Court Opinion

ID: 3153816
Source: CourtListenerOpinion
Date Created: 2015-11-10 23:07:04.614196+00
Date Added: 2024-06-11T12:00:58.096842
License: Public Domain

November 10 2015

                                   OP 15-0302
                                                                                     Case Number: OP 15-0302

           IN THE SUPREME COURT OF THE STATE OF MONTANA

                                  2015 MT 318

IN RE:

CHRISTOPHER COLLIN GOLZ,

          Debtor.

ORIGINAL PROCEEDING:          Certified Question from the United States Bankruptcy
                              Court for the District of Montana
                              Cause No. 14-61350-7
                              Honorable Ralph B. Kirscher, Presiding Judge

COUNSEL OF RECORD:

          For Appellant:

                 James J. Screnar, Screnar Law Firm; Bozeman, Montana

          For Appellee:

                 Joseph V. Womack, Waller & Womack, P.C.; Billings, Montana

                                            Submitted on Briefs: October 21, 2015
                                                       Decided: November 10, 2015

Filed:

                 __________________________________________
                                   Clerk
Justice James Jeremiah Shea delivered the Opinion of the Court.

¶1     The United States Bankruptcy Court for the District of Montana certified the

following question to this Court:

       Whether, under Montana’s liberal construction of exemptions, a debtor
       may claim an exemption in an inherited Individual Retirement Account
       pursuant to § 25-13-608(1)(e), MCA.

We accepted the certified question and accepted briefs from the Debtor and the Chapter 7

Trustee appointed to the Debtor’s bankruptcy.

¶2     We answer the question: No.

                 PROCEDURAL AND FACTUAL BACKGROUND

¶3     The following factual background is taken from the undisputed facts related by the

Bankruptcy Court in its certification order:

¶4     Christopher Collin Golz, the Debtor, filed for Chapter 7 Bankruptcy on

December 1, 2014. Joseph V. Womack was appointed Trustee of the case. Golz is 40

years old.    He is employed by Simms Fishing Products as a Customer Care

representative. Golz is married; his spouse did not file bankruptcy with him.

¶5     Item number 12 on Golz’s Schedule B (list of personal property) is a

“MorganStanley [sic] IRA.       Acct.   #319-116461-409” valued at $6,905.65.       Golz

inherited the Individual Retirement Account (IRA) from his mother upon her death.

Womack requested and received information from Golz regarding the IRA and learned

that it was an inherited traditional IRA as set forth on the Morgan Stanley Client

Statement. Golz claimed the inherited IRA as exempt property from the bankruptcy

estate. Womack objected to Golz’s claim of exemption.

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¶6     Golz has made no personal contributions to the inherited IRA, and he cannot

invest additional money in the account. Golz is required to withdraw money from the

inherited IRA account no matter how far he is from retirement. Golz may withdraw the

entire balance of the account at any time and use it for any purpose without penalty.

                                     DISCUSSION

¶7     Whether, under Montana’s liberal construction of exemptions, a debtor may claim
       an exemption in an inherited Individual Retirement Account pursuant to
       § 25-13-608(1)(e), MCA.

¶8     When a debtor files for bankruptcy, an estate is created consisting of all legal and

equitable property interests of the debtor as of the date of filing. 11 U.S.C. § 541(a)

(2012). A debtor is allowed to exempt certain property from the bankruptcy estate.

11 U.S.C. §§ 541(a)(1), 522 (2012). Property that may be exempt from the bankruptcy

estate is set forth at 11 U.S.C. § 522(d). States may opt out of the federal exemption

statutes pursuant to 11 U.S.C. § 522(b)(2).            Montana has opted out of the federal

exemptions. Section 31-2-106, MCA; In re Archer, 2006 MT 82, ¶ 7, 332 Mont. 1,

136 P.3d 563.

¶9     Property that may be exempted in a bankruptcy proceeding in Montana includes

property described in Title 25, chapter 13, part 6, of the Montana Code Annotated.

Section 31-2-106(1),   MCA.        Relevant       to    the   certified   question   before   us,

§ 25-13-608(1)(e), MCA, provides that debtors may claim exemptions, without

limitation, in “individual retirement accounts, as defined in 26 U.S.C. 408(a), to the

extent of deductible contributions made before the suit resulting in judgment was filed

and the earnings on those contributions . . . .”         The Internal Revenue Code defines

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“individual retirement account” as “a trust created or organized in the United States for

the exclusive benefit of an individual or his beneficiaries . . . .” 26 U.S.C. § 408(a)

(2012).

¶10    The U.S. Supreme Court has defined an inherited IRA as “a traditional or Roth

IRA that has been inherited after its owner’s death.” Clark v. Rameker, ___ U.S. ___,

___, 134 S. Ct. 2242, 2245 (2014) (citing 26 U.S.C. §§ 408(d)(3)(C)(ii), 408A(a) (2012)).

“When anyone other than the owner’s spouse inherits the IRA, he or she may not roll

over the funds; the only option is to hold the IRA as an inherited account.” Clark,

___ U.S. at ___, 134 S. Ct. at 2245.

¶11    The Montana Constitution expressly states: “The legislature shall enact liberal

homestead and exemption laws.” Mont. Const. art. XIII, § 5. Montana courts give

liberal construction to exemption laws. Archer, ¶ 15. However, the liberal construction

of a law cannot disregard the plain language of the statute. Archer, ¶ 15.

¶12    Golz argues that, because Montana’s exemption laws are to be interpreted

liberally, an inherited IRA should be exempt like other IRAs under § 25-13-608(1)(e),

MCA. However, in Clark, the U.S. Supreme Court held that inherited IRAs are not

retirement funds exempt from a bankruptcy estate under 11 U.S.C. § 522(b)(3)(C), and

the Court distinguished traditional and Roth IRAs defined in 26 U.S.C. §§ 408(a) and

408A, from inherited IRAs. Clark, ___ U.S. at ___, 134 S. Ct. at 2244-45. In drawing

the distinction, the Court noted that the holder of an inherited IRA may never invest

money in the account under 26 U.S.C. § 219(d)(4) (2012); funds must be withdrawn no

matter how close the holder is to retirement under 26 U.S.C. §§ 401(a)(9)(B), 408(a)(6)

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(2012); and the entire balance of the account may be withdrawn at any time without

penalty under 26 U.S.C. § 72(t)(2)(A)(ii) (2012). Clark, ___ U.S. at ___, 134 S. Ct. at

2247.

¶13     The Montana Legislature also distinguished traditional and Roth IRAs from

inherited IRAs. In § 25-13-608(1)(e), MCA, the Legislature exempted IRAs “as defined

in 26 U.S.C. 408(a)” and Roth IRAs “as defined in 26 U.S.C. 408A.” The Legislature

did not exempt IRAs defined in other subsections of 26 U.S.C. § 408. In Clark, the U.S.

Supreme Court distinguished traditional and Roth IRAs defined in 26 U.S.C. §§ 408(a)

and 408A, from inherited IRAs. Inherited IRAs are not defined in 26 U.S.C. § 408(a) or

§ 408A. Rather, inherited IRAs are financial accounts with distinct legal characteristics

addressed in other sections of Title 26, as outlined above. “In the construction of a

statute, the office of the judge is simply to ascertain and declare what is in terms or in

substance contained therein, not to insert what has been omitted or to omit what has been

inserted.” Section 1-2-101, MCA. Under the plain language of § 25-13-608(1)(e), MCA,

inherited IRAs are not exempt from the bankruptcy estate.

                                    CONCLUSION

¶14     Our answer to the certified question is: No, under Montana law, a debtor may not

claim an exemption in an inherited IRA pursuant to § 25-13-608(1)(e), MCA.

                                                /S/ JAMES JEREMIAH SHEA

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We Concur:

/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ PATRICIA COTTER
/S/ LAURIE McKINNON
/S/ MICHAEL E WHEAT
/S/ JIM RICE

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