Q&A Hero

Q: Jody is an attorney. Kevin is a certified public accountant. At common law, Jody and Kevin may be liable to clients for a. breach of contract, negligence, or fraud. b. breach of contract or negligence only. c. breach of contract only. d. nothing.

Q: The only professional-client communications that are privileged under federal law are those between an accountant and his or her client.

Q: There is no penalty under the Internal Revenue Code for a tax preparer who fails to give a taxpayer a copy of his or her tax return.

Q: An accountant who prepares a financial statement in good faith may avoid liability under Section 18 of the Securities Exchange Act.

Q: A lack of scienter is a lack of an intent to deceive.

Q: A failure to follow generally accepted accounting principles and generally accepted auditing standards is proof of a lack of due diligence.

Q: An accountant's liability under the Securities Act of 1933 does not require privity of contract with the purchaser of a security.

Q: Some jurisdictions hold accountants liable to users whose reliance on the accountants' statements was reasonably foreseeable.

Q: An accountant who prepares a financial statement for a client, knowing that the client will use the statement to obtain a loan, can be liable to the lender.

Q: If a third party will be affected by a contract, the parties to the contract are in privity with the third party.

Q: A professional whose client justifiably relies on the professional's misstatement may be liable for constructive fraud.

Q: A professional who intentionally misstates a material fact to mislead a client may be liable for actual fraud.

Q: A professional's failure to perform a duty, with reckless disregard of the consequences, constitutes actual fraud.

Q: An attorney who misses a crucial deadline may be liable to a client.

Q: If an accountant is hired to prepare an unaudited financial statement, he or she may be liable for failing to delineate the statement as "unaudited."

Q: Compliance with generally accepted accounting principles and generally accepted auditing standards relieves an accountant of liability for negligence.

Q: A professional is liable only for a breach of a duty of care specifically stated in a written contract.

Q: An accountant's violation of generally accepted accounting principles and generally accepted auditing standards is prima facie evidence of negligence.

Q: With respect to negligence, an accountant is subject to no greater standard of care than the average reasonable person.

Q: At common law, professionals may be liable to clients for breach of contract.

Q: The liability of professionals is based solely on statutory law.

Q: Dina is the trustee of a trust in which Elin has a life estate and Frank has the remainder interest. The trust property is a farm. The farm is leased to Glen, who pays the rent to the trust. Property taxes are paid annually on the farm. Long-term improvements are occasionally made and paid for. A section of the farm's land is sold to Holly, one of the farm's neighbors. How are the payments for taxes and improvements classified (ordinary or extraordinary)? How are the receipts of rent and the proceeds from the land sale classified? To whom are these costs and benefits allocated?

Q: Lee's will provides for a distribution of Lee's property. Who does these things, and what are the steps involved?

Q: Ann is the trustee of a trust in which Bob has a life estate and Carol has the remainder interest. The trust property is an apartment building. The expense of paying the building's property taxes is chargeable to a. Ann. b. Bob. c. Bob and Carol in equal proportion. d. Carol.

Q: Frank wants to put some money in trust for his son Greg, but he does not want to lose full control over the funds in case he may need them in the future. The trust best suited to Frank's needs is a. a charitable trust. b. a constructive trust. c. a spendthrift trust. d. a Totten trust.

Q: Kay has two children, Larry (the eldest) and Mona, both of whom predecease Kay. Larry is survived by a son, Nick, and Mona by two daughters, Opal and Pearl. On Kay's death, if the estate is distributed per capita a. each grandchild will receive one-third of the estate. b. Nick will receive the entire estate. c. Nick will receive one-half of the estate, and Opal and Pearl will each receive one-fourth. d. the grandchildren will not receive anything.

Q: Ben dies intestate, with no surviving spouse or child. Ben's survivors include his granddaughter Cathy, his nephew Doug, and his cousin Earl. His estate passes to a. Cathy. b. Doug. c. Earl. d. the state.

Q: Owen dies intestate, survived by his niece Patty and his uncle Quinn. Patty and Quinn are Owen's a. collateral heirs. b. constructive heirs. c. inter vivos heirs. d. lineal descendants.

Q: Gus dies intestate. Under intestacy laws, the debts of the estate are paid by a. Gus's estate, after its assets are distributed. b. Gus's estate, before its assets are distributed. c. Gus's heirs, after the estate's assets are distributed. d. Gus's heirs, before the estate's assets are distributed.

Q: Paul dies intestate. His survivors include his spouse Rhoda and his two children, Sue and Tony. Under intestacy laws, of Paul's estate, Rhoda will probably receive a. one-fifth. b. one-third. c. one-half. d. everything.

Q: Ruth executes a will in 2003 naming her nephew Stan as sole beneficiary. In 2006, Ruth executes another will, naming her niece Tammy as sole beneficiary, but does not state in the 2006 will that she is revoking the 2003 will. On Ruth's death a. Stan and Tammy will share the estate in equal shares. b. Stan will be the sole heir. c. Tammy will be the sole heir. d. the estate will pass as if there were no will.

Q: Max is married to Nina. Max executes a will, leaving certain property to Nina and other property to Opal, who is unrelated to Max and Nina. On Max's death a. neither Nina nor Opal can renounce their shares. b. Nina and Opal can both renounce their shares. c. Nina can take only what the will provides but Opal can renounce her share. d. Opal can take only what the will provides but Nina can renounce her share.

Q: Leo is asked to serve as a witness to Mona's will. To qualify, Leo must be a. a collateral heir. b. a lineal descendant. c. eighteen years of age or older. d. mentally competent.

Q: Wendy types onto a computer what she intends to be her will and prints it out on a laser printer. If Wendy has capacity, this "will" is a. invalid. b. valid if she signs it. c. valid if she signs it and has three witnesses sign it. d. valid if she signs it, has three witnesses sign it, and files it in a certain state office.

Q: Ann writes her will in crayon, on a paper bag, while Brad states orally how he wants his estate distributed. Most states do not permit a. a holographic will. b. a nuncupative will. c. a will written on a paper bag. d. a will written in crayon.

Q: For Ron's will to be valid, Ron must be mentally competent at the time of a. death. b. the acquisition of the property to be distributed under the will. c. the making of the will. d. the probate of the will.

Q: The owners of Designer Software, Inc., want to execute wills. Eve is fifteen years old, Fred is seventeen, and Gail is nineteen. In most states, those with the capacity to execute a will are a. all of the owners. b. Fred and Gail only. c. Gail only. d. none of the owners.

Q: Eighty-year-old Clark exhibits confusion, forgetfulness, and disorientation. To Clark's doctor Dave, the symptoms indicate dementia. Elsa, who has significant contact with Clark, believes that he is in a state of mental decline. These facts indicate a. an urgency that Clark distribute his assets. b. Clark's lack of capacity. c. Dave's misdiagnosis. d. Elsa's intent to take advantage of Clark.

Q: Dan makes a will leaving a specific sum of money to each surviving relative. The assets of Dan's estate are not enough to make all of the gifts in full. This situation requires a. an abatement. b. a publication. c. a residuary. d. a revocation.

Q: Ann's will gives her vacation cabin to her friend Belle. Belle dies before Ann. When Ann dies, the cabin does not pass to Belle's heirs but to Ann's daughter Connie. This is a. a lapsed legacy. b. a general bequest. c. an abatement. d. the residuary of the estate.

Q: In his will, Rob makes a gift of $10,000 to Sam. This is a. a general bequest. b. a general devise. c. a specific bequest. d. a specific devise.

Q: In her will, Jill makes a gift of stock to Kent. At the time of Jill's death, she owes $10,000 to Local Mortgage Company. The residuum of her estate consists of assets that a. exist before taxes, expenses, and the debt to Local Mortgage are paid. b. pay estate taxes, expenses, and debts. c. remain after the debt to Local Mortgage is paid and the gift to Kent is made. d. remain after taxes, expenses, and the debt to Local Mortgage is paid, but before the gift is made to Kent.

Q: Amy dies without a will. A court appoints Bill to handle the probate of Amy's estate. The administrator is a. Amy. b. Amy's eldest heir. c. Bill. d. the clerk of the court.

Q: A trust that does not specify a termination date will continue into perpetuity.

Q: A trust that arises by operation of law in the interests of equity and fairness is a resulting trust.

Q: A trust created by a will to come into existence on the settlor's death is an inter vivos trust.

Q: Under intestacy laws, only when no children or grandchildren survive the decedent will a surviving spouse succeed to the entire estate.

Q: A child born after a will has been executed may still inherit a portion of his or her parent's estate.

Q: A codicil is a clause in a will affirming the testator's testamentary capacity.

Q: A testator may revoke a will by tearing it.

Q: A testator's intentionally destroying a will revokes it.

Q: An "X" cannot qualify as a signature on a will.

Q: A will is required to be in writing only if real property is being transferred.

Q: Many states do not permit nuncupative wills.

Q: A formal will does not need to be signed by the testator.

Q: A testator must be of legal age at the time a will is made for it to be valid.

Q: A gift of real estate by will is a bequest.

Q: A devisee is a person who receives a gift of real property under a will.

Q: One who dies without a valid will died testate.

Q: If no heirs or kin can be found, title to the property of a deceased individual is transferred to charitable organizations.

Q: An administrator is a personal representative named in a will.

Q: A will is probated to establish its validity and to carry out the administration of the estate.

Q: An administrator is a personal representative appointed by a court for a decedent who dies without a will.

Q: Patty makes a gift of real estate in her will to Quinn. This gift is a. a bequest. b. a devise. c. a legacy. d. an abatement.

Q: Jack makes a will. As a person who makes a will, Jack is a. an administrator. b. an executor. c. a settlor. d. a testator.

Q: The trustee is the person for whose benefit a trust is held.

Q: In a spendthrift trust, a beneficiary can transfer his or her right to the trust's principal if the transfer is "thrifty."

Q: A trust that a grantor executes orally in contemplation of immediate death is a testamentary trust.

Q: An express trust arises by operation of law.

Q: Per stirpes is a method of dividing an intestate share of an estate.

Q: Many states allow for the distribution of assets without probate proceedings.

Q: Divorce automatically revokes the entire will of a spouse who executed the will prior to the divorce.

Q: To "publish" a will means to record it in the appropriate county office.

Q: Once executed, a will cannot be revoked.

Q: A nuncupative will is an oral will.

Q: A formal will may be implied by conduct.

Q: A will that is completely in the handwriting of the testator is a nuncupative will.

Q: A will may be declared invalid because of undue influence.

Q: In most states, a person must be twenty-one years of age to execute a valid will.

Q: To be effective, a will must follow certain requirements exactly.