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Everyday questions about the law and the United States legal system are answered in this engaging series of questions and answers by Jay M. Feinman, professor of law at Rutgers, the State University of New Jersey’s School of Law in Camden. If you’ve ever wondered about privacy rights and banking, copyright protection on the Internet, co-signing a loan, the ins and outs of making a will and inheriting an estate, and what to do about a neighbor’s encroaching fence, Feinman provides some guidance. Feinman is the author of Law 101: Everything You Need to Know About the American Legal System (2000).
Q: Are banks allowed to release account information to people unaffiliated with the account? My bank released negative information about my account to my parents, who are no longer affiliated with my checking account.
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A: You are right to be concerned about your privacy in financial transactions, on the Web and everywhere else. Congress responded to concerns like yours by enacting a new law governing the privacy rights of customers of financial institutions.
Every bank has to have a privacy policy. By law, your bank is required to send you a copy periodically (although many consumers, thinking it is junk mail, don’t bother to read it). You can also get a copy of the privacy policy from the bank or from its Web site. The bank’s privacy policy specifies when it will release your account information or other private information to someone else.
Commonly, the bank will only release information to someone when you have asked it to or when there is a business reason for doing so. For example, if you write a check to someone, the bank can tell that person whether you have sufficient funds in your account to pay the check. Therefore, you need to find out what your bank’s privacy policy is and exactly why it provided information to your parents. For best results, ask an officer at the branch where you normally bank.
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Everyone also should know that the bank privacy policy specifies when the bank can use, trade, or sell your information for marketing purposes. If you don’t want your information shared in this way, the policy will state how you can prevent the bank from doing so.
Q: Does a contract have to be in writing?
A: Most oral promises are enforceable. By statute, however, some kinds of contracts must be in writing. The list varies from state to state, but common examples include: contracts for the sale of land, a contract for the sale of goods for $500 or more, a promise to pay someone else’s debt, and a contract that is not to be performed within one year of the time it is made.
Q: Can I just copy documents (a will, a living will, and powers of attorney for health care and property) that were drawn up for me verbatim and give them to my parents to sign since those documents are boilerplate documents? Of course, we would get it notarized and have a witness.
A: The primary reason that you should not do this is that your parents would miss out on the counseling provided by a good lawyer. When you went to your lawyer, he or she made sure the documents fit your needs (I hope!). Your parents’ financial situation, age, health, and personal wishes may require changes to the documents. Wills, living wills, and powers of attorney are not “one-size-fits-all” documents, and it usually is well worth the time and expense to make sure the documents are tailored to the individual’s needs.
Q: Do copyright laws apply on the Internet?
A: Some people argue that cyberspace is, or should be, beyond the reach of the law. For the moment, however, it is clear that the copyright laws (and other laws) apply on the Internet—although how they apply is much in dispute. You should be aware of the copyright laws as you copy things from the Internet or create your own Web pages. Here are a few things to keep in mind:
*Most of what you see on the Internet, like most of what is published in hard copy, is subject to copyright. Text, graphics, and Web page designs are original, creative works for which the person or company who created them can claim a copyright. The copyright gives the owner the exclusive right to copy, distribute, and display the work. Therefore, you cannot copy the content of a Web site and post it on your own Web site.
*An important exception to the copyright owner’s exclusive right is what is known as fair use. Fair use means that you can use a copyrighted work for some purposes. Determining what constitutes fair use is complex, but the courts take into account whether the use is commercial or noncommercial, the nature of the copyrighted work, how much of it is used, and the economic effect of the use on the copyright owner. Thus, it is not fair use to recopy and sell Encarta, but it is probably fair use to print out a picture of your favorite rock star from a fan Web site so you can post the picture next to your bed.
*Some things you find on the Internet are in the public domain. That means they are not subject to copyright and can be freely copied by anyone. For example, a work for which the time of copyright has expired or a work produced by the U.S. government is in the public domain.
Q: What are my risks if I co-sign a loan?
A: If you co-sign a loan, you can be liable for the entire principal amount of the loan (the amount borrowed) and possibly for interest and other charges. The lender wants to have a co-signer to make sure that the loan gets paid if the borrower defaults, particularly if the lender has doubts about the creditworthiness of the borrower. If the borrower misses a payment or defaults, the lender can go after the co-signer.
Therefore, you should treat any loan that you co-sign as if you were borrowing the money yourself. Make sure that you think the borrower will pay the loan and that you are prepared to pay if the borrower fails to do so. Sometimes you can limit your risk by having the lender agree that you will be liable to repay only the principal of the loan, not interest and other fees.
Q. I am falling behind in paying my bills. Will credit counseling or debt consolidation help me?
A. The first thing to do when you fall behind in your bills is recognize you have a problem; don’t just put off paying your bills, avoid the mail and phone calls from your creditors, and hope things will get better. If you have too many bills or cannot work out payment plans with your creditors by yourself, consider contacting a credit-counseling service or a debt-consolidation service. Some services are nonprofit, while others are profit-making businesses. The services can help you set up a budget for managing your expenses and paying your bills so that you can get back on track. They also can negotiate with your creditors to set up repayment plans. Typically, each month you will pay a single amount to the service, which will then pay each of your creditors. You can find counseling services in the telephone book under “Credit- and Debt-Counseling Services” and on the Internet.
Another form of debt consolidation is to take out one big loan and use it to repay all of your other loans. This can lower your total monthly payment if the new loan is at a lower interest rate than your other loans. However, there are risks: The new loan may be in the form of a loan against the equity in your house, so your home is at risk if you fail to repay it. Also, the new loan won’t help if your real problem is that you cannot control your spending or that you are living beyond your income; credit counseling is a must in that case.
Q: What is the normal time of disclosure in a real estate transaction to reveal 'problems' with the property? Is it normal to wait until the signing of the loan document, one day before the close of escrow? I just bought a house, and we discovered after moving in that it is directly under an approach to a busy local airport runway. We then looked through the documents we got when we signed the loan document and found a disclosure statement about the airport situation buried in the 300+ pages of documents we got from the escrow officer. None of our agents or the seller mentioned the problem to us. Is that legal?
A: It must be terribly disappointing to move into a new house and then discover a problem like yours. Here is some background to help you decide what to do:
For a long time, the law took the position of “buyer beware.” Under that rule, the seller had no duty to disclose problems with the property—buyers had to find out about problems for themselves. Fortunately, the law has changed in most places. However, there is no uniform rule across the country about what the seller has to disclose, when, and how. Each state has different rules.
Some states have mandatory disclosure forms that the seller must fill out and give to the buyer at specified times. Other states have more general rules that the seller cannot conceal important information, or that the seller has to affirmatively tell the buyer about conditions affecting health and safety. In some states, if a real estate agent is involved in the transaction, he or she has to make certain disclosures. (Something to remember here: Even if a real estate agent helps you find a house, in many cases the agent is legally the representative of the seller, not you, and owes primary responsibility to the seller.) Your problem—living near an airport approach pattern—might not be covered in many jurisdictions.
What should you do now? If the noise bothers you enough, it may be worth consulting a real estate lawyer to see if the seller failed to comply with your state’s disclosure requirements and if there is anything you can do about it.
Q. Do I need a will?
A: If you are an adult with more than a modest amount of property, you probably need a will. If you die without a will, state law determines who gets your property, and the law’s plan may not match your wishes. By having a will, you can control how your property is distributed. If you have children, particularly minor children, you definitely need a will. In your will you can designate whom you would like to take care of your children and what property you would like to leave them. For wealthier people, wills and other estate-planning devices can help avoid taxes.
Q: What exactly is considered harassment at work? My employer yells and curses his employees all day—is this harassment?
A: Your employer’s behavior sounds nasty and abusive, but it is not necessarily illegal harassment. Unless the yelling and cursing is extremely outrageous and is intended to cause you emotional distress, it is only harassment if it harms you as a member of a protected group. The law prohibits harassment on the basis of race, gender, religion, or similar categories. If your boss only yells at the women, or uses sexually charged language, for example, that could be harassment if the abuse creates a “hostile work environment.” If you think you are being harassed, contact an employment lawyer or the federal or state equal employment opportunity commission.
Q: My neighbor built a fence on my property. What can I do?
A: You can be neighborly about this situation, but you also should protect your rights. Even if the fence does not bother you, you run two risks if you leave it there. First, when it comes time to sell your house, the buyer probably will find out that the fence encroaches on the property and may demand that it be removed. Second, if the fence stays there for a long period of time, your neighbor eventually may claim that he has a legal right to continue using that piece of your property, or even that he has acquired ownership of it. Under a “prescriptive easement,” if someone uses someone else’s property for a long period, he may acquire a right to continue to use it. Under “adverse possession,” if someone acts as the owner of a piece of land for a sufficiently long period of time, he becomes the true owner. Therefore, if your neighbor keeps the fence there long enough, he could establish legal rights to that strip of land.
You are entitled to ask your neighbor to move the fence off your property and to sue if he refuses to do so. You have to decide whether the encroachment on your land is worth the bad feelings that a dispute may produce. Another strategy to protect your rights is to have your lawyer prepare a document in which you give your neighbor permission to keep the fence in place, so that his use is not “adverse” to your ownership, defeating claims of prescriptive easement or adverse possession.
Q: What are the steps to filing an appeal after a guilty plea and sentence?
A: Laws vary by state, but here are some general principles: If a person pleads guilty instead of going to trial, whether as part of a plea bargain or not, the possibilities for appeal are very limited. By pleading guilty, the defendant has admitted the facts of the crime and given up the possibility of contesting the basic legal issues in the case.
An appeal is then allowed only in unusual circumstances, especially those that go to the integrity of the plea itself—for example, when the plea is unfairly coerced or the defendant is not provided with a competent lawyer. Any convicted defendant who is considering appeal will want an experienced criminal lawyer to review the case.
Q: I have just learned that I am one of 6 beneficiaries of my aunt's $500,000 (approx.) estate. The lawyer has indicated that most of the estate is in mutual funds and stock. Would it be better for the beneficiaries if these funds and stocks are liquidated prior to disbursement? If they are not, I would think it might be very difficult to do an equal division. Also, if the stocks are turned over to us and we decide to sell them won't we then have to pay taxes on this amount whereas if we receive the cash from the sale by the lawyer there would be no taxes. Please give me your thoughts on this matter.
A: The executor of your aunt’s estate—the person named in her will to administer the estate—is responsible for making sure that the property is fairly divided among the beneficiaries. The terms of her will and your state’s law determine how much discretion the executor has in doing so. This is usually simple with mutual funds or stock, which have a known value and can be transferred proportionally to the beneficiaries.
For federal income tax purposes, in most cases it does not matter much if you receive your inheritance in cash or in stock. If you receive stock, you do not have to pay tax on any increase in value of the stock up to the date of your aunt’s death. The IRS assumes that the cost of the stock to you (known as its “basis”) is the stock’s value on the date of your aunt’s death. For example, suppose your aunt bought the stock for $5 and it was worth $100 when she died. When you get it, your basis in the stock is $100, so if you sell it right away for that amount, you don’t have any capital gain and you don’t owe any tax. You are responsible for any increase in value after her death, just as if you had received $100 in cash from her estate and immediately bought the stock.
As with any other significant financial transaction, if you have concerns that the executor does not satisfy, consult a lawyer.
Q: My partner and I had a joint bank account to pay household expenses. When we split up, she withdrew all of the money from the account. Can she do this?
A: Yes. In a joint bank account, either owner can withdraw all of the funds. From the bank’s point of view, each person has an equal right to the entire account. If you and your partner had an agreement about the use of the money, however, you could sue her in small claims court for breaking the agreement.
Q: Does a signed letter of intent carry the same weight as a legal contract?
A: It depends. Letters of intent come in different forms for different circumstances. In some business transactions, letters of intent contain so many loopholes and exceptions that they are little more than an expression of good faith. In other transactions, they lack the detail of a final agreement but otherwise effectively bind the parties to the deal. The only way to tell is to read your specific letter of intent carefully and consult a lawyer if you have any questions.
Q: My new car stalls on cold mornings. The dealer’s service department can’t find anything wrong with the car. What can I do about it?
A: First work your way up the chain of command. Talk to the dealership’s service manager and general manager, and then contact the manufacturer’s regional representative. (Check your owner’s manual for the information.)
If that doesn’t work, most states have lemon laws that protect you. The law in each state is different, but generally you can invoke the lemon law if your new car has a defect that substantially impairs its value or safety. Repeated stalling probably would qualify. The manufacturer must fix the problem by repairing the car. If the manufacturer cannot fix it after a certain number of attempts (usually three), or if the car is unusable for 30 days, you can demand a refund or replacement. If the manufacturer refuses, you can submit to a dispute resolution mechanism set up by the state or the manufacturer and then sue for a refund or replacement.
Q: What is the difference between murder and manslaughter?
A: Generally, murder is the act of killing a person with the intent to kill or something close to it, such as acting with reckless disregard for human life or killing in the course of committing a serious crime. Manslaughter is a less serious but still wrongful killing. Voluntary manslaughter is killing in the heat of passion under provocation—in hot blood, rather than the cold blood required for murder. A death caused by extreme carelessness is involuntary manslaughter.
Q: I just got married. What steps do I need to take to change my name?
A: If you decide to change your name upon getting married, there is no special legal procedure you need to follow. Simply be consistent in using your new name and notify anyone who needs to know that you are using a new name: the Social Security Administration, the motor vehicle bureau, your credit card companies, your bank, and so forth.
Q: I’m ready to buy a house. Do I need a lawyer?
A: Custom varies from place to place about whether home-buyers typically use lawyers. In some places, escrow agents, title insurance companies, or real estate agents handle the transaction and the parties seldom hire lawyers.
It is natural to want to avoid the expense of hiring a lawyer, but here is why you may want one: Buying a house is one of the largest financial transactions you will ever make, and it is emotionally charged, so you may want someone with independent judgment on whom you can rely to protect your interests. A lawyer can review the agreement of sale, the deed, and the title abstract or title insurance policy to make sure you are getting what you pay for. If problems arise, a lawyer can advise you, negotiate with the seller, and draft documents. Ask your real estate agent what is customary in your area, then decide what would make you most comfortable.
Q: Is it legal for my landlord to keep some of my security deposit for cleaning and painting?
A: Usually a landlord can keep part of the security deposit to pay for damage the tenant did to the apartment. This may include failing to leave the apartment as clean as it was at the beginning of the lease. It often does not include ordinary wear and tear. Look at your lease to determine just what circumstances are covered. The law in some states also specifies the cases in which the landlord can keep the security deposit. Check a book on your state’s landlord-tenant law, or call your local legal services program.
Q: What is a replevin bond and what does is mean to have one on you?
A: Replevin is a legal action for recovery of property. For example, if you leased a car and failed to make payments, the leasing company can sue in a replevin action to get the car back. The company may be able to repossess the car even before their lawsuit against you is decided. In many states, the company will be required to secure a replevin bond if it does this. The bond usually protects you and the sheriff or repossession agency that seizes your car in case something happens to the car and the leasing company loses the suit.
Q: A work colleague and I have the same title and job description, and roughly the same amount of experience, but our salaries differ substantially. Is this legal?
A: Several federal and state statutes—such as Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Equal Pay Act, and the Americans with Disabilities Act—require a degree of equal treatment in the workplace, including in pay. These statutes define the basis on which an employer can and cannot make distinctions among employees. For example, an employer may not pay one employee less than another because of the employee’s race, gender, religion, age (if over 40 years old), national origin, disability, or, in some places, sexual orientation.
An employer can distinguish among employees on the basis of other factors, such as seniority and quality of employees’ work. If you have the same job description and experience, your employer might be unlawfully discriminating against you, or your employer might believe your colleague is doing a better job. If you belong to a union, ask your union representative for help. Or ask your supervisor or the personnel department for an explanation (in a nonconfrontational way, if possible). If you think you may be a victim of discrimination, contact an employment lawyer or your state or federal Equal Employment Opportunity Commission.
Q: My husband and I are considering selling our home via rent-to-own. Are there any legal drawbacks or consequences that we should consider? Any specific questions we should be asking?
A: This is a complex transaction, and you should get a lawyer. Think about some of the issues involved: Who has to insure the property, and who gets the insurance proceeds if the house is damaged by fire? If the buyer misses a few payments, can you cancel the contract and keep all the previous payments? Who has to replace the furnace if it breaks down? Only a lawyer who has experience in this type of transaction and knows your state’s law can give you the answers and help write a contract to protect your interests.
Q. How do I file a suit in small claims court?
A. Look in the government listings in the telephone book under “Courts” or “Judiciary” to find the small claims court for your state, county, or city. The court clerk will give you the forms to fill out to begin your case and instructions on how to serve the forms on the defendant. Most people in small claims cases do not use a lawyer. When you go to court, be prepared to tell your story in a simple but persuasive way. Bring any documents relating to your case, and if any witnesses can bolster your claim, ask them to come along, too.
Q. What are the differences between a corporation, a partnership, and a sole proprietorship?
A. Corporations are owned by many people, each of whom has a piece of the company, measured by the number of shares of stock they own. If you own one share of stock in a corporation, in legal terms you have the same relationship to the company as an owner of a majority of the shares. (In practical terms, of course, you will not have as much influence on the company’s affairs.) You own a partial interest in the company that gives you the right to indirectly control its affairs by voting for the board of directors and on other matters. You also can sell, exchange, or give away your stock. However, because the corporation is a separate legal entity from you and the other shareholders, you are not liable for the actions of the corporation or its debts. If the company goes under, your stock may be worthless, but you will not have to contribute more money to pay its debts.
A sole proprietorship or a partnership is different than a corporation in that there is no separation between ownership and management. The sole proprietor (a single owner) or the partners (multiple owners) directly control the company’s affairs. Their interest in the firm is not limited, as is the case with the stockholder of a corporation. The proprietor or the partners are individually liable for debts of the firm even beyond their investment. This disadvantage led to the creation of alternatives such as limited partnerships and limited liability companies that can be managed like partnerships but have some of the attributes of corporations.
Q: What recourse do I have for a surgery that went wrong? My son's belly button was mangled during his hernia operation, and the doctor refuses to fix it.
A: You may be able to sue the doctor, but it is important to understand that a patient does not have a legal remedy every time a medical procedure turns out badly. A doctor is liable to an injured patient only if the doctor has been negligent, which means the doctor has failed to perform with the reasonable care expected of a competent physician.
In your case, you may be able to sue for your son’s injury if the surgeon performed the operation carelessly. Cases like these can be very complicated, so consult a lawyer who specializes in medical malpractice cases. Ordinarily you do not have to pay your lawyer up front—his or her fee comes as a percentage of your eventual recovery.
Q: The toilet in my apartment doesn’t work all the time. The landlord ignores my complaints. What should I do?
A: The law in most states implies a warranty of habitability in apartment leases. This means that the landlord must keep the premises reasonably fit for living. Sometimes the local housing code is used as the standard, and sometimes tenants are given greater protection. If the landlord fails to fix the toilet, you may be able to withhold part of the rent, pay the rent and sue for damages, fix the toilet and deduct the cost of the repair from the rent, or break the lease and move out.
Q. A Florida jury awarded $145 billion in damages against the tobacco companies. How can they do this?
A. Most damages in personal injury cases are given to compensate the injured party for his or her losses. In a small number of cases (less than 1 percent), where the defendant has acted outrageously, punitive damages are awarded to punish the defendant. Punitive damages also reduce the defendant’s incentive to engage in wrongful conduct, acting as a big stick that requires potential wrongdoers to think twice about the consequences of their actions.
Punitive damage awards are often not as bad as headlines make them out to be. They are awarded most often in commercial cases between businesses, not in personal injury cases. And even if a jury gives a large punitive damage award, the trial judge or a higher court often reduces it if it is excessive.
Q: My uncle died and left a checking account valued at approximately $50,000 in trust for my brother and I. Can we go to the bank and withdraw this money without paying inheritance tax?
A: State inheritance taxes (in the states that have them) are owed by the beneficiaries—the people who receive the property. The state laws vary on what property is taxed and at what rate.
First, you need to check your state’s law to see if it has an inheritance tax (many do not). If your state does have an inheritance tax that applies to you, you are obligated to pay it. Moreover, the bank is likely to report the withdrawal to the tax authorities, so there will be a record of the transaction.
There is also a federal tax called an estate tax. The federal estate tax was revised in 2001. It first reduces and then repeals the estate tax over a ten-year period. The estate tax is owed by the deceased person's estate if it is over a certain size. (That is, the tax is paid out of the deceased person's property.) In this case, the executor of the uncle's estate is responsible for paying the estate tax, and, depending on exactly how the account was set up, the $50,000 may or may not be included in the estate.
There are two reasons why a beneficiary should not avoid paying the tax: (1) You might not be able to get away with it, since the bank may report the transaction and the government will find out. (2) It's wrong. Even if you could steal a candy bar from the 7-11 and get away with it, you shouldn't do it.
Q. What is a trust?
A. In a trust, the person setting up the trust, or grantor, conveys property to a trustee for the benefit of someone else, the beneficiary. The grantor specifies how the assets in the trust will be used. The trustee manages the trust assets and follows the grantor’s instructions in paying the money to or for the beneficiary. Charitable trusts benefit institutions such as schools and hospitals. Private trusts are used for estate-planning purposes or for family members’ benefit. In a will, for example, someone might set up a trust with instructions to pay the income to the surviving spouse for life and then to give the assets to the children upon the spouse’s death.
Q. On television shows, the lawyers are always objecting to evidence because it is “hearsay.” What does that mean?
A. Hearsay is secondhand testimony, or the introduction of an out-of-court statement to prove the truth of the content of that statement. Suppose in a criminal case John testifies that Sue told him that the accused committed the crime. This is hearsay—John “heard” Sue “say” that the accused did it. We don’t know how reliable Sue’s identification of the accused is, and we have no way of testing the identification because Sue is not in court to testify and be cross-examined. Because of the potential unreliability and unfairness to the accused, the judge will exclude John’s statement.
Q. Why do lawyers plea bargain?
A. A plea bargain is a deal—an agreement between the defendant (through his or her attorney) and the prosecutor—that stipulates the defendant will plead guilty in exchange for a reduction of the seriousness of the charges, a dismissal of some of the charges, or help obtaining a lenient sentence.
For the prosecutor, many cases are routine, and he or she may have too many cases to be able to bring them all to trial. Even if the prosecutor could, the judges before whom he or she practices would be unable to try all the cases. Underfunded courts face a huge backlog of cases. Moreover, even though a case may look airtight, no case is a sure thing. So a plea bargain gives the prosecutor an efficient and certain disposition of a case.
A plea bargain works to the defendant’s advantage, too. If the defendant cannot make bail, he or she does not have to stay in jail for several months waiting for a trial. No matter how good the chances are at trial (and for many defendants, the chances are not very good), losing probably involves a heavier penalty than what the defendant would get in a plea bargain.
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