18, including a Patient Advocate Designation, HIPAA Medical Authorization, and Financial Power of Attorney.

Why Are These Legal Documents Critical for Adult Children?

1. Patient Advocate Designation and Living Will

This legal document appoints someone, often a parent, to make medical decisions on behalf of the child if they’re unable to do so themselves, such as during a medical emergency. The living will section allows the individual to express their preferences regarding end-of-life care, alleviating uncertainty and emotional burden for family members during difficult times.

2. HIPAA Medical Authorization

This authorization allows healthcare providers to share the child’s medical information with you, the parent, without violating privacy laws. Often combined with the Patient Advocate Designation, it ensures that you have the necessary information to make informed medical decisions.

3. Financial Power of Attorney

This document authorizes you to manage your child’s affairs, including paying bills and managing student loans, in the event they become incapacitated.

Consequences of Not Having Important Planning Documents

Without a Patient Advocate Designation, HIPAA Medical Authorization, and Financial Power of Attorney, parents must petition the probate court to become a legal guardian or conservator. This process is often costly, time-consuming, and can delay critical medical or financial decisions during emergencies.

Protecting Your Young Adult Child

Whether your child is preparing to leave for college or turning 18 at home, now is the time to implement these essential legal protections. Proper planning safeguards your child’s interests and prevents unnecessary legal complications for your family.

For additional information or assistance with patient advocate designations, HIPAA authorizations, and power of attorney documents, please contact your Varnum attorney or a member of our Estate Planning Practice Team.

This advisory was originally published on August 27, 2019, and republished on August 29, 2022. 

Understanding Surrogacy Compensation Under Michigan’s New Law

Understanding Surrogacy Compensation Under Michigan’s New Law

On April 2, 2025, the Assisted Reproduction and Surrogacy Parentage Act (ARSPA) went into effect, making Michigan the final state to lift its criminal ban on compensated surrogacy. This landmark law allows intended parents and surrogates to enter legally enforceable agreements that include compensation, free from criminal penalties. It also establishes a clear process for securing judgments of parentage, aligning Michigan with modern family-building practices across the United States. This advisory provides an overview of the typical compensation practices and related financial considerations found in Michigan surrogacy agreements under the new law.

Base Compensation

One of the key elements in a surrogacy agreement is base compensation, which is negotiated between the parties and paid to the surrogate for her time, commitment, and willingness to undertake the medical and emotional responsibilities of pregnancy. This typically begins after a pregnancy is confirmed by ultrasound and continues monthly until delivery.

In most agreements, a portion of the base compensation becomes fully vested after a specific stage of pregnancy, ensuring fairness in the event of a loss or premature delivery. The amount varies and is influenced by factors such as prior surrogacy experience, region, and whether an agency is involved.

Reimbursable Expenses

In addition to base compensation, most agreements reimburse surrogates for out-of-pocket expenses. Michigan law requires reimbursement only for the surrogate’s independent legal counsel. However, it is common for intended parents to also cover a range of pregnancy-related costs, consistent with established surrogacy practices and the goal of minimizing the surrogate’s financial burden.

Typical reimbursements include health insurance premiums and accidental death coverage, often secured by the intended parents. Many agreements also include monthly allowances for expenses, including transportation, over-the-counter medications, and pregnancy supplies. Maternity clothing and travel for medical appointments, especially over long distances, are also usually covered. If a physician orders bed rest or other restrictions, agreements often include additional support for childcare or housekeeping.

Medical Procedures or Complications

Most agreements include compensation for certain medical events or procedures. This can cover cesarean delivery, selective reduction, surgical procedures related to miscarriage, and other complications. If long-term consequences arise, such as loss of reproductive organs, additional compensation may be provided.

Escrow and Payment Management

While the law does not require escrow, using a licensed escrow agent is widely considered best practice. Escrow ensures payments are timely, documented, and managed to protect all parties.

Typically, intended parents deposit funds at the outset, and the escrow agent disburses them based on a written schedule. Most agreements require maintaining a minimum balance throughout the pregnancy and shortly after delivery.

Tax Considerations

Surrogates should be aware of potential tax implications. Although the Internal Revenue Service (IRS) has not issued formal guidance, compensation is generally presumed to be taxable. The taxability of payments may depend on their nature and how they are structured. Both surrogates and intended parents are encouraged to consult with qualified tax professionals.

Final Considerations

In conclusion, Michigan’s new surrogacy law brings long-awaited legal clarity to compensated surrogacy. Whether parties work with an agency or independently, the law requires separate Michigan-licensed legal counsel for both intended parents and surrogates. This ensures independent advice and informed decision making. Understanding the compensation terms in surrogacy agreements is an important part of that process.

For questions about the legal aspects of surrogacy, including contract negotiation and parentage, contact Varnum’s Family Law Practice Team. For tax-related questions, reach out to our Tax Planning, Compliance, and Litigation Practice Team.

Equity Compensation for Startups and Early-Stage Employees

Equity Compensation for Startups and Early-Stage Employees

As the startup sector grows increasingly more competitive, equity compensation has become a vital tool for attracting and retaining top talent. Rather than relying solely on cash salaries, early-stage companies often offer equity to align employee incentives with long-term company success. While equity can provide significant upside for both employers and employees, it also introduces important legal, financial, and tax considerations.

What is Equity Compensation?

Equity compensation is a form of non-cash payment that grants employees partial ownership in a company. Startups often provide equity in place of, or in addition to, a traditional salary.

Common Types of Equity Compensation Offered

Understanding the different forms of equity compensation is key for both startups and employees to maximize the benefits and manage risk.

Restricted Stock Awards (RSAs)

RSAs are shares granted to employees, typically subject to a vesting schedule. Employees own the shares upon grant, but they may face tax obligations when the shares vest and again when they are sold.

Stock Options

Stock options give employees the right to purchase company shares at a set price after meeting vesting conditions. There are two main types:

  • Incentive Stock Options (ISOs): Offered only to employees, ISOs may qualify for favorable capital gains tax treatment if holding requirements are met. However, the alternative minimum tax may apply at the time of exercise.
  • Non-Qualified Stock Options (NSOs): NSOs are available to both employees and contractors. They are more flexible but lack tax advantages. NSOs are taxed at exercise and again when the stock is sold.

Why Startups Offer Equity

Startups often operate with limited cash flow. Equity compensation allows the company to attract and retain talent without heavy upfront salary costs. It also helps align employee and company goals.

Benefits of Equity Compensation

For startups, equity fosters a culture of ownership. Employees with a personal stake in the business are often more motivated and invested. Equity also strengthens retention when paired with a vesting schedule.

For employees, equity compensation offers the chance for substantial financial gain if the company grows in value. Favorable tax treatment may also reduce liabilities. In some cases, vested equity includes voting rights, giving employees a greater voice in company matters.

Drawbacks of Equity Compensation

For startups, managing equity plans can be complex and time-consuming. Legal and administrative costs, equity pool dilutions, and reporting requirements can pose challenges.

For startups concerned about the drawbacks of equity compensation, one increasingly common alternative is equity-based compensation. Equity-based compensation still provides incentive by linking compensation to the value (or increase in value) of the company without the issuance of actual ownership. This avoids the multistep process and purchase obligation for options, as well as preventing the creation of more shareholders that can complicate your cap table and dilute ownership for the founders.

For employees, equity does not guarantee financial gain. Shares may become worthless if the company underperforms or fails. Tax obligations can arise at various stages, when shares are granted, exercised, or sold, depending on the equity type. And because equity typically vests over time, employees may need to stay with the company for years to realize full benefits.

Creating a Strong Equity Compensation Plan

A strong equity plan should include:

  • Clear vesting schedules to support retention.
  • Employee education about equity types, tax implications, and exercise timelines.
  • Ongoing compliance with legal and tax requirements.

Equity compensation offers meaningful advantages, but it brings legal and tax complexity. Startups should work closely with legal and tax professionals to create tailored equity plans that align with business goals and protect all parties. 

For help designing or reviewing an equity compensation plan, contact Varnum’s Startup Practice Team.

Key Estate and Tax Planning Changes in New H.R. 1 Bill

Key Estate and Tax Planning Changes in New H.R. 1 Bill

On Friday, July 4, 2025, President Donald Trump signed into law the budget reconciliation bill H.R. 1 (the Act), formerly known as the “One Big Beautiful Bill Act.” The legislation extends several expiring provisions of the Tax Cuts and Jobs Act (TCJA) and makes changes to the federal tax code that will impact estate and tax planning strategies for high-net-worth individuals, families, and business owners. Below are five of the key provisions relevant to wealth and tax planning:

Estate, Gift, and Generation-Skipping Transfer Tax Exemptions Increased

The Act eliminates the scheduled sunset of the current $13.99 million federal transfer tax exemption set to expire December 31, 2025. Instead, it permanently raises the federal lifetime exemption to $15 million for single filers (or $30 million combined for a married couple), effective January 1, 2026, and indexed annually for inflation thereafter.

Federal Income Tax Rates Made Permanent

The current personal income tax laws, including lower rates, higher standard deductions, and expanded income brackets, have been made permanent. The top marginal rate will stay at 37% in 2026 instead of reverting to 39%, as previously scheduled under the TCJA.

Qualified Business Income Deduction Extended

The Act makes permanent the 20% federal deduction of qualified business income (QBI) for qualifying business owners of pass-through entities, including S corporations, partnerships, and sole proprietorships, and some trusts. Phase-in thresholds are $75,000 for single filers and $150,000 for joint filers. The Act also introduces a minimum $400 deduction, indexed for inflation, for taxpayers with at least $1,000 in QBI. 

Charitable Giving Deduction Changes

For non-itemizing taxpayers, the deduction for qualified charitable donations increases to $1,000 for individuals and $2,000 for those filing jointly. Itemizing taxpayers can deduct donations only to the extent they exceed 0.5% of the filer’s contribution base. Carryovers are only permitted if this 0.5% threshold is met. The deduction limit for cash contributions to qualified charities rises from 50% to 60% of adjusted gross income (AGI).

State and Local Tax (SALT) Deduction Cap Raised Temporarily

The Act raises the SALT deduction limit to $40,000 per household, with a 1% annual increase, for tax years 2025 through 2029. A phase-down applies for individuals with a modified AGI above $500,000, with a minimum deduction of $10,000. Beginning in the 2030 tax year, the cap will revert to $10,000 for all taxpayers.

Take Advantage of Better Certainty for Long-term Planning

These changes create an opportunity to review and update your estate plan to ensure alignment with your long-term goals. For guidance on how the new law may affect your situation, contact a member of Varnum’s Estate Planning Practice Team.

Delaware Overhauls DBA Registration Process with HB 40

Delaware Overhauls DBA Registration Process with HB 40

Delaware recently enacted House Bill 40, which significantly restructures the registration process for “doing business as” (DBA) trade names in the state. The new law, which takes effect February 2, 2026, centralizes and streamlines DBA filings, introduces electronic registration, and imposes new requirements for both existing and new DBAs.

Businesses operating in or registering as a DBA in Delaware should begin preparing now to ensure continued compliance.

Centralized, Statewide Filing System

Previously, businesses were required to file DBA registrations in each of Delaware’s three counties. HB 40 eliminates this approach, replacing it with a centralized filing system administered by the Delaware Division of Revenue. This change is expected to simplify the process and reduce administrative burdens.

Electronic Filing and Elimination of Notarization

Under the new system, all DBA applications must be submitted electronically through the Division of Revenue’s online portal. The new law also eliminates the requirement for notarization, further streamlining the process.

Re-Registration Requirement for Existing DBAs

A critical aspect of HB 40 is the requirement that all existing DBAs in Delaware must re-register their trade names with the Division of Revenue. Failure to do so may result in the loss of rights to use the assumed name. Businesses should start preparing for this change ahead of the 2026 effective date.

Requirements for New DBA Registrations

Entities conducting business in Delaware must have an active Delaware business license to register for a DBA. Additionally, all trade names must be unique as duplicate or confusingly similar names will not be permitted.

Entities not conducting business in Delaware but wishing to register a DBA must obtain a special trade name license from the Division of Revenue. This license requires a $25 annual fee and must be renewed each year.

Next Steps for Businesses

  1. Review Existing DBAs: Identify all trade names currently registered in Delaware and prepare to re-register them electronically with the Division of Revenue before the February 2, 2026, deadline.
  2. Update Business Licenses: Ensure all licenses are active and in good standing before re-registration begins.
  3. Check Name Availability: Confirm that desired trade names are unique and meet the new standards.

If you have questions about how these changes may impact your business or need assistance navigating the new DBA registration process, contact your Varnum attorney or a member of our Corporate Practice Team.

2025 summer associate Benjamin Riley contributed to this advisory. Ben is currently a law student at Wake Forest University School of Law.

The Importance of Service Agreements

Mitigating Risk in TPA Agreements Under ERISA

Most employee benefit plans are administered by third-party administrators (TPAs) under the terms of signed service agreements. While the plan sponsor is generally the legal “plan administrator,” many administrative functions can be delegated to the TPA through these agreements. As benefit structures and related litigation grow more complex, the specific terms of service agreements have become increasingly important. Now is a good time to review potential risks.

The Employee Retirement Income Security Act (ERISA) imposes fiduciary duties on plan sponsors that affect certain aspects of TPA service agreements. For example, agreements must be in writing, the fees charged must be reasonable considering the services provided, and those services must be necessary for plan administration.

Whether entering into a new agreement, renewing a TPA relationship, or reviewing existing terms, here are some key points to consider:

Who is the TPA, and what services do they provide?

It is essential to clearly define the scope of services and fees, including how fees are paid and to whom. This transparency helps plan administrators meet their fiduciary duties and improves efficiency by clarifying contacts and avoiding duplication when multiple service providers are involved.

What is in the indemnification and limitations of liability provisions?

Indemnification clauses protect both the plan sponsor and the service provider. Indemnification generally means one party agrees to cover certain losses or damages incurred by the other. Plan sponsors typically seek broad indemnification from the provider and minimal limits on the provider’s liability. Service providers often seek to limit liability, for instance, to 12 months of fees. These provisions should clearly define what is covered, what is excluded, and the limits (if any) on liability. Sponsors should also consider insurance or separate indemnification to protect against liability arising from a provider’s actions, especially where the provider has limited fiduciary obligations.  

What is the duration of the agreement, and how can it be terminated?

ERISA requires that agreements either have a defined term or include a termination clause allowing for reasonable notice.

What happens if the TPA makes an error?

Service agreements should address how errors are handled. It should clearly outline who is responsible for identifying and correcting mistakes, sending required notices, and covering any related costs. These obligations may intersect with indemnification terms.

Does the service agreement address data privacy and HIPAA compliance?

Benefit plans involve sensitive personal data. Service agreements should include strong provisions to ensure data protection and compliance with HIPAA and other applicable privacy standards. As with other fiduciary obligations, documentation is key.

Are agreements regularly reviewed?

Plan administrators have a fiduciary duty to monitor both their service providers and the activities performed under the agreements. It is best practice to review these relationships every two to three years. While not required, many sponsors use request-for-proposal (RFP) processes or detailed performance reviews to assess fees, service levels, and compliance with fiduciary duties.

Regular reviews of key relationships, including with recordkeepers, investment advisers, and welfare benefit administrators, can help ensure compliance, minimize risk and financial exposure, and improve the value of services received.

For assistance reviewing your service agreements, contact a member of Varnum’s Employee Benefits Team.

Understanding the Role of Insurance Agents Under Michigan Law

Understanding the Role of Insurance Agents Under Michigan Law

Many businesses and individuals consider their insurance agent a trusted advisor who will proactively ensure adequate coverage. But when an insurance claim is denied or doesn’t result in the expected payout, policyholders may be surprised to learn that Michigan law does not impose a general legal duty on insurance agents to advise clients on the adequacy or suitability of coverage.

In most situations, insurance agents are only responsible for securing the specific coverage requested by the client. They can be held liable for inadequate or inaccurate coverage recommendations only in limited and specific circumstances.

The General Rule: No Duty to Advise

Under longstanding Michigan law, insurance agents and brokers are generally considered facilitators of coverage, not legal or financial advisors. As outlined by the Michigan Supreme Court in Harts v. Farmers Insurance Exchange, 461 Mich. 1 (1999), an agent’s primary legal obligation is to obtain the insurance coverage requested by the client. They are not required to assess whether the coverage is appropriate for the client’s situation or to suggest additional protections.

The Exception: Special Relationships

There are exceptions to this rule. A heightened legal duty may apply if a “special relationship” exists between the agent and the insured. Whether such a relationship has been established is typically a question of fact for a jury.

Michigan courts have identified several nonexclusive factors that may support the existence of a special relationship. In Harts, the court outlined that an agent’s duty may expand in situations such as:

  1. The agent misrepresents the nature or extent of the coverage offered or provided.
  2. An ambiguous request is made that requires clarification.
  3. An inquiry is made that may require advice, and the agent, though not obligated, gives inaccurate advice.
  4. The agent assumes an additional duty through express agreement or a specific promise to the insured.

When a special relationship is found, the agent has a duty to advise and may be held legally responsible for failing to fulfill that duty. See, for example, Zaremba Equipment, Inc. v. Harco National Insurance Co., 280 Mich. App. 16, 28 (2008). However, the burden falls on the insured to prove that such a relationship existed.

Practical Tips for Policyholders

Although most insurance agents strive to provide excellent service and guidance, it’s important for policyholders to understand the legal framework and take steps to protect themselves. Here are a few practical tips:

  1. Be specific. If you need assurance that your policy meets particular needs, ask your agent or broker directly and get confirmation in writing. The more specific your request, the more likely the agent’s response will carry legal significance.
  2. Keep good records. Document conversations and correspondence, especially when coverage recommendations or assessments are involved.
  3. Review your policy. Even if a special relationship exists, policyholders still have a duty to review and understand their policy. Courts have held that an unreasonable failure to read the policy can weaken or defeat a claim for negligent advice.

Ultimately, Michigan courts are reluctant to impose liability on insurance professionals beyond their traditional role. While many clients naturally view their agent as an advisor, the law may not always treat them that way.

To strengthen your position and ensure clarity in your insurance arrangements, be proactive: ask questions, get answers in writing, and review your policy carefully. These steps can help demonstrate that your agent acted in an advisory capacity, if needed.

For questions about how you may be impacted, contact your Varnum insurance attorney.