Adam Wolk, left, and Barbara Goodstein, right, of Mayer Brown. Courtesy photos Introduction
Last June this column discussed two federal court cases showing the challenges faced by lawyers in structuring bank deposit arrangements, such as trusts and escrows, free of bankruptcy risk of the depositor. ("Trusts, Escrows and Property of the Estate (or Not)," 269 N.Y.L.J. 109 (June 8, 2023)). These two decisions, one by a bankruptcy court in the Southern District of New York involving an attorney escrow account, and the other by a federal district court in the Northern District of Texas involving a trust arrangement, reached the same conclusion—namely that the cash at issue was subject to claims of the depositor's creditors. These cases emphasize the continuing uncertainty across states of treatment of different structures intended to insulate cash from the risk of bankruptcy of its depositor. Fortunately, this uncertainty may soon be resolved by a uniform state statute proposed by the Uniform Law Commission.What's Special About Special Deposits? The New Uniform Special Deposits Act
In their Secured Transactions column, Barbara M. Goodstein and Adam C. Wolk, discuss the Uniform Special Deposits Act. The act aims to create a set of "clear and executable" rules to govern bank deposits that involve at least two beneficiaries (one of whom may be the depositor) where "the identity of the person entitled to payment is not determined until the occurrence of a contingency identified at the time the deposit is created."
January 31, 2024 at 01:12 PM
11 minute read
Adam Wolk, left, and Barbara Goodstein, right, of Mayer Brown. Courtesy photos
Introduction
Last June this column discussed two federal court cases showing the challenges faced by lawyers in structuring bank deposit arrangements, such as trusts and escrows, free of bankruptcy risk of the depositor. ("Trusts, Escrows and Property of the Estate (or Not)," 269 N.Y.L.J. 109 (June 8, 2023)). These two decisions, one by a bankruptcy court in the Southern District of New York involving an attorney escrow account, and the other by a federal district court in the Northern District of Texas involving a trust arrangement, reached the same conclusion—namely that the cash at issue was subject to claims of the depositor's creditors. These cases emphasize the continuing uncertainty across states of treatment of different structures intended to insulate cash from the risk of bankruptcy of its depositor. Fortunately, this uncertainty may soon be resolved by a uniform state statute proposed by the Uniform Law Commission.
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