Macdonald Fernandez LLP

03/02/2023

Although we are disappointed with the outcome of our Supreme Court case, it will be very interesting to see how the outcome will impact bankruptcy cases involving vicarious liability for fraud. Our very own Iain Macdonald will be a panelist in this discussion. Please feel free to sign up for this informative webinar and get CLE credit

Hear from one of the lawyers (Iain Macdonald of San Francisco) who represented Mrs. Bartenwerfer at the U.S. Supreme Court. The Hon. Barry Russell and J. Scott Bovitz will provide their own views.

12/05/2022

Today , Iain Macdonald and Reno Fernandez are observing oral arguments at the Supreme Court! Tomorrow, our case gets argued, and they will be at counsel table, representing the Petitioner in Bartenwerfer v. Buckley. Wish us luck!

11/17/2022

Probate

What Is Probate And When Does This Occur?

Probate is a court-supervised legal process which can become necessary after:

A person has died,
It appears that the person’s property value exceeds the probate threshold ($166,250; adjusted periodically), and
The transfer of property is not controlled by asset title (ex: through a living trust, joint tenancy, etc.)
The probate process is used to:

Authorize someone to administer the estate (often called a “personal representative”, “executor”, or “administrator”)
Determine what assets and debts the deceased person had
Pay the deceased person’s debts where appropriate
Identify beneficiaries
Distribute the assets after the debts and expenses of administration have been paid
Why Should You Avoid Probate?

Probate is an incredibly expensive pain-in-the-neck. There are many significant disadvantages to the probate process, such as:

Cost – Probate is one of the most expensive ways to transfer property. Probate expenses (such as compensation to the personal representative and to the representative’s attorney) are paid from the probate estate; the amount is determined by law and is basically a percentage of the estate. Here is a breakdown of the ordinary personal representative’s and attorney’s fees (compensation) at different estate values:

$200,000 estate → $14,000 in fees
$500,000 estate → $26,000 in fees
$1M estate → $46,000 in fees
$1.5M estate → $56,000 in fees
$2.5M estate → $76,000 in fees
Additional fees may be paid by the estate if the personal representative or attorney perform additional work (called “extraordinary services”). Fees for extraordinary services are typically charged by the hour.

Lots of Paperwork – Probate involves the court system which means there can be extensive paperwork and accountings which must be filed with the court.

Time – Probate can take a long time to complete, anywhere from several months to years.

Lack of Privacy – Probate is a matter of public record, so anyone can see what the deceased person’s assets and debts are, as well as the names of the beneficiaries.

For more information about the Probate Process In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (209)521-8100 today.

Are There Ways To Avoid Probate?
Typically, the best way to avoid probate is to use a revocable living trust to transfer assets at death. Living trusts often make things much easier on the surviving family members because they frequently:
· Cost less to administer than probate
· Streamline the process for transferring assets
· Provide far more privacy than probate
· Create organization
· Reduce the risk of getting a court involved in your estate
Other Alternatives to Probate
Certain accounts like joint tenancy, transfer-on-death (“TOD”) or payable-on-death (“POD”) accounts can also be used to transfer assets at death. However, there are risks in relying on these mechanisms to transfer property.
Joint Tenancy & Its Risks – Joint tenancy is designed to work like this: if two people are joint tenants on an account and one dies, the survivor inherits whatever is in the account. This can work ok, but often what happens is that after the first joint tenant dies, the surviving joint tenant never updates the account to add a new joint tenant and never changes the account to a pay-on-death or transfer-on-death account (which would enable the surviving tenant to name a designated beneficiary). Consequently, when the surviving joint tenant dies and there is no designated beneficiary or joint tenant to inherit the contents of the account, this can create a situation in which the probate process may be needed to determine who should inherit the asset. There may also be difficulties with creditors; if one joint tenant defaults on a loan the creditor may satisfy the debt by taking money from the joint account (even when the other joint tenant is not a borrower).
TOD or POD Accounts & Their Risks – These are accounts designed to enable the accountholder to identify a beneficiary for the account. A big problem with these accounts is that many times there is no beneficiary listed on the account. Another problem that can arise is when the designated beneficiary dies before the accountholder. If there is no ascertainable, living beneficiary on the account, that could create a probate problem.
Other problems with joint tenancy, TOD, and POD accounts
(1) There are no control mechanisms in these accounts to protect younger beneficiaries from themselves. One of the most valuable aspects of using a living trust is that the trust creator can include restrictions on gifts to prevent beneficiaries from wasting their inheritances. For example, a common restriction we put into trusts is an age requirement – beneficiaries must be at least 30 years old (for example) before they are allowed to receive their inheritance outright. If a beneficiary is under 30 years of age, then that beneficiary’s gift will remain in trust until the beneficiary turns 30. In the meantime, the gift will stay in the trust where it is to be protected and the beneficiary will only be allowed to receive distributions for a good reason (like to pay for schooling, rent, food, gas, medical expenses, etc.). These kinds of control mechanisms are not available when the deceased person uses joint tenancy accounts, POD accounts, or TOD accounts.
(2) There is no mechanism inherent in joint tenancy, POD, or TOD accounts to allow for another person to manage these assets on the accountholder’s behalf in the event the accountholder gets sick or hurt and cannot manage his or her assets. If the accountholder puts these assets into a living trust, the terms of the trust will authorize a successor decision-maker to manage these accounts for the accountholder any time the accountholder is unable to manage his or her assets.
For more information about Ways To Avoid Probate In California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (209)521-8100 today.
The ideas discussed in this article are for general informational purposes only and should not be construed as legal advice. The reader should consult with an attorney to determine what is in the reader’s own best interest.

11/17/2022

Trust Administration
What Is Trust Administration?

Through the creation of a living trust, a person can protect his/her assets from the probate process upon death, saving loved ones the time, the expense, and the public exposure of a long, drawn-out legal proceeding. Probate is a legal process through which a deceased person’s assets and debts are handled, and it should generally be avoided due to its cost, extensive court paperwork, and exposure to the public. Unlike probate, the creation and administration of a living trust is usually private. The trust administration process is used to pay off creditors and distribute assets from an estate to the designated beneficiaries.
In California, a successor trustee—often a close friend or family member of the person who created the trust—is granted the authority to act on the person’s behalf and becomes responsible for managing the assets held within the trust. Serving as a trustee during a trust administration involves many important responsibilities, such as filing income tax returns, managing those investments held by the trust, and maintaining communication with the beneficiaries on a regular basis.
Not only does the trustee have a fiduciary duty under California law to perform their role in accordance with the trust’s terms for the benefit of the beneficiaries, but they also can incur legal liability if they mishandle their responsibilities. As you can imagine, being a trustee comes with plenty of paperwork during a trust administration.
Understanding and fulfilling the responsibilities imposed on a trustee by California law and the trust itself can feel overwhelming, but an experienced trust administration attorney can guide you through the process and help you come to a firm understanding of your new role. With expert guidance, you can eliminate a lot of stress and uncertainty. Trust administration lawyer Amber K. Gill can help you perform your trustee duties correctly. Trustees often need guidance on:
· What records they need to keep and how to maintain those records
· What information they need to provide to beneficiaries
· Strategies and legal options available to resolve problems
· Navigating court proceedings
· When and how to modify or terminate a trust
· Determining appropriate and lawful trustee compensation

What Are The Steps In The Trust Administration Process?
Every trust administration is a little different because the terms of a particular trust will in part determine what steps must be taken. However, in general, the basic steps of a trust administration include the following:
Read the trust to determine the extent of the trustee’s responsibilities.
Determine if the trust should be modified in any way or if there are any ambiguities in the trust’s language which need clarification. Sometimes there are problems with the trust that need to be resolved before the real administration can begin. Those problems may be resolved with or without the court, but either way, they should be resolved ASAP.
Obtain a tax identification number (aka employer identification number or “EIN”) so that the tax authorities know that this particular trustee is serving as trustee of this trust.
Inform certain persons of the existence of the trust (for example, beneficiaries and nominated successor trustees).
Create an inventory of the assets and debts.
Protect and manage the assets in the trust. This requires the trustee to transfer title to his/her name as trustee of the trust. The trustee will also need to ensure the assets are properly insured and set up a bookkeeping system to track the trust income and expenses.
File the deceased person’s tax returns; pay taxes owed.
File fiduciary income tax returns.
Give information to the beneficiaries about income and expenses that flow into and out of the trust (usually done in the form of an accounting).
Keep beneficiaries reasonably well-informed about what the trustee is doing to administer the trust. This is an important part of managing beneficiaries. Beneficiaries tend to get suspicious when they feel like the trustee is not being forthcoming with information about what is going on.
Ultimately distribute the assets to the beneficiaries.
There is a lot to know to be a competent trustee, and it is very common for trustees to make mistakes–and fail to follow the law–without even knowing it. Working with an attorney who is experienced in trust administration can be a great way to:
Become informed about what the law requires from a trustee
Learn how to best fulfill the responsibilities that come with the trustee’s job
Help the trustee prepare the required paperwork
Will A Trustee Be Compensated For Their Role?
In the state of California, a trustee can usually be paid for the work they perform in their role administering the trust. The fee depends on the circumstances of the particular trust. Generally the trustee may charge a reasonable hourly rate or a small percentage of the trust assets, though many waive this fee if they’re also a beneficiary.
Amber K. Gill is a seasoned trust administration attorney who can help you determine appropriate compensation based on your particular situation.

11/17/2022

Estate Planning

Estate planning is about helping you protect yourself, your loved ones and your assets during your lifetime and after.
Why Do You Need An Estate Planning Attorney?
Estate planning with our approach enables you to:
· Help your family: Avoid putting your family through the stress that comes with the probate process while they are trying to adjust to life without you.
· Protect your assets: Save potentially thousands of dollars in probate fees and estate taxes so that more of your assets will go to your loved ones rather than to attorneys and the government.
· Maintain control over your assets: Control who receives your assets after your lifetime, how much they receive and under what conditions. Estate planning is a great way to ensure your assets will go to the people and organizations you feel will appreciate the gifts and use them in ways that are consistent with your values and beliefs.
· Protect your beneficiaries from themselves: Structure gifts to your children and grandchildren so that they can receive money for things like education, buying a home or retirement, without giving them unrestricted access to any money until the age(s) you deem appropriate.
· Protect minor children: Identify whom you would want to raise your young children in the event you and your child’s other parent become incapacitated or pass away. Identifying your guardianship preferences before it’s too late can make the guardianship process easier on your kids.
· Have less stress: No matter what happens to you, you have already predetermined how you and your family will be taken care of and by whom.
· Prevent family arguments: When your financial and medical wishes are clearly spelled out in a comprehensive estate plan, there is often more family support for your decisions and less second-guessing by family members.
How Can Mcdonald Fernandez LLP Help You?
Integrated Estate Plans: We help our clients by crafting customized estate plans using tools such as:
· Wills
· Revocable trusts
· Irrevocable trusts
· Durable powers of attorney
· Advance health care directives

Probate and Estate Administration: When a person passes away, many things have to be done to complete the administration of the estate. We can assist executors and trustees with their responsibilities, including:
· Preparing or reviewing documents for the court
· Distributing property to heirs and beneficiaries
· Communicating required information to beneficiaries
Choosing Fiduciaries: An executor should be named in a will to administer the estate. Similarly, a trustee should be named in a trust to administer a trust estate. Executors and trustees are fiduciaries, which means they are required to:
· Put the beneficiaries’ (or estate’s) interests ahead of their own personal interests and
· Remain impartial
Most people’s initial inclination is to name their children as their fiduciaries in their estate plans. We have found, however, that sometimes children are not the best choice for this role. This is especially true when the children do not have the skills, interest, time or ability to remain impartial or put their personal interests aside. There are professional fiduciaries we work with who can step into the role of executor or trustee in situations like these.
Taxes: We assist our clients with various tax-related issues, including:
· Estate taxes
· Gift taxes
· Property taxes

07/11/2022

In Case you didn't know.... in addition to bankruptcy, our firm also specializes in Estate Planning and Asset Preservation matters. With the acquisition of Tuttle Van Konynenburg LLP of Modesto, CA, we have been providing estate planning and probate services for many years. Our Senior Attorney Amber K. Gill is a Certified Estate Planner (NICEP), a Registered Financial Consultant, Insurance Agent and has an MBA in Business Administration. She is well versed in entity formations, dissolutions and business contracts, as well as estate planning and asset preservation.

Protecting and Helping Our Clients Grow

We are taking new clients, so please feel free to refer us

[email protected]

05/20/2022

The firm is restructuring following the departure of Reno F.R. Fernandez to pursue appellate law with California Appellate Law Group, an association of appellate lawyers around the country. While we are saddened by his departure, we understand he must follow his true passion for appellate work and tend to his family needs.

He will also continue his involvement with the United States Supreme Court appeal of In re Bartenwerfer, a chapter 7 debtor case, which began in 2013 in the U.S. Bankruptcy Court for the Northern District of California, San Francisco Division, a nondischargeability action. The firm initially obtained a favorable decision in the Bankruptcy Court, which was then upheld on appeal to the Bankruptcy Appellate Panel. The Ninth Circuit Court of Appeals, believing that the decision was inconsistent with the 1888 Supreme Court decision of In re [See Below], reversed. Following an unsuccessful Petition for Rehearing En Banc, the Firm filed a Petition on Writ of Certiorari with the United States Supreme Court, which was granted on May 2, 2022.

Bankruptcy and related litigation.

Such litigation can be complicated, messy and time consuming and unavoidable. Aside from its SCOTUS aspect, Bartenwerfer is not atypical, described by the Wall Street Journal as a "house flip gone bad".

Mr. & Mrs. Bartenwerfer sold a house in 2008 after extensive renovations. The buyer, one Buckley took issue with a number of.

Chapter 11

Mediation


Ninth Circuit Court of Appeals Ruling:

Strang v. Bradner, 114 U.S. 555, 561 (1885); see also In re Cecchini, 780 F.2d 1440, 1444 (9th Cir. 1986) (holding a partner responsible for a tortfeasor/partner’s fraud when the fraud was performed “on behalf of the partnership and in the ordinary course of the business of the partnership”), overruled in other part by Kawaauhau v. Geiger, 523 U.S. 57 (1998). Mrs. Bartenwerfer’s debt is nondischargeable regardless of her knowledge of the fraud. By rejecting Strang and Cecchini, in favor of the “knew or should have known” standard, the bankruptcy court applied the incorrect legal standard for imputed liability in a partnership relationship. We reverse the bankruptcy court’s judgment regarding imputed liability against Mrs. Bartenwerfer under § 523(a)(2)(A), and we remand to the bankruptcy court with instructions to enter judgment in favor of Buckley and against Mrs. Bartenwerfer.