For the purpose of this blog, I am going to assume that the annuity in question would be exempt had the decedent been alive.
At first, I thought the answer was simple:
Assuming the annuity was a retirement fund to begin with, the answer is yes, it continues to be a retirement fund because under the IRC, an inherited retirement fund is NOT treated as “inherited” if the spouse is the person who inherited it. That is in 28 U.S.C. 408(d)(3)(C)(ii)(II), quoted for convenience: Read more…
SB 308 is a new bill introduced by Senator Bob Wieckowski in the California State Senate that provides significant improvements to California’s current exemptions including:
- increasing the homestead to $300,000 for all individuals;
- removing the 6 month reinvestment requirement;
- increasing the exemption for vehicles to $6,000;
- establishing that bankruptcy alone is not an event of default; and
- creating a grubstake of $5,000 for self-employed individuals.
The complete text of the amendment can be found here.
Note: the link above is to the original proposal and is easy to read. The original proposal provided for a $700,000 exemption which was amended down to $300,000. A more difficult to read, updated version can be found here.
An odd couple you say? The skit put on at the Inns of Court meeting last week made me want to have another beer, then retire. There were three would-be clients who had three issues that I thought I knew (one I actually did). The poor lawyer, 40 years experience he kept saying, gave the wrong advice three times, started tipping the bottle and received advice from the state bar – very well done.
Client one had just sold their home. They had $65,000 proceeds in the bank. “That money’s safe if I file chapter 7 now – right?” ”No doubt about it, I’ve been doing this for 40 years.” Wrong. That exemption applies only if the debtor has actually filed a Declaration of Homestead prepetition. Gulp.
Client two had just sold their home. They had $65,000 proceeds in the bank. “That money’s safe if I file chapter 7 now – right?” “No doubt about it, I’ve been doing this for 40 years.” Wrong. That exemption applies only if the debtor actually reinvests the proceeds in a new home within six months from the sale of the first. The trustee can hold up the estate closing and wait for the reinvestment. No reinvestment, the proceeds magically become not exempt at the end of the six months. (I knew that one).
Client three still owned the home. They wanted to file chapter 7, sell the home and use the $175,000 proceeds for retirement. ”We can do that - right?” “No doubt about it, I’ve been doing this for 40 years.” Wrong – sort of. A secured creditor got relief from stay during the case and foreclosed. The debtors got the $175,000 from the sale. They did not reinvest it. At the end of the six months, the trustee was there with his hand out. The exemption applies again only if the debtor reinvests within six months. This is actually a new 9th Circuit case, In re Jacobson.