Opinion
Case No. 10-72587.
August 19, 2011
OPINION DENYING TRUSTEE'S OBJECTION TO DEBTOR'S CLAIM OF EXEMPTIONS
The matter before the Court is Trustee's Objection to Debtor's Claim of Exemptions (Docket No. 17).
I. BACKGROUND
Kelli Kalso ("Debtor") filed her Chapter 7 bankruptcy petition on October 25, 2010. On her Schedule B, Debtor listed her interest in the following IRAs: (1) Fidelity — $2,117; (2) Van Guard — $4,919; (3) Van Guard — $4,045; and (4) Van Guard Roth — $7,468. At the 341 Meeting of Creditors, Debtor testified that those IRAs were inherited from her father. On her Schedule C, Debtor claimed $18,549 of the inherited IRAs as exempt pursuant to 11 U.S.C. § 522(d)(12). On January 13, 2011, the Trustee filed an Objection to Debtor's Claim of Exemption of those IRAs. The Court held a hearing on the matter on February 24, 2011 and took the matter under advisement, allowing time for the parties to submit post-hearing briefs and for Debtor to provide additional documentation regarding the IRAs to the Trustee. The Court entered two orders extending the submission deadlines for the post-hearing briefs and additional documentation regarding the IRA accounts. Such were eventually filed.
Debtor indicated that the Van Guard Roth IRA was not property of the estate per Patterson v. Shumate.
There is no dispute as to the facts of this case. The only remaining issue is whether inherited IRAs can be exempted under 11 U.S.C. § 522(d)(12). The Trustee argues that inherited IRA funds cannot be considered "retirement funds" under § 522(d)(12) because they were not funds contributed to the IRA by the Debtor. Debtor argues that the explicit language of § 522(d)(12) does not distinguish inherited IRAs from IRAs in which a debtor contributed the funds.
II. DISCUSSION
Pursuant to 11 U.S.C. § 522(d)(12), a debtor is permitted to exempt certain property, including "Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986." "A Section 522(d)(12) exemption must meet two requirements: (1) the amount the debtor seeks to exempt must be retirement funds, and (2) those retirement funds must be in an account that is exempt from taxation under Section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code." Chilton v. Moser (In re Chilton). 444 B.R. 548, 551 (E.D. Tex. 2011), rev'g 426 B.R. 612 (Bankr. E.D. Tex. 2010) (citing In re Nessa, 426 B.R. 312, 314 (8th Cir. BAP 2010).
There is no controlling authority in the Sixth Circuit regarding whether inherited IRAs can be exempted under § 522(d)(12). The Trustee has cited the following cases to support his position: In re Chilton, 426 B.R. 612 (Bankr. E.D. Tex. 2010) (holding that an inherited IRA is not equivalent to an ordinary IRA for purposes of determining whether the account contains "retirement funds" that may be exempted under Section 522(d)(12)), rev'd, 444 B.R. 548 (E.D. Tex. 2011); In re Jarboe, 365 B.R. 717 (Bankr. S.D. Tex. 2007) (holding that an inherited IRA cannot be exempted under the Texas exemption statute); In re Sims, 241 B.R. 467 (Bankr. N.D. Okla. 1999) (holding that an inherited IRA cannot be exempted under the Oklahoma exemption statute); In re Klipsch, 435 B.R. 586 (Bankr. S.D. Ind. 2010) (holding that an inherited IRA cannot be exempted under Indiana exemption statute); In re Kirchen, 344 B.R. 908 (Bankr. E.D. Wis. 2006) (holding that an inherited IRA cannot be exempted under the Wisconsin exemption statute and that an inherited IRA does not constitute a retirement benefit nor serve a retirement purpose); In re Ard, 435 B.R. 719 (Bankr. M.D. Fla. 2010) (holding that an inherited IRA cannot be exempted under the Florida exemption statute). Only one of the cases the Trustee cited, In re Chilton, 426 B.R. 612 (Bankr. E.D. Tex. 2010), considered the question of whether an inherited IRA can exempted under § 522(d)(12). In that case, the bankruptcy court held that an inherited IRA is not equivalent to an ordinary IRA for purposes of determining whether the account contains "retirement funds" that may be exempted under § 522(d)(12). That case was reversed by a decision of the United States District Court, E.D. of Texas on March 16, 2011. Chilton v. Moser (In re Chilton). 444 B.R. 548 (E.D. Tex. 2011). The other cases the Trustee cited, listed above, all considered the question at issue in the context of various state exemption statutes.
In Chilton v. Moser, the court considered several cases in which inherited IRAs were found to be exempt under either § 522(d)(12) or § 522(b)(3)(C). Chilton v. Moser (In re Chilton). 444 B.R. at 551-52. That court found, for the reasons discussed at length by the Nessa, Kuchta, Thiem, and Weilhammer courts, that: "(1) the funds in an inherited IRA are `retirement funds' within the meaning of Section 522(d)(12), and (2) the inherited IRA is tax-exempt under 26 U.S.C. § 408(e). Therefore, the inherited IRA can be exempted under Section 522(d)(12)." Id. at 552 (citing In re Nessa, 426 B.R. (8th Cir. BAP 2010); In re Tabor, 433 B.R. 469 (Bankr. M.D. Pa. 2010); In re Kuchta, 434 B.R 837 (Bankr. N.D. Ohio 2010); In re Thiem, 443 B.R 832 (Bankr. D. Ariz. 2011); In re Weilhammer, 2010 WL 3431465 (Bankr. S.D. Cal. 2010)). That Court stated that § 522(d)(12) "does not require that the retirement funds be the Debtor's." Id.
This Court adopts the reasoning set forth in Chilton v. Moser and Weilhammer and concludes that the Debtor's inherited IRAs can be exempted under § 522(d)(12). The language of § 522(d)(12) does not make a distinction as to who contributed the funds to the IRA. To conclude otherwise would require reading meaning into § 522(d)(12) that its language belies.
III. CONCLUSION
Accordingly, the Trustee's Objection to Debtor's Claim of Exemptions is overruled. An order is being concurrently entered.