BLAW 2 FINAL

LtC: Civil fraud (actual or constructive)

Accountants are liable for fraud if: - a false statement of fact is made - they know it is not true or recklessly disregard the truth, and - the client justifiably relies on the statement - the client is damaged - ex: doctoring a clients books ***PUNITIVE DAMAGES ARE AVAILABLE***

adverse possession

To gain ownership of land in New York by adverse possession, the user must prove: - Entry and exclusive possession - Open and notorious possession - A claim adverse to the owner; and - Continuous possession for statutory period - 10 years. - "Reasonable basis for the belief that the property belongs to the adverse possessor" (added in '08) - Erecting fences, growing hedges, mowing lawns not enough to establish a claim in New York (added in '08) *like squatters*

When is the first time someone is serious about getting a will or doing estate planning?

When they have/or are expecting a child

real property

land, buildings, subsurface rights, air rights, plant life (only if sold with land), fixtures (objects considered permanent parts of the property)

commercial leases - triple net leases

tenant pays rent, property tax, insurance, maintenance. (often used for free standing buildings)

Tenant's duties - duty to pay rent

tenant's foremost obligation

common commercial lease provisions

term, termination rights, use, renewal options, expansion rights, base of fixed rent, security deposit, tax payments, operating expenses, electricity, broker commission, assignment and subleasing, guarantees, utilities and services, tenants/LL work, compliance laws, end of term, signage, subordination and non-discrimination

probate duties

testator dies, the executor takes over. The executor must: -Admit the will to probate. -Send notices. -Gather assets. -Manage assets. -Pay debts and expenses. -Pay taxes and file estate tax returns. -Distribute assets.

PMSI is perfected without filing if

the PMSI is used personal pleasure (ex: aquarium at home - PMSI vs aquarium in restaurant - not a PMSI)

commercial leases - percentage lease

tenant pays rent and property of revenue (retail)

quit claim deeds

- No covenants - Grantor simply says "whatever title I have, I transfer to Grantee;" - Used between family members, among corporate affiliates, and to clear up title by having someone who might have an interest convey it.

When Michelle buys a laptop, she pays an extra fee so that the computer arrives at her door with the latest version of Microsoft Word pre-installed. Under Article 9, the word processing program is considered: (a) "goods" (b) "services" (c) "software" (d) none of the above

(a) "goods"

Gateway sold a big-screen TV and entertainment center to Iris for $2000 on credit. Iris signed a promissory note and gave Gateway a security interest in the TV and entertainment center. Gateway filed a financing statement in the appropriate public office. When Iris defaulted on her monthly payments owing a balance of $1780, Gateway's attorney made arrangements to have the TV and entertainment center repossessed. The attorney then placed classified ads in the local newspaper to sell the goods. The attorney's fees are $300, the repo company charged $150, and the advertising costs are $50. (A) If Iris chooses to redeem the property, how much must she pay to Gateway to recover the property? (B) If Iris does not redeem and the TV and entertainment center are sold for $1750, how will the money be disbursed?

(a) all amounts owed = $2280 (b) attorney, repo, ads, deficiency to creditor

Alpha perfects its security interest by properly filing a financing statement on January 1, 2010. Alpha files a continuation statement on September 1, 2014. It files another continuation statement on September 1, 2018. When will Alpha's financing statement expire? (a) January 1, 2015 (b) September 1, 2019 (c) September 1, 2023 (d) Never

(b) September 1, 2019

Under the UCC Secured Transactions Article, which of the following actions will best perfect a security interest in a negotiable instrument against any other party? (a) Filing a security agreement (b) Taking possession of the instrument (c) Perfecting by attachment (d) Obtaining a duly executed financing statement

(b) Taking possession of the instrument

Under the UCC, Article 9, perfection of a security interest by a creditor provides added protection against other parties in the event the debtor does not pay its debts. Which of the following parties is not affected by perfection of a security interest? (a) Other prospective creditors of the debtor (b) The trustee in a bankruptcy case (c) A buyer in ordinary course of business (d) A subsequent personal injury judgment creditor

(c) A buyer in the ordinary course of business

Mars, Inc., manufactures and sells VCRs on credit directly to wholesalers, retailers, and consumers. Mars can perfect its security interest in the VCRs it sells without having to file a financing statement or take possession of the VCRs if the sale is made to which of the following: (a) Retailers (b) Wholesalers that sell to distributors for resale (c) Consumers (d) Wholesalers that sell to buyers in ordinary course of business

(c) Consumers

UCC-1 duration

- 5 years with unlimited 5 year renewals - renewal must be within 6 months prior to expiration

Securities Exchange Act of 1933, Section 11

- Adutor liability: for any material misstatement or omission in the audited financial statements that they prepare for a Registration Statement - registration statement: required disclosure that a company must make before offering securities for sale (must include audited financial statements) - plaintiff's' proof: registration statement contained a material misstatement or omission AND the investor lost money (don't need to prove that the error cause the loss) - due diligence: Auditors can avoid liability by showing they made a reasonable investigation, and had reasonable grounds to believe there were no material misstatements or omissions.

C13: Discharge

- Binding: to all creditors once confirmed - timing of discharge: debts are not permanently discharged until the debtor fully complies with the plan (but debtor is free of all other debts (pre-petition) not in plan) - changed circumstances: if changes, debtor/creditor/trustee can ask court to change plan - scope of discharge: debts that can't be discharged in C7 liquidation can't be discharged after a C13 reorginization

Automobile Insurance

- Collision: pays to repair or replace a car damaged in an accident. - Comprehensive: covers fire, theft and vandalism. - Liability: covers harm to other people or other property (usually required). - Uninsured/Underinsured Motorist: covers the insured and all passengers who are injured by another driver who does not have insurance, or enough insurance.

C11: plan of reorganization

- DIP has 120 days to create - acceptable to the creditors' committee - creditors accept only if plan will be better for them than liquidation - if plan is rejected by creditors, they or the shareholders may submit alternative plans to the court

Goods moved out of state

- Debtor moves - Secured party has 4 months to re-file - Goods to party in different state- Secured party has 1 year to re-file

C11: Confirmation hearing

- Does a majority of every class of creditor approve the plan? - Is the plan approved by holders of 2/3 of the debt in each class?

lost/mislaid property

- NYS mislaid property is always considered "lost property" - abandoned & treasure trove are claimed to be "lost property" - finders who were trespassing do not have rights

dynasty trusts

- Private Trust not subject to Rules Against Perpetuities. - never has to end - Not allowed in NYS

Critical Audit Matters (CAMs)

- SEC Released 10/23/2017 - Effective FY ending on or after 6/30/2019 or 12/15/2020 - requires auditor communication of CAMs - this requirement can increase litigation/liability risk

duty when finding property

- Under $20 Value: reasonable effort to find owner, you have title after one year - $20 or More Value: within 10 days of finding it, either return it to owner or deposit it with the police. police hold for stated period then it is the finders

C11: Effect of Plan Approval

- a confirmed plan binds the DIP, creditors and shareholders - typical plans gives some current assets to creditors and promises to pay them a portion of future earnings - DIP owns assets in bankrupt estate, free of all obligations except of those listed on the plan - obligations usually include repayment of debt

land use regulation - nuisance

- a nuisance is an unprivileged interface with a the use and enjoyment of property - intentional conduct substantially and interferes with another's use and enjoyment

General: Voidable Preferences

- a transfer of money or property right before filing bankruptcy - trustees can void a transfer

LtC: Breach of fiduciary duty

- accountants in audit roles are NOT fiduciaries - because fiduciary must act in trustworthiness to benefit the other party and put the other party interest first - accountants are considered fiduciaries when they preform: consulting, tax services, asset management, investing advisory services

tenant's duties - landlord's remedies fir nonpayment

- apply security deposit to rent - sue tenant for non-payment - evict tenant

c7: no discharge:

- businesses must cease operation - dishonesty or bad faith - revocation within one year if debtor committed fraud or concealment of assets

General: Transfer to insiders

- can also be voided by trustee if made within one year of filing - Insiders: family, officers and directors of corporations, and partners

accountant client relationship

- challenge: balancing responsiveness and a client-focused practice with ethical and legal obligations - stock ownership: SEC prohibits accountants form owning stock in their firm's audit clients - good practices: adding value through education and proactive information (studying clients industry & interpersonal contact)

bargain and sale deed with covenant

- common in downstate NY - Grantor impliedly states she has title; - Grantor covenants she's done nothing to encumber property; - These deeds are coupled with title insurance.

warranty deed

- common in upstate NY - Covenant of Seizen (ownership and right to convey) - Covenant Against Encumbrances (no liens or encumberances, except as stated in the deed) - Covenant of Quiet Enjoyment (Grantor guarantees the title is good and will defend it against any challenges.) - Covenant of Further Assurance (Grantor will obtain and deliver any other instrument needed to make the title good.) - Covenant of Warranty Forever (Grantor will be liable if title fails in the future.)

C11: confirmation the plan

- confirmation hearing is held to determine whether the plan should be accepted - court will usually approve a plan if a majority of each class of creditors votes in favor of it

Sarbanes-Oxley Act of 2002

- conflicts of interest: an accounting firm cannot audit a company whose officer has worked for the firm in the past year - term limits on audit partners: lead audit partner cannot work for a client for more than 5 years - consolidation of accounting profession: fewer but bigger accounting firms - auditors must communicate regularly with audit committees of their clients - consulting services: accounting firms that audit public companies cannot provide consulting services to their audit clients on topics (bookkeeping, financial information systems, human resources, and legal issues (unrelated to the audit)) - PCAOB

default triggers

- debtor fails to make payment when due - debtor enters bankruptcy - occurrence of an event of default

Insurance contract

- elements: same as any other contract - offer & acceptance: -- Offer made by delivering an application and a premium to the insurer. --Accepted by oral notice, by written notice, or by delivery of the policy. --Also be accepted by issuance of a written binder, which is a temporary acceptance.

Insurable interest

- financial stake in the policy's subject - required for a policy to be valid - must exist at the time of the loss - can't exceed the amount of the exposure

Joint and several liability under '34 act

- for knowing violations by accountants - accountant can be liable for the entire thing

proportionate liability under '34 act

- for other violations - only liable for portion of what you did (not entire thing

authenticating a security agreement

- form needs to be written, signed, or recorded - content needs to identify parties, the deal, describe the collateral, grant security interest, specify duties, provide rights if there is a default

Gifts in consideration of marriage

- heart balm statues (most states and NY) - Return of Ring and Gifts: in NY if an engagement ends, all gifts made in consideration of marriage must be returned, regardless of fault. - Exception: if one party was legally incapable of getting married.

New York's Roommate Law

- if one tenant signs a lease, he or she can have one other adult living in the apartment, plus that adult's dependent children - you shoaled notify your landlord within 30 days - this applies even if the lease forbids it

Property Not Transferred by Will

- joint property - property in a trust - retirement benefits - life insurance

C13: plan of payment

- must be submitted to debtor within 15 days after filing petition - plan must be feasible, not extend beyond 3 to 5 years, & show debtors good faith and reasonable efforts to pay obligations - If the plan does not pay the debts in full, it must allocate all of debtor's disposable income for the next five years to creditors. - debtor pays trustee who pays creditors

C13: Student loans

- not dischargeable under C13 - automatic stay suspension efforts - payments may be reduced or suspended in 3-5 year plan but interest still accuses and full payment is still due

c7: discharge

- once estate is diluted debts are discharged - financial management course must be completed before discharge - bar to discharge: some things will prevent discharge (multiple filings, dishonesty)

renters insurance

- only 40% or renters have it - should have it to protect yourself

Sarbanes-Oxley Act of 2002; additional information

- prohibits destruction of material that would be used on an investigation - mainly tangible objects of DOCUMENTS or RECORDS - ex: files threaded/ burned/ photos/ hard drives

Community Property

- recognized in 9 states - brought by French and Spanish - property brought into marriage or inherited by a single spouse is remained individually owned (separate property) - income or assets earned during the marriage is community property (equally shared) - a spouse cannot convey it without the other's consent

community property

- recognized in 9 states (not NYS) - property brought to the marriage or inherited by one spouse may remain individually owned (separate property) - income or assets earned during the marriage is community property (must be equally shared) - spruce cannot convey it without other's consent

Tenancy by the Entirety

- recognized in NYS and more than half the others - Husband and wife each own the entire property, and they both have a right of survivorship. Ends automatically with divorce. - Neither can sell his or her interest without the other doing so too. - The property cannot be seized by a creditor of just one spouse. - If one spouse is bankrupt the property cannot be taken

Durable Power of Attorney in NYS

- requires signatures by: principal & agent - additional requirements: If agent will have the power to make total annual gifts of more than $500 to a person or charity, then this provision must be in a separate rider and two witnesses must also sign.

Changing a will

- revocation: testator can generally revoke or alter a will at any time prior to death - Automatic Revocation for Divorce: NYS divorce automatically revokes a disposition to the former spouse, unless the will provides otherwise - Amendment: A will is amended by a *Codicil* must meet all the requirements of a will (signature, witnesses, act.)

2019 Tenant Protections in NYS

- security deposits capped at 1 month - late fee limit $50 - credit/background check fee $20 - LL must mitigate - new eviction protections - 14 day "rent demand" - security deposit back within 14 days

Practice Entity structures allowed in NYS

- single owner firm: may form as a Professional Limited Liability Company (LLC), a Professional services corp. (PC), or a sole proprietorship - multiple owner firm: may form as a partnership, LLC, PC, or professional limited liability partnership (LLP)

seller's remedies after default

- take possession of the collateral - sue for the amount owed

LtC: Negligence / Malpractice

- the accountant breached a duty to the client by failing to exercise the degree of skill & competence that an ORDINARY PRUDENT ACCOUNTANT would under the circumstances - violation of duty caused harm to the client

General: Reaffirmation

- the debtor promises to pay debt even after discharge - if reaffirmation is taken the debtor MUST pay back the debt IN FULL

injuries - landlord's liability

- the landlord is generally liable for injuries occurring in common areas (such as a sidewalk) where the tenant has no control - common law holds landlords liable for latent defects and negligent repairs - landlord can sometimes be held liable for a crime committed on the property

Why are accountants good targets for liability?

- they have money even if the company is in a bad position - they have assets and malpractice insurance

commercial leases - single net leases

tenant pays rent and property tax

c7: debts that cannot be discharged

-Income taxes and property taxes - Money obtained fraudulently or illegally - Some loans for luxury goods -Recent cash advances on credit cards - Alimony and child support debt - Fines and penalties - Most student loans

3 elements of a gift

-The donor intends to immediately transferownership of the property to the donee. -The donor delivers the property to the donee. -The donee accepts the property.

exceptions to priority rules

1. BIOC 2. some buyers of consumer goods 3. some PMSI

Trust advantages

1. Control - trust document can specify how the money is to be used. 2. Children - protect children's assets. 3. Tax Savings - minimize estate taxes. 4. Privacy - trust documents are not available to the public; probated wills are. 5. Accessibility - trusts do not have to go through probate, so heirs have quicker access to pre-existing trust funds.

terminal illness

1. Discontinuing Treatment - The Supreme Court ruled that family members can choose to discontinue treatment for an incompetent person if there is evidence the patient would have made that choice herself. 2. the administration of a lethal substance or prescription of a fatal dose of drugs by a physician, is illegal in almost every state.

No fault auto coverage

1. First Party Benefits: NY insureds look first to their own insurance carriers in auto accidents 2. Basic Economic Loss: Up to $50,000 for: - medical bills - percentage of lost income - other expenses 3. Lawsuits: for serious physical injury or damages > $50K

disposing of collateral

1. Give Debtor reasonable notice and details of the sale; 2. Give Debtor a chance to buy the collateral back at the sale; 3. Sell the collateral; 4. Apply proceeds first to Creditor's repo and sale costs; 5. Apply the balance to the amount due on the loan;

Inheriting Virtual Property

1. Kindle and iTunes - not inheritable. Deceased had only a license. 2. Facebook/Instagram - No one other than the deceased can access. Can end or memorialize. Can designate a Legacy Contact. 3. Twitter - No one other than the deceased can access. Twitter will deactivate. 4. Google - Can transfer Gmail, Google Plus, Picasa, YouTube 5. New York and ~ 20 other states have adopted the *Revised Uniform Fiduciary Access to Digital Assets Act (2016)*

Trust requirements to create

1. Legal capacity - legal age and sound mind 2. Trustee - must appoint trustee, but it can be you 3. Beneficiary - must specify (either by name or by class - "all living children of...") 4. Trust Property - must transfer specific assets to the trust, though amount may be small and added to later

NYS Minimum Insurance required

1. Liability: - personal injury$25k/$50k - death$50k/$100k - property damage$10k 2. No fault insurance: $50k 3. uninsured motorist: $25k/$50k

Found property

1. Primary principle: return to the owner, if possible. 2. Second principle: reward the finder, if no owner. 3. Third principle: escheat of certain property to state.

priority collection rules under the UCC

1. Secured creditors collect before unsecured creditors; 2. Perfected security interests beat unperfected ones; 3. Between two unperfected security interests, first to attach (take collateral & sign security agreement) wins; 4. Between two perfected security interests, first to perfect wins; 5. Sometimes perfected PMSIs beat interests perfected earlier.

Limited liability

1. Sole Proprietors: personal and business assets at risk 2. Partnerships: personal and business assets of all partners at risk 3. LLPs, LLCs and PCs: business assets are at risk BUT: personal assets of negligent accountants are always at risk

life insurance

1. Term Insurance - simple, cheap; covers a particular time period 2. Whole Life Insurance (straight life) - more expensive, but "forces policyholder to save"; part of premium goes into savings, giving the policy cash value. Questionable as an investment. 3. Universal Life - a hybrid of term and whole life; premiums may be adjusted some.

c7: priority claims subcategories (7)

1. alimony and child support 2. administrative expenses (fees to trustee, lawyers, and accountants) 3. gap expenses - (expenses incurred in the ordinary course of business during the period between the filing of an involuntary petition and the order for relief) 4. payments to employees - (back wages to the debtor's employees for work preformed during the 180 days prior to the date of the petition, limited t0 $10,000 to each employee) 5. Employee Benefit Plans -- what the debtor owes to employee pension, health, or life insurance plans for the 180 days prior to the petition; included in the $10,000 limit above. 6. Consumer Deposits -- any individual who has put down a deposit with the bankrupt for consumer goods will get a refund of up to $2,225. 7. Taxes --income taxes for the three years prior to filing and property taxes for one prior year. 8. Drunk driving damages --the claims of anyone injured by a bankrupt who was driving a vehicle while drunk or on drugs.

shifting burden of proof: bailor to bailee

1. bailor must prove: the existence of a bailment, demand made for return of the goods, and loss or harm to the goods 2. presumption of negligence arises; burden shifts 3. bailee must prove she used adequate care

c7: Brunner Test

1. based on current income/expenses, you can't maintain a minimal standard of living if forced to repay 2. situation unlikely to change for long time 3. good faith repayment effort made

commercial leases - double net leases

tenant pays rent, property tax, insurance

exculpatory clause: professional bailees

1. can't exempt themselves from liability created by their negligence 2. can limit their liability by: bailor must know limitation, limitation must be by contract 3. claim check provisions usually aren't enough 4. signs may be effective if conspicuous enough 5. signed contracts can limit liability

distributing assets

1. choice of beneficiaries: generally testators may leave assets to anyone they want 2. Spouse's elective share: in NYS a spouse is entitled to an "elective share" regardless of the will. (Greater of $50K or 1/3 the estate.) 3. Disinheriting Children. Can be done, but the will should state, "I make no provision for my daughter, name, because ......." (Otherwise, it may be considered a mistake.)

UCC-1 required contents

1. corporation - debtor's exact official name 2. individuals - by last name; NAME ON DRIVERS LICENSE 3. reasonable description of collateral 4. name and address of secured party 5. debtor's signature is NOT required

attachment parts

1. debtor has rights in collateral 2. creditor gives value 3. creditor gets an authenticated security agreement OR possess/controls the collateral

chattel paper purpose

1. documents a security interest 2. allows receiver of paper to put it up as collateral in another transaction

c7: means test

1. does the debtor earn less than the median family income in their state? 2. if it's higher than the median, can debtor afford to pay back $7K over 5 years?

tenant's duties

1. duty to use premises for proper purposes: (New York's Roommate Law) 2. duty not to damage: tenants are liable for any significant damage they cause to the property 3. duty not to disturb other tenants: this includes the duty to not allow animals to disturb or injure other tenants

Inheriting Virtual Property good pratices

1. list & describe all accounts 2. create & encrypt info lists with user names and passwords 3. backup stuff locally 4. Give executor/trustee/attorney clear power over your accounts and authorize service providers to deal with them.

kinds of perfection

1. pledge - possessing the goods 2. control (ex bank accounts) 3. filing a financing statement (UCC-1)

c7: Student loan debt not dischargeable unless:

1. presently unable to repay 2. current financial hardship likely to be long-term

goals of bankruptcy

1. preservation of debtors property 2. division of property between debtor and creditors 3. fair division of property among creditors

c7: payment of claims (who gets paid first)

1. secured claims 2. priority claims 3. unsecured claims

taking possession of collateral

1. without court order: seize collateral w/o breaching the peace or car when it is parked 2. with curt order: if debtor refuses to cooperate then creditor must sue 3. relief from automatic stay: if debtor bankrupt, creditor can ask for relief from the stay

Will: legal requirements

1. written 2. signed (incapable of signing may request a person to sign for them in front of witnesses) 3. witnesses: must have 2 - better to have 3 incase one dies - witnesses must sign a form - witnesses cannot inherit from a will they witnessed

joint tendancy

2 or more people own the property, but when one tenant dies, his interest passes to the surviving joint tenants (right of survivorship)

tenancy in common

2 or more people own the property, ea. w/the right to convey their interests of pass it down to their heirs

c7: individuals with more than __% consumer must pass the __________

50%; means test

accepting collateral

A Creditor may notify debtor that it wants to accept the collateral in full or partial satisfaction. Many rules.

Ernst & Ernst v. Hochfelder

A landmark case in which the U.S. Supreme Court decided that auditors could not be held liable under the Securities Exchange Act of 1934 for ordinary negligence.

Exclusive right to sell contract

A listing that gives the brokerage firm the sole right to sell the property during the term of the agreement

Buyer's Agent

A real estate professional who is under contract to locate property for a buyer and represent the buyer's interests in a transaction.

Trust Termination

A trust ends : -On the date indicated by the grantor. -If revocable, when revoked by the grantor. -When the purpose has been fulfilled. The Rule Against Perpetuities specifies that a trust must end within 21 years after the death of some named person who is alive when the trust is created. -Nearly half the states (but not New York ) now permit dynasty trusts, that never have to end.

c7: Unsecured claim subcategories

All three of these unsecured subcategories have an equal claim and must be paid together. -Secured Claims Above the Value of the Available Collateral. -Priority Claims That Exceed the Priority Limits. -All Other Unsecured Claims

professional liability insurance

American Institute of CPAs offers liability coverage through Aon Insurance, and provides extensive guidance. (many other insurance carriers) - Exclusions include: fraud; intentional acts; illegal acts; personal injury, property damage.

sellers agent

An agent who represents the seller of real property. (sellers interests)

Easement Appurtenant

An easement created to benefit adjacent land. - "runs with the land" and can be resold with land designed for

c7: filing a petition

Any individual, partnership, corporation, or other business organization that lives, conducts business, or owns property in the United States can file a petition under Chapter 7

CAM

Any matter arising from an audit that was communicated or required to be communicated to the auditor and which: - was martial and - involved especially challenging, subjective, or complex auditor judgement

right of redemption

Any time up to the Creditor's disposition the Debtor can redeem by paying off debt and expenses

protections for BIOC

Buyers in the Ordinary Course from sellers routinely dealing in such goods take free of all security interests

What kinds of liability exposure should accountants be concerned about?

CEO, SEC, IRS, shareholders, investors

After a jury ordered actor Kim Basinger to pay $8 million for breaching a movie contract, she filed for bankruptcy protection, claiming $5 million in assets and $11 million in liabilities. Under which chapter should she file? Why?

Chapter 7. She has business related debt.

LtC: AICPA Code of Conduct

Code of conduct requires 1. integrity 2. objectivity 3. no conflicts of interest 4. truthfulness

Umbrella Liability Policy

Coverage that provides extra protection against liability, and excess amount of insurance above the primary policy.

criminal liability

Criminal offenses include: - willful violations of the 1933 or 1934 Acts - wrongdoing in preparation of income tax returns - violations of state securities statutes

Holographic Will

Entirely handwritten and signed by the testator, does not have to be witnessed. -Only available to soldiers during armed conflict, those serving with them, and mariners (in NYS) -In other states, more often recognized

Gift taxes

Federal: -Lifetime Exclusion: $11, 200,000 per Donor - Annual Exclusion: $14,000 per Donor to a Donee - Gifts to US spouse: no limitRate: 40% - Effect on Estate Tax Exemption: gifts reduce the lifetime estate tax exemption also State: NY has no state gift tax, but most gifts made within 3 years prior to death are included in computing the size of the estate for estate tax purposes Example: Mother gives $100,000 to her daughter in 2018 First $14,000 covered by annual exclusion Balance of $86,000 reduces the lifetime exclusion

Trust Administration

Fiduciary Duty - In carrying out the terms of the trust, the trustees have a fiduciary duty to the beneficiary. -Duty of Loyalty: the beneficiary's interests come first. -Duty of Care: trustee must use reasonable care in managing trust assets.

General: fraudulent transfers

Fraudulent if made within a year before a petition is filed and its purpose is to hinder, delay, or defraud creditors.

Aubry purchased a washing machine, a freezer, and a refrigerator from Gateway Appliances on credit, giving Gateway a security interest in the appliances. The appliances were for Aubry's household use. Gateway did not file a financing statement. Six months later, Aubry had a garage sale and sold the appliances to Tam. Tam bought the appliances for her student rental property. Aubry left town owing money on the appliances. If Gateway can trace the appliances to Tam, can Gateway repossess the appliances?

Gateway can repossess the appliances because Tam is using them for business use.

easements

Give the recipient the right to enter land belonging to another and make a limited use of it, without taking anything away

attachment issue: proceeds

If a secured party has interest in collateral, it automatically has interest in proceeds

Securities Exchange Act of 1934, Section 18

Inaccurate Disclosure in a Required Filing: - an auditor who makes a false or misleading statement in a required filing is liable to any buyer or seller of the stock who has acted in reliance on the statement. Defense: Auditor acted in good faith and didn't know the information was misleading Required Filings include: 10-K with audited financial statements, and 10-Q with unaudited ones

Why are PMSIs in consumer goods perfected without filing?

It would be a large burden and a lot of paperwork/records.

Nuncupative Will

Oral will made by a soldiersduring armed conflict, those serving with them and mariners

Accountant-Client Privilege: Kovel Rule

Kovel rule: accountants retained by attorneys may be protected by the attorney-client privilege - accounting must be helping attorney understand the accounting issues by acting as a translator - accountant cannot provide financial services

commercial leases - gross leases

LL pays most property expenses. the "load factor". can contain rent escalator clause (often used in office buildings)

Accountant-Client Privilege: Section 7525

Section 7525, Internal revenue code provided a limited privilege for: - federally authorized tax practitioners - in non-criminal matters - in federal court - but not related to tax shelters

Lt3P: Negligence

NYS approach requires privity to near privity

Mark Milbank built custom furniture in Port Chester, New York. His business was unsuccessful, and he repeatedly borrowed money from his wife and her father. He promised that the loans would enable him to spend more time with his family. Instead, he spent more time in bed with his next-door neighbor. After the divorce, his ex-wife and her father demanded repayment of the loans. When Milbank filed under Chapter 13, his ex-wife and her father asked the court not to discharge Milbank's debts on the grounds that he had acted in bad faith toward them. Should the bankruptcy court discharge Milbank's loans?

No. The court refused to discharge the loans because the debtor had acted in bad faith. He pretended to his then wife and father-in-law that he was making an effort to stabilize his marriage, when in fact he was rending it asunder.

Big Four

PWC, KPMG, Ernest & Young, Deloitte

Securities Exchange Act of 1934, Section 10(b)

Primary fraud liability under §10(b) and Rule 10b-5 An auditor is liable for making: 1. a misstatement or omission of a material fact 2. knowing it is wrong or recklessly not verifying it 3. that the plaintiff relies on in purchasing or selling

C11: Small business rules

SB with less than $2m may qualify for different rules - 1st 180 days DIP has exclusive rights to file a plan - court must confirm or reject plan within 45 days - if deadlines not met, case can be converted to a chapter 7 liquidation, or dismissed

Aiding and abetting fraud

SEC can prosecute those who aid and abet others in making untrue statements in connection with the purchase or sale of a security - difficult to hold accountants civilly liable - Even companies who help another inflate its profits are not liable - no reliance. (Motorola and Charter One)

whistleblowing

Step 1: Notifying Board: Under §10A of the 1934 Act, auditors who suspect that a client has committed an illegal act must ensure that the client's board of directors is notified. Step 2: Notifying SEC. If board does not take appropriate action, the auditors must notify the SEC themselves

c7: trustee

The U.S. Attorney General has appointed a U.S. Trustee in each region of the country to oversee bankruptcy cases. Job is to gather assets and divide them among creditors

c7: first meeting of creditors

The U.S. Trustee calls a meeting of all creditors after the order for relief. 1. The bankrupt must answer their questions under oath; 2. The creditors can elect a trustee or opt to have one appointed.

C7: Petitions may be voluntary or involuntary (T/F).

True

T/F: The Statute of Frauds requires that the agreement to sell real property must be in writing.

True - must contain names of all parties, precise description of the property, price and signatures

constructive bailment

a bailment without an agreement e. finding friends watch in your house

UCC-1

a financing statement that is filed in NYS with the New York Secretary of State in Albany

duty to maintain premises - habitable condition

a landlord has a duty to deliver the premises in a habitable condition and to maintain a habitable condition

Will

a legal document that disposes of the testator's property after death - why have one? - Ensure assets are distributed as you wish -Select a representative to oversee estate -Avoid unnecessary expenses -Provide guardians for minor children- Convey any "last words"

Real estate interests: remainder

a named, third party, gains possession of a property after a life tenant dies

secured party

a person or company holding a security interest

testator

a person who has signed a valid will (testatrix is used for female)

chattel paper

a record that indicates (1) the debtor owes money (2) the debtor has given the secured party a security interest in specific goods

nonpossessory interest in real estate: mortgage

a security interest in real property, given to the institution (mortgagee) loaning a buyer (mortgagor) the money to buy real estate

injuries - tenant's liability

a tenant is generally liable fo injuries occurring within the leased premises

gift

a voluntary transfer of property from one person to another without any consideration

lease - covenants

a written lease usually includes covenants (promises) from the landlords and the tenant

Decal Corp. incurred substantial operating losses for the past three years. Unable to meet its current obligations, Decal filed a petition of reorganization under Chapter 11of the Federal Bankruptcy Code. Which of the following statements is correct? a. A creditors' committee, if appointed, will consist of unsecured creditors. b. The court must appoint a trustee to manage Decal's affairs. c. Decal may continue in business only with the approval of a trustee. d. The creditors' committee must select a trustee to manage Decal's affairs.

a. A creditors' committee, if appointed, will consist of unsecured creditors.

Grass Co. is in bankruptcy proceedings under Chapter 11. _____________ serves as trustee. In the case of ______________ the court can approve a plan of reorganization over the objections of the creditors. a. The debtor in possession, a cramdown. b. A person appointed by the U.S. Trustee, fraud c. The head of the creditors' committee, reaffirmation d. The U.S. Trustee, a voidable preference

a. The debtor in possession, a cramdown.

Lt3P: Fraud

accountant who commits fraud is liable to any foreseeable user of the work product who justifiably relied on it

LtC: Breach of trust

accountants have a legal obligation to: - keep all client information confidential, and - use client information only for client's benefit

Lt3P: Negligence: Restatement Doctrine

accountants who fail to exercise due care are liable to 1. anyone they knew would rely on the information and 2. anyone else in the same class. - rules for most states but NOT NYS

Lt3P: Negligence: Ultramares Doctrine

accountants who fail to exercise due care are liable to a 3rd party only if they know: 1. identity of 3rd party 2. 3rd party will see their work 3. 3rd party will rely on work for a particular known purpose

Lt3P: Negligence: Foreseeability Doctrine

accountants who to exercise due care are liable to third parties if: 1. it was foreseeable that the third parties would receive financial statements from the accountant's client, and 2. the third party relied on these statements.

Attorney work-product

accounting work may be protected by the attorney work-product doctrine when: - preformed at the request of counsel because of actual or impending litigation

attachment issue: attachment to future property

after-acquired property is included

partition

all co-tenants have an absolute partition (division of property) - division is in kind where possible

quiet enjoyment

all tenants are entitled to use the property without the landlord's interference

The Uniform Anatomical Gift Act (UAGA)

allows an individual to indicate her desire to be a donor either by putting a provision in her will or by signing an organ donation card How to make/noting location? - driver's license; - anatomical gift card - will - living will with two witnesses - NY Donate Life Registry

life estate

an estate for the life of a named person ex: owner of home would like to pass on estate to college or church after they die, so they give it to the college/church now but get to live in it until they die (they get a tax deduction)

c7: business debt

an individual whose indebtedness is 50% or more non-consumer debt can qualify for Chapter 7 without passing the Means Test

living trust

an inter vivos trust is established while the grantor is still alive - Most living trusts are revocable during the grantor's lifetime

security interest

an interest in collateral (personal property or fixtures) securing performance

C11: retirees' committee

appointed to look after pension holders' interest

C11: committee of equity security holders

appointed to watch out for the interests of the shareholders

Mark Milbank built custom furniture in Port Chester, New York. His business was unsuccessful, and he repeatedly borrowed money from his wife and her father. He promised that the loans would enable him to spend more time with his family. Instead, he spent more time in bed with his next-door neighbor. After the divorce, his ex-wife and her father demanded repayment of the loans. Milbank filed protection under Chapter 13. What could his ex-wife and her father do to help their changes of being repaid?

ask the court not to discharge Milbank's debts on the grounds that he had acted in bad faith toward them

attachment by possession

assets that are physically held

disclaimer of opinion

auditor does not have enough information to form an opinion -cannot be used when auditors know, but don't want to disclose

Unger owes a total of $50,000 to eight unsecured creditors and one fully secured creditor. Quincy is one of the unsecured creditors and is owed $6,000. Quincy has filed a petition against Unger under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code. Unger has been unable to pay debts as they become due. Unger's liabilities exceed Unger's assets. Unger has filed papers opposing the bankruptcy petition. Which of the following statements regarding Quincy's petition is correct? a. It will be dismissed because the secured creditor failed to join in the filing of the petition. b. It will be dismissed because three unsecured creditors must join in the filing of the petition. c. It will be granted because Unger's liabilities exceed Unger's assets. d. It will be granted because Unger is unable to pay Unger's debts as they become due.

b. It will be dismissed because three unsecured creditors must join in the filing of the petition.

Bailee's duty to deliver: redelivery

bailee must redeliver the goods on time to the bailor or to whomever the bailor designates. (mis-delivery to the wrong person results in strict liability (exception: forged/stolen claim check))

Common carriers - bailor//general public

bailor must show 1. property delivered to common carrier in good condition 2. property arrived damaged 3. damaged result common carrier: strictly liable unless they can prove negligence free and loss due to: - act of god - act of public enemy - act of bailor - act of public authority - features of property **Can limit liability amount**

insolvency

balance sheet test: liabilities exceed assets cash flow test: inability to pay debts as they are due

title insurance

banks require buyers to obtain title insurance in order to obtain a mortgage

surplus

buyer gets the rest in the rare cases where the money is left over after the costs and the loan balance are paid

Other Liens: construction or mechanics lien

by improving real property - filed in county clerks office - good for 1 year

Other Liens: artisan's lien

by those improving personal property - possession necessary - no filing

Other Liens:garage keeper's lien

by those improving/towing cars - possession necessary - no filing

granting easements

can be created when: - landowner expressly grants them - when he implies them (ex. granting permission to access an area accessible only by crossing his land) - by necessity (when it is the only way to reach the property)

Real estate interests: future interests

can be sold now, but do not convey possession - ability to possess may or may not develop later

attachment issue: value

collateral can include future value (ex line of credit)

Chapter 13

consumer reorginization

security agreement

contract in which debtor gives security interest to secured party

Insurance

contract in which one person, for a fee, agrees to guarantee another against a specific loss - Insurer: issues the insurance policy - Insured: their loss is the subject of the policy - owner: person who enters into the insurance contract and pays the premiums - premium: consideration the owner pays for policy - beneficiary: person who receives policy proceeds

grantor

conveyor (seller) of property

Real estate interests: reversion

conveyor of a life estate in property regains possession after the life tenant dies

bailment basics

creation: generally but not always by agreement elements: bailee must - assume physical control with intent to possess

other debt

creditor must file it or give it to the debtor to file within 20 days

consumer debt

creditor must file within 20 days of payoff or demand

c7: violation of automatic stay =

creditors receiving lawsuits and damages

protections for buyers of consumer goods

free and clear of lean if it is unknown

A voluntary petition filed under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code a. Is not available to a corporation unless it has previously filed a petition under the reorganization provisions of Chapter 11 of the Federal Bankruptcy Code. b. Automatically stays collection actions against the debtor except by secured creditors. c. Will be dismissed unless the debtor has 12 or more unsecured creditors whose claims total at least $5,000. d. Does not require the debtor to show that the debtor's liabilities exceed the fair market value of assets.

d. Does not require the debtor to show that the debtor's liabilities exceed the fair market value of assets.

Dale is in bankruptcy proceedings under Chapter 13. Which if the following statements is true? a. His debtors must have filed an involuntary petition. b. His unsecured creditors will be worse off than if he field under Chapter 7. c. All of his debts are discharged as soon as the court approves his plan. d. His creditors have an opportunity to voice objections to his plan.

d. His creditors have an opportunity to voice objections to his plan.

C7: consumer debt

debt incurred for personal family or household purpose

advantages of possession

debtor doesn't have it, stays in good shape, no need to repossess if there's a default

C11: the petitioner is called

debtor in possession

C11: DIP

debtor in possession - operates the business - develops a plan or reorganization

deficiency

debtor is still liable if the sale price doesn't cover the costs and the loan balance

default

debtors failure to pay money due on a loan or credit purchase

purpose of estate planning

document desires, asset disposition, charitable giving, liquidity and insurance planning, minimize taxes, business succession planning, special needs, power of attorney & living will

financing statement

document filed to give public notice of a security interest

Durable power of attorney

document that allows you to empower another person to conduct legal business on your behalf - immediate power: takes effect when signed - springing power: takes effect at time in future (ex. if diagnosed with dementia)

property (casualty) insurance

does not cover: -Earthquakes and floods (unless a special rider is added) -Friendly fire (fire that stays where it is supposed to be) -Employee theft or embezzlement -Merchandise lost or damaged in transportation

C11: has/does not have a trustee

does not have a trustee

tenant's duties - joint and several liability

each tenant is liable for the entire thing

Easement by Prescription

easement can be found after use which is: - open - notorious - adverse - continuous - without interruption - for the requires period (in NYS: 10 years over private land) - if land is used as an easement without actually having an easement for 10 years and the land owner does nothing to stop it a easement by prescription is created where the easement is now enforceable and non-revokable under any circumstances (including resale of land)

LtC: breach of contract

engagement letter - document btw accounting firm and client: - services included - timeline - fees - services not included 2 types of promises 1. express - timely completion 2. implied - work as carefully as ordinarily prudent accountant (accuracy)

Trust

entity that separates legal and beneficial ownership - grantor - trustee - beneficiary

sources of collateral

equipment, inventory/proceeds, accounts receivable, patents, work in progress, raw materials, chattel paper, stock in subsidiaries

Oregon Steel Mills, Inc. v. Coopers & Lybrand, LLP

example of negligence / malpractice - failure to follow GAAP - incorrectly determining the amount of a gain

default

failure to make payments

Estate Tax Exemptions (2018)

federal: exemption $11.2M with rate of 40% if exceeding 11.2m (per person) $22.4M for married couple NYS: exemption $5.25M with rate of 3-16% readapted if exceeding 5.25m (per person) $10.5M for married couple Florida: no estate or inheritance tax an no individual income tax

judgments and mortgages

filed in county clerks office in the county where the property is located

UCC-1 filing procedure

filing against: 1. individuals - state of principal residence 2. corporations/LLCs - state of incorporation 3. unincorporated business - state of chief executive office

qualified opinion

financial statement is generally accurate, but there are unresolved issues

adverse opinion

financial statement is not accurate; this places the company in a bad position

C13: Wage earners plan

for individual debtors with regular income - purpose: rehab Available only to debtors with less than $307,675 in unsecured debt or $922,975 in secured debt. - trustee IS appointed - can NOT be forced into a chapter 13 - debtor remains in possession of all assets

C13: Why choose it?

for individuals who: - Can't pass the Means Test for Chapter 7 liquidation; - Have regular income, but can't keep up their debt payments; - Have substantial non-dischargeable debt; - Have substantial non-exempt assets they want to keep (ex, house)

termination statement

generated then the debt is paid in full

attachment

gives a creditor rights in collateral

nonpossessory interest in real estate: profit

gives one person the right to enter land belonging to another and take something away

nonpossessory interest in real estate: license

gives the holder temporary permission to enter upon another's property

estate planning

giving away property after (or in anticipation of) death

bailment control

giving keys to valet to park car, or stuff to moving crew to move - they must return the property with no damage

fixture

goods that come attached to real property (ex heating ducts)

personal property

goods, not real estate or fixtures

attachment by control

having control through bank accounts ect.

actual eviction

if a landlord prevents the tenant from possessing the premises, he has actually evicted her

constructive eviction

if a landlord substantially interferes with the tenant's use and enjoyment of the premises, he has constructively evicted her

c7: Exempt property in NY

if any property is more than the amount listed (s.25) then the debtor has to sell it

C11: Cramdown

if majority of at least one class supports a plan, the court can "cram it down the throats" of the other creditors if the court believes it is fair.

Real estate interests: possibility of a reverter

if the conveyor puts a condition on the possession of the property, it reverts to the conveyor if/when the condition is no longer met

land use regulation - public nuisance

impacts overall community, government tries to shut it down

land use regulation - private nuisance

impacts small group that sues for money damages

duties regarding security deposits - interest

in NY, for buildings with 6 or more units, landlords must pay interest earned on the deposit to the tenant

exculpatory clauses

in NYS a clause exempting the landlord from liability for injuries to tenants or others caused by the landlord's negligence is void

lease - oral agreement

in NYS oral rental agreements for 1 year or less are enforceable, but a written contract is clearer and safer. if it is oral and purports to be for longer than 1 year, the whole deal is void

General: Shareholders, what happens?

in bankruptcy are RESIDUAL CLAIMANTS = they are last in line

c7: Exempt property

individual debtors (not organizations) can keep some property for themselves Under the BAPCPA, debtors can only take advantage of state exemptions if they have lived in that state for two years prior to the bankruptcy. And they can only exempt $125,000 of any house that was acquired during 40 months before the bankruptcy.

C11: is available for

individuals with a lot of debt and for business

Dying Intestate

intestacy - process of determining how assets are distributed in the absence of a valid will - NYS approach: 1. spouse and no issue - all to spouse 2. spouse and issue - $50K and 1/2 residue to spouse, the rest to issue (by representation) 3. no spouse or no issue - all to parents

c7: Order of relief

issued after filing: 1. puts debtor under the court's jurisdiction 2. starts the proceeding 3. requires an involuntary debtor to file documentation

PCAOB (Public Company Accounting Oversight Board)

job is to ensure investors receive accurate/complete financial information

Chapter 7

liquidation

land use regulation - zoning

local communities can regulate building and land use - key concepts: zoning code, pre-existing use, non-conforming use, use variance (cases of unnecessary hardship and no reasonable ROI), area variance (cases of uniques property characteristics), zoning boards appeals

c7: unsecured creditors who do not file proof of claim

loose the right to file

duties regarding security deposits - deposit

max 1 month rent

C7: voluntary petition

may be filed by any debtor - not necessary for liabilities to exceed assets - debtor must provide: --a petition --a list of creditors --schedules of assets and liabilities --claim of exemptions --schedule of income and expenditures, statement of financial affairs

unreasonable sale

may cause the amount if the deficiency or surplus to be adjusted to reflect what a reasonable price would be

General: Voidable Preferences can be voided if

meet all: - The transfer was to a creditor of the bankrupt. - It was to pay a pre-existing debt. - The creditor received more than she would have received during the bankruptcy process. - The debtor's liabilities exceeded assets at the time of transfer. - The transfer took place in the 90-day period before filing - Transfer by a consumer debtor exceeded $600, by a business debtor exceeded $5000.

unqualified opinion

most favorable report an auditor can give; financial statements match true condition

c7: undue hardship

must be shown to discharge student loan debt (extremely hard)

c7: proof of claim

must be submitted by unsecured creditors after the first meeting of creditors

occurrence insurance policy

must bring claim to insurance policy holder at the time the malpractice occurred - malpractice occurred in 1997 but was brought in 2020. must bring it to policy holder had in 1997

General: Valid Reaffirmation

must have all: - not violate laws of fraud, duress or unconscionability - be filed in court - include detailed disclosure statement - clearly state debtor has right to rescind within 60 days - not impose undue hardship on the debtor

C7: credit counseling

must have counseling within 180 days before filing with an approved agency

Ken decided to open a retail boat dealership. He expects that many of his sales will be credit sales. What should Ken do to protect his interests in the collateral in the credit sales that he makes?

perfect his security interest by documenting a notation on the title of each boat

repossession

no breach of the peace

tenant's duties - eviction

no self help: must bring summary proceeding

c7: fully secured creditors are _____ required to file proofs of claim

not required to file proofs of claim

sale

notice to debtor with seasonal efforts

duty to maintain premises - building codes

often my require stricter than normal standards for rental property

grantee

one receiving (buying) property

bailee

one rightfully possessing another's property

Midland Fumigant filed a voluntary petition under Chapter 11 of the Bankruptcy Code. It owed money to the United Phosphorous, which also happened to be a competitor. United refused to approve Midland's plan of reorganization. What recourse did Midland have?

order a cram down, United is acting in bad faith

buyers of chattel paper in the _____________________ take free of all liens

ordinary course

exculpatory clause

part of a contract that attempts to relieve one of the parties of future liability - generally valid if parties have equal bargaining power - suspicious in business - consumer deals

automobiles and boats

perfection is made by a notation on the title NOT by filing a UCC-1

co-operative apartment

person buys shares equal to the worth of their apartment unit - shares are a one time purchase - must be approved to buy shares

creditor

person to whom money is owed

heir

person who inherits from a decedent who died intestate (person who inherits from person who dies without a will)

debtor

person with original ownership interest in collateral

collateral

personal property or fixtures subject to security interest

administrator

personal representative appointed by the court to oversee the probate process

executor or executrix

personal representative chosen by the decedent to carry out the will

constructive trust

prevents unjust enrichment - someone gets property that shouldn't really get it, this turns them into a trustee

Applicable laws for wills estates and trusts

probate law - state only estate tax law - federal and state **Called Surrogate's Court (one for ea county in NYS)**

c7: automatic stay

prohibits creditors from collecting debts that the bankrupt incurred BEFORE the petition was filed

note

promise to pay

land use regulation - restrictive covenants

promises in deeds about how property will be used - EX: house size, house design/type of construction, set back from the road, garages/outbuildings, in-home business, pets, fencing, RVs and boats in driveway, landscaping

bailor

property owner who delivered it to another

escheatment

property that has been abandoned while in the hands of an intermediary may be subject to escheatment - state takes title to property - dormitory period 3 years then must give to NYS Comptroller in Albany - office of unclaimed u=funds, NYS comptroller (largest claim repaid 4m, largest outstanding 1.7m) EX: safe deposit boxes contents, bank accounts, uncashed checks

claims made insurance policy

provide coverage only if the claim for an injury that has occurred is filed with the courts and is reported to the insurance company during the active policy period - malpractice occurred in 1997 but was brought in 2020. must bring it to policy holder in 2020 if within 2020 year

fee simple absolute

provide the owner with the greatest control

condominium

purchasing a unit of a building, while having an 1/x interest in all other shared commodities of the building (ex: own 1/20th of the pool but not 1/20th of another persons apartment) - x = number of units in building

Lt3P: Breach of Contract

rarely claimed because of no privity - most 3rd parties are incidental beneficiaries

Other Liens: judgement lien

results from a lawsuit, often a collection action filed on county clerk's office - good for 10 years

annuities

reverse of life insurance-they make payments until death. - Owner makes a lump sum payment to an insurance company in return for a guaranteed fixed income for life. -Deferred annuities work the same way, except they don't begin immediately. The payments begin at a designated time in the future.

tenant's duties - duty to mitigate

recognized in New York and in most states, the landlord must try to minimize losses by finding a new tenant quickly

Chapter 11

reorganization

bailment

rightful possession of goods by someone other then their owner - ex: valet parking, coat check, borrowed car, movers, storage units/warehouses

lien

rights in property that belong to another, used to secure a debt

estates or interests

rights that someone can hold in real estate - can include unrestricted use and right to sell, or lesser use but not the right to sell

town house / town home

row of units, you own one, including the land below and the air above (think meadows)

title search

search preformed (by a title company) once an agreement is made to ensure the seller has a valid title

security agreement v. financing statement

security agreement: gives a security interest financing statement: tells the world they have a security interest

authenticate

sign or transmit a document to show you adopted it as your own

unsecured creditor

someone ho is owed money but has no lien

grantor or settlor

someone who creates a trust

secured creditor

someone who is owed money and has a lien on property

donor

someone who makes a gift or creates a trust

obligor

someone who must repay a loan

perfection

steps taken by a secured party to protect its rights AGAINST OTHERS

liens on property and mortgages ________________ even if debt is discharged

survive bankruptcy

purchase money security interest (PMSI)

taken by seller of collateral or one advancing money for the collateral's purchase

Faith owns a copyright in a book she recently wrote. She applies for a $10,000 loan through Cumberland Bank and wants to use the copyright as collateral. Explain if and how the bank can perfect a security interest in such collateral.

the bank can file with the Secretary of State and take a lean on the loan

devisee

the correct term for one who inherits though a will, but "heir" is often used in either situation

duty to maintain premises - implied warranty of habitability

the implied warranty of habitability requires a landlord to meet code, or that the premises be fit for human habitation

duties regarding security deposits - return of deposit

the landlord must return a security deposit within 14 days after a tenant vacates the property

landlord's duties - delivering possession

the landlord'd first important duty

estate

the lease entity that holds title to assets after the owner dies

General: Trustee can NOT void if pre-petition payments are made in ___________

the ordinary course of business , as opposed to those for pre-existing debts

decedent

the person who died

land use regulation - eminent domain (condemnation)

the power of the government to take private property for public use (govt. needs to pay a fair value for it)

probate

the prices of carrying out the will

duties regarding security deposits - deductions from deposit

the reasonable cost of repairs other than reasonable wear and tear, and unpaid rent

Easement in Gross

the right to use land for a specific, limited purpose unrelated to any adjacent parcel - ex. installing power lines and using reasonable means to reach them - may be resold

repossession

the secured party takes collateral because the debtor defaulted

lease - writing requirement

the statute of frauds generally requires that a lease be in writing

abstract of title

the title company produces a history of the property's ownership - an abstract

Once perfected, some PMSIs may have priority over prior perfected security interests in the same goods if the creditor takes the right steps. Why does the code provide this?

to allow PMSI businesses to continue to make money

intestate

to dye without a will

c7: automatic stay purpose

to give the debtor time and space to make a rational plan for paying debts without pressure from creditors

Liability insurance

to reimburse the insured for any liability she incurs by (accidentally) harming someone else coverage includes: -Injuries sustained on the insured's property -Injuries to another's property caused by the insured -Professional malpractice -Product liability -Automobile liability

Disability Insurance

to replace the insured's income if he becomes unable to work because of illness or injury - The average person is 7 times more likely to be disabled for at least 90 days than to die before 65. - Half of all mortgage foreclosures are due to an owner's disability.

testamentary trust

trust created by a will - Will can be amended but once the grantor dies, it is irrevocable

landlord's duties - New York approach

unless the lease provides otherwise, the landlord must deliver the property ready to be occupied, with the prior tenant removed

consumer goods

used primarily for personal, family, or household purposes

C11: creditors' committee

watches over the creditors' interests

workout

when debtor and creditor agree about payment of unpaid debt

Accountant-Client Privilege

where information shared btw an accountant and client may be protected from disclosure - privilege is not recognized in NYS - working papers: accountants own the draft materials they are preparing for a client, but the client controls who sees them - under Sarbanes-Oxley Act, accountant for public companies must keep audit work paper for 7 years

The Copper King Inn, Inc. had money problems. It borrowed $62,500 from two of its officers, Noonan and Patterson, but that did not suffice to keep the inn going. So Noonan, on behalf of Copper King, arranged for the inn to borrow $100,000 from Northwest Capital, an investment company that worked closely with Noonan in other ventures. Copper King signed an agreement giving Patterson, Noonan, and Northwest a security interest in the inn's furniture and equipment. But the financing statement that the parties filed made no mention of Northwest. Copper King went bankrupt. Northwest attempted to seize assets, but other creditors objected. Is Northwest entitled to Copper King's furniture and equipment?

yes but only after all other creditors are given their share