December 11, 2019
Supreme Court
No. 2018-94-M.P. (BK 16-11859)
In re: Lynette Kapsinow :
NOTICE: This opinion is subject to formal revision before publication in the Rhode Island Reporter. Readers are requested to notify the Opinion Analyst, Supreme Court of Rhode Island, 250 Benefit Street, Providence, Rhode Island 02903, at Telephone 222- 3258 of any typographical or other formal errors in order that corrections may be made before the opinion is published. Supreme Court
No. 2018-94-M.P. (BK 16-11859) (Dissent begins on Page 10)
Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.
OPINION
Justice Robinson, for the Court. This case comes before us pursuant to an April 12,
2018 order of the United States Bankruptcy Court for the District of Rhode Island (the
Bankruptcy Court) certifying a question to this Court in accordance with Article I, Rule 6(a) of
the Supreme Court Rules of Appellate Procedure.1 The certified question reads as follows:
“Whether a debtor may claim an exemption in an inherited Individual Retirement Annuity [IRA], including one inherited from a non-spouse, pursuant to R.I. Gen. Laws § 9-26-4(11).”
1 Article I, Rule 6(a) of the Supreme Court Rules of Appellate Procedure provides as follows:
“This Court may answer questions of law certified to it by the Supreme Court of the United States, a Court of Appeals of the United States, or of the District of Columbia, or a United States District Court when requested by the certifying court if there are involved in any proceeding before it questions of law of this state which may be determinative of the cause then pending in the certifying court and as to which it appears to the certifying court there is no controlling precedent in the decisions of this Court.”
The exercise of jurisdiction anticipated by the above-quoted rule is discretionary. See Mancini v. City of Providence, 155 A.3d 159, 161 n.1 (R.I. 2017) (citing In re Tetreault, 11 A.3d 635, 639 (R.I. 2011)). On May 21, 2018, we issued an order reflecting our decision to exercise that discretion in the instant case and to accept the certified question for determination.
-1- For the reasons set forth in this opinion, we answer the certified question in the
affirmative—G.L. 1956 § 9-26-4(11) does permit a debtor to claim an exemption for an inherited
Individual Retirement Annuity (IRA).2
I
Facts and Travel3
The parties reached an agreed statement of facts, which was attached to and incorporated
in the Certification Order transmitted to this Court from the Bankruptcy Court. The parties
further stipulated that “there are no outstanding issues of disputed fact before the Court.”
Accordingly, in relating the facts of this case, we rely solely on the agreed statement of facts.
The debtor, Lynette Kapsinow, “filed a voluntary Chapter 7 [bankruptcy petition] on
October 31, 2016 * * *.” Stacy B. Ferrara (the Trustee) was appointed as the trustee for that
matter. As is permitted by 11 U.S.C. § 522(b), the debtor in this case opted for state exemptions.
See In re Strandberg, 253 B.R. 584, 586 (Bankr. D.R.I. 2000) (discussing the fact that Rhode
Island has not opted out of the federal bankruptcy exemption scheme and that, consequently, a
debtor in Rhode Island may choose either state or federal exemptions). The debtor’s bankruptcy
petition sought, under Rhode Island law, to exempt an IRA held by American Century
2 The acronym “IRA” is often used to stand for either Individual Retirement Annuity or Individual Retirement Account. In this case, the certified question specifically references an Individual Retirement Annuity. However, for the purposes of this opinion, our conclusion is the same whether we are presented with an Individual Retirement Annuity or an Individual Retirement Account. 3 We pause at the outset to note our appreciation for the additional submissions, in the form of amicus curiae briefs, which this Court has received—namely, one brief from the Association of Rhode Island Creditors’ Attorneys and one joint brief from the National Consumer Law Center, the National Consumer Bankruptcy Rights Center, and the National Association of Consumer Bankruptcy Attorneys.
-2- Investments in the sum of $84,962.88 (the inherited IRA) pursuant to Rhode Island state statute
§ 9-26-4(11). The Trustee objected.
The inherited IRA in question was inherited by the debtor from her late mother, Miriam
Kapsinow. At the time of her death, Miriam Kapsinow “owned an Individual Retirement
Annuity with Aviva Life and Annuity Company” (Aviva), of which the debtor was the
beneficiary. Miriam Kapsinow’s account was a “qualified retirement account as defined under
408 of the Internal Revenue Code.” On April 15, 2010, following her mother’s death, the debtor
“executed an Annuity Claim Form seeking claim to [Miriam Kapsinow’s IRA] and requested
that the proceeds be ‘moved to an Inherited IRA.’” Aviva then opened an Inherited Annuity
Account for the debtor.
On June 7, 2012, the debtor directed Aviva to “surrender and transfer all of her beneficial
interest in and to” the inherited IRA to American Century Investments. American Century
Investments invested half of the balance in an “Ultra Fund” and half in a “Select Fund” with the
account titled as follows: “SSBT&T Cust for the IRA Bene of Lynette S. Kapsinow as Bene of
Miriam Kapsinow.”
Since the death of the debtor’s mother, the debtor has “had access to all of the funds in
the Inherited IRA for any reason, without penalty; could not make any further contributions into
the Inherited IRA; was required to take minimum distributions from the Inherited IRA Account;
and must keep the Inherited IRA separate from any other accounts she has, if any.” Additionally,
the agreed statement of facts noted that “[t]he [d]ebtor has never made any contributions to the
Inherited IRA.” As of March 31, 2017, the value of the inherited IRA was $94,421.87.
-3- On April 12, 2018, the Bankruptcy Court certified to this Court the question about the
availability of an exemption in bankruptcy with respect to the inherited IRA with which we now
contend. We are limited in our review to the legal question which was certified to us.
II
The Certified Question
“Whether a debtor may claim an exemption in an inherited Individual Retirement
Annuity, including one inherited from a non-spouse, pursuant to R.I. Gen. Laws § 9-26-4(11).”
III
Standard of Review
Certified questions are questions of law; and, consequently, this Court reviews them in a
de novo manner. Mancini v. City of Providence, 155 A.3d 159, 161 (R.I. 2017); see also In re
Tetreault, 11 A.3d 635, 639 (R.I. 2011). What is more, as we have consistently stated, “this
Court adheres to the de novo standard when reviewing issues of statutory construction.”
Mancini, 155 A.3d at 161; see also DeMarco v. Travelers Insurance Co., 26 A.3d 585, 616 (R.I.
2011).
IV
Analysis
It has long been a cornerstone of our statutory construction jurisprudence that “[i]f a
statute is clear and unambiguous we are bound to ascribe the plain and ordinary meaning of the
words of the statute and our inquiry is at an end.” Olsen v. DeMayo, 210 A.3d 431, 435 (R.I.
2019) (internal quotation marks omitted). Only when we determine that a statute is “susceptible
of more than one meaning, [do] we employ our well-established maxims of statutory
construction in an effort to glean the intent of the Legislature.” Id. (internal quotation marks
-4- omitted). We also note that “under no circumstances will this Court construe a statute to reach
an absurd result.” Mendes v. Factor, 41 A.3d 994, 1002 (R.I. 2012) (internal quotation marks
omitted).
We begin our inquiry with the statutory section at issue. Section 9-26-4(11) provides as
follows:
“The following goods and property shall be exempt from attachment on any warrant of distress or on any other writ, original, mesne, or judicial:
“* * *
“An individual retirement account or individual retirement annuity as defined in the Internal Revenue Code, 26 U.S.C. §§ 408 and 408A,[4] and the payments or distributions from such an account or annuity, except that this exemption does not apply to any of the following: (i) An order of a court pursuant to a judgment of divorce or separate maintenance. (ii) An order of a court concerning child support. (iii) Contributions to an individual retirement account, or premiums on an individual retirement annuity, including the earnings or benefits from those contributions or premiums that constitute an excess contribution within the meaning of Section 4973 of the Internal Revenue Code, [26 U.S.C. § 4973].” (Emphasis added.)
In our judgment, the language of § 9-26-4(11) clearly and unambiguously provides an exemption
for an IRA “as defined in * * * 26 U.S.C. § * * * 408.” Accordingly, the question we must ask
ourselves is whether an inherited IRA is defined in § 408.
When we turn our attention to § 408, we find that § 408(a) defines “individual retirement
account,” and § 408(b) defines “individual retirement annuity.” Later, in § 408(d)(3)(C)(ii),
which deals with the rollover treatment of IRAs for tax purposes, it is provided as follows:
4 We note that 26 U.S.C. § 408A applies specifically to Roth IRAs, with which we are not concerned in this opinion.
-5- “Inherited individual retirement account or annuity.--An individual retirement account or individual retirement annuity shall be treated as inherited if-- (I) the individual for whose benefit the account or annuity is maintained acquired such account by reason of the death of another individual, and (II) such individual was not the surviving spouse of such other individual.”
Thus, we are tasked with determining whether the just-quoted language is a definition.
After a painstaking review of the statutory scheme at issue and after thoughtful
consideration of the arguments of the parties, we simply have not been swayed from our
considered judgment that the language of both § 9-26-4(11) and § 408 is clear and unambiguous.
Section 408 clearly defines both individual retirement annuities and individual retirement
accounts. Then said section goes further and, in the opinion of this Court, clearly defines an
inherited IRA as well. See § 408(d)(3)(C)(ii). For the purposes of this case, it matters not that
the term inherited IRA is defined in a statutory section devoted to the rollover treatment of IRAs
for tax purposes. It is clear that the General Assembly included IRAs as defined in any and all
parts of § 408, not just § 408(a) and/or (b). The General Assembly was certainly free to restrict
exemptions to IRAs as defined in § 408(a) and/or (b). However, in this case, it chose not to do
so. Consequently, we are constrained to interpreting the language of the statute before us. See
Powers v. Warwick Public Schools, 204 A.3d 1078, 1089 (R.I. 2019) (“If the General Assembly
had intended to include work-sharing benefits in the average weekly wage calculation it would
certainly have been free to do so (and it remains free to choose to do so prospectively), but we
are constrained by the statute before us.”); see also State v. LeFebvre, 198 A.3d 521, 527 (R.I.
2019) (“It is not for this Court to determine whether a statute enacted by the General Assembly
‘comports with our [own] ideas of justice, expediency or sound public policy.’”); Felix
Frankfurter, Some Reflections on the Reading of Statutes, 47 Colum. L. Rev. 527, 545 (1947)
-6- (“In a democracy the legislative impulse and its expression should come from those popularly
chosen to legislate, and equipped to devise policy, as courts are not.”).5
Since it is readily apparent to this Court that the statutory sections at issue are clear and
unambiguous, our inquiry is at an end. We need only apply the plain and ordinary meaning of
the words in the statute.6 See Olsen, 210 A.3d at 435. We need not involve ourselves in this
case with the venerable maxims of statutory construction or with weighing policy arguments for
or against the appropriateness of an exemption in this case. Rather, we look solely to the
pellucid dictates of the General Assembly. Accordingly, under the plain and ordinary meaning
of the language in § 9-26-4(11) and § 408, an inherited IRA is defined under § 408, and it is,
therefore, exempt under § 9-26-4(11).7
5 We are wholly in accord with the following jurisprudential principle nicely articulated by the United States Supreme Court:
“[The Court’s] individual appraisal of the wisdom or unwisdom of a particular course consciously selected by the Congress is to be put aside in the process of interpreting a statute. Once the meaning of an enactment is discerned * * *, the judicial process comes to an end. We do not sit as a committee of review, nor are we vested with the power of veto.” Tennessee Valley Authority v. Hill, 437 U.S. 153, 194-95 (1978). 6 Although we need not rely on this maxim, we note that G.L. 1956 § 9-26-4(11) is a remedial statute, and this Court has stated that, “where the statute is remedial, one which affords a remedy, or improves or facilitates remedies already existing for the enforcement of rights or redress of wrongs, it is to be construed liberally.” Gem Plumbing & Heating Co., Inc. v. Rossi, 867 A.2d 796, 811 (R.I. 2005) (internal quotation marks omitted). 7 We are aware that numerous states have dealt with the issue of a bankruptcy exemption for an inherited IRA under state law. See, e.g., In re Mosby, No. 15-9153-JWL, 2015 WL 6610988 (D. Kan. Oct. 30, 2015); Todd v. Endurance American Insurance Co., 596 B.R. 79 (N.D.N.Y. 2019); In re: Arehart, No. 17-01678-TLM, 2019 WL 171466 (Bankr. D. Idaho Jan. 10, 2019); In re: Hamm, 586 B.R. 745 (Bankr. N.D. Ill. 2018); In re: Kara, 573 B.R. 696 (Bankr. W.D. Tex. 2017); In re Pacheco, 537 B.R. 935 (Bankr. D. Ariz. 2015); In re Everett, 520 B.R. 498 (E.D. La. 2014); In re Navarre, 332 B.R. 24 (Bankr. M.D. Ala. 2004); In re Golz, 360 P.3d 1142 (Mont. 2015). While we have read and considered those cases, in addition to other cases
-7- That being said, we will briefly comment on the possible relevance of the United States
Supreme Court’s opinion in Clark v. Rameker, 573 U.S. 122 (2014), which was raised on appeal
by the Trustee. In that case, the Court ultimately concluded that, under the federal bankruptcy
exemption statute, in particular 11 U.S.C. § 522(b)(3)(C), the term “retirement funds” did not
include inherited IRAs. Clark, 573 U.S. at 124, 133. In so doing, the Court discussed the factors
that distinguish a traditional IRA from an inherited IRA—viz., the fact that holders of inherited
IRAs may never invest additional funds into the account; the fact that “holders of inherited IRAs
are required to withdraw money from such accounts, no matter how many years they may be
from retirement;” and the fact that holders of inherited IRAs may “withdraw the entire balance of
the account at any time—and for any purpose—without penalty.” Id. at 128-30. In Clark, the
Court further addressed the policy reasons for exempting IRAs and determined that those policy
considerations did not suggest that inherited IRAs should have exempt status under the federal
bankruptcy statute. Id. at 129-30.
However, while Clark is certainly instructive, it is not controlling on this Court. The
Court in Clark was construing the language of a federal statute, specifically the meaning of the
term “retirement funds,” while the question before us involves completely different language
contained in a Rhode Island state statute. Indeed, § 9-26-4(11) never uses the term “retirement
funds.” Additionally, our General Assembly was certainly free to enact a statute that provides
greater protections to the debtor than does its federal counterpart; and, in this case, it did so in a
clear and unambiguous manner. See In re Pacheco, 537 B.R. 935, 940 (Bankr. D. Ariz. 2015)
(determining that Clark did not apply to an analysis of Arizona’s state exemption statute and
stating that “Arizona’s exemption law may allow a debtor to keep more than he or she could
from around the country, each of those cases are governed by the particular language of the state statute at issue. Consequently, those are, at best, instructive.
-8- under the Bankruptcy Code[;] * * * [t]hat is a choice Congress has allowed states to make”); see
also In re: Kara, 573 B.R. 696, 699 (Bankr. W.D. Tex. 2017).8 What is more, given the fact that
the language of our state statute is clear and unambiguous, we need not and do not consider
policy considerations such as those discussed in Clark. See Olsen, 210 A.3d at 435.
Furthermore, we are not swayed by the argument of the Trustee that subsection (iii) of
§ 9-26-4(11) somehow alters our interpretation of the “as defined in” language in that statute.
Additionally, we are utterly unable to say that recognizing the presence of an exemption in this
case constitutes an absurd result. See Mendes, 41 A.3d at 1002. Indeed, some states have
expressly included inherited IRAs in their exemption statutes, which reinforces our conviction
that the choice made by the General Assembly is a rational legislative decision devoid of any
absurdity. See, e.g., Ariz. Rev. Stat. Ann. § 33-1126(B); Fla. Stat. Ann. § 222.21(2)(c); Mo.
Ann. Stat. § 513.430(1)(10)(f); Tex. Prop. Code Ann. § 42.0021(a)(4).
Accordingly, we hold that, based on the clear and unambiguous statutory language at
issue, a debtor may claim an exemption in an inherited IRA pursuant to § 9-26-4(11).9
V
Conclusion
For the reasons set forth in this opinion, we answer the certified question in the
affirmative—§ 9-26-4(11) does permit a debtor to claim an exemption for an inherited IRA. The
8 We note that this is not the only circumstance where Rhode Island’s state bankruptcy exemption is more forgiving to the debtor than its federal counterpart. With respect to the homestead exemption in bankruptcy, under 11 U.S.C. § 522(d)(1) the available federal exemption is $25,150, while pursuant to § 9-26-4.1(a) the Rhode Island state exemption is $500,000. See also Revision of Certain Dollar Amounts in the Bankruptcy Code Prescribed under Section 104(a) of the Code, 84 Fed. Reg. 3488-01 (Feb. 12, 2019). 9 We pass no judgment on the question of preemption, which is referenced in several of the briefs; it is simply not referenced in the specific legal question certified to us by the Bankruptcy Court, and our review is restricted to that legal question. See Mancini, 155 A.3d at 161.
-9- papers in this case may be remanded to the United States Bankruptcy Court for the District of
Rhode Island for further proceedings.
Justice Indeglia, with whom Chief Justice Suttell joins, dissenting. A careful review
of G.L. 1956 § 9-26-4(11) leads me to believe that the statute unambiguously restricts a debtor
from claiming “an inherited Individual Retirement Annuity [(IRA)], including one inherited from
a non-spouse,” as exempt from Chapter 7 of the United States Bankruptcy Code. 10 Therefore, I
respectfully dissent.
When reviewing questions of statutory interpretation, “our ultimate goal is to give effect
to the purpose of the [statute] as intended by the Legislature.” In re B.H., 194 A.3d 260, 264 (R.I.
2018). “When the language of a statute is clear and unambiguous, this Court must interpret the
statute literally and must give the words of the statute their plain and ordinary meanings.” Id.
(brackets omitted) (quoting State v. Santos, 870 A.2d 1029, 1032 (R.I. 2005)). “The Legislature
is presumed to have intended each word or provision of a statute to express a significant
meaning, and the Court will give effect to every word, clause, or sentence, whenever possible.”
Id. (brackets omitted) (quoting State v. Clark, 974 A.2d 558, 571 (R.I. 2009)).
Three reasons lead me to believe that the statute is unambiguous and does not include
inherited IRAs. First, the word “inherited” appears nowhere in § 9-26-4(11), and the reference to
this term is buried within the Internal Revenue Code under a subsection titled “Tax treatment of
distributions.” 26 U.S.C. § 408(d)(3)(C). Second, an inherited IRA is distinctly different from an
10 I adopt the majority’s second footnote, which states: “The acronym ‘IRA’ is often used to stand for either Individual Retirement Annuity or Individual Retirement Account. In this case, the certified question specifically references an Individual Retirement Annuity. However, for the purposes of this opinion, our conclusion is the same whether we are presented with an Individual Retirement Annuity or an Individual Retirement Account.”
- 10 - IRA, such that the term “inherited” should not be read into § 9-26-4(11). Third, the policy
underlying such bankruptcy exemptions supports the conclusion that the term “inherited IRA”
should not be morphed into the statute. I address each of these issues below.
First, § 9-26-4(11) exempts “[a]n individual retirement account or individual retirement
annuity as defined in the Internal Revenue Code, 26 U.S.C. §§ 408 and 408A[.]” A plain reading
of § 9-26-4(11) indicates that only an individual retirement account or individual retirement
annuity may be exempt. The statute then directs the reader to §§ 408 and 408A for the limited
purpose of obtaining definitions to those two terms.11 Section 408(a) is titled “Individual
retirement account[,]” and § 408(b) is titled “Individual retirement annuity[,]” both of which
serve as definition sections for those respective titles. The clear direction of our Legislature,
therefore, was to consider §§ 408 and 408A for the definitions of these two terms. In my view,
the statute is unambiguous, and that is where the analysis should end.
The majority, however, holds that § 9-26-4(11) is unambiguous but reads it to include
inherited IRAs in addition to noninherited ones. Notably, the term “inherited” is absent from the
language of § 9-26-4(11); yet, the majority concludes that the statute is unambiguous while at the
same time reading in a word that is not present in the statutory language and that has a distinctly
different definition from the terms listed. See Olsen v. DeMayo, 210 A.3d 431, 435 (R.I. 2019)
(“If ‘a statute is clear and unambiguous we are bound to ascribe the plain and ordinary meaning
of the words of the statute and our inquiry is at an end.’”) (quoting Town of Warren v. Bristol
Warren Regional School District, 159 A.3d 1029, 1039 (R.I. 2017)).
11 Section 408A, the second statutory section readers are directed to in § 9-26-4(11), defines Roth IRAs. While I am of the opinion that inherited IRAs should not be read into the statute, a Roth IRA is covered because it is, for all intents and purposes, a retirement fund, comparable to a traditional IRA.
- 11 - The majority gleans a “definition” for inherited IRA from a discrete subsection of the
Internal Revenue Code, 26 U.S.C. § 408(d)(3)(C)(ii), which a reader can find thirty-four
paragraphs into the section. This subsection articulates under what circumstances an IRA shall
be “treated as inherited[.]” Section 408(d)(3)(C)(ii). While §§ 408(a) and 408(b) clearly define
the terms listed in § 9-26-4(11), § 408(d) refers to “[t]ax treatment of distributions.”
Specifically, the term “inherited IRA” is being utilized in that subsection to determine whether
the account should be “deni[ed] * * * rollover treatment[.]” Section 408(d)(3)(C). Section
9-26-4(11) refers to § 408 for the sole purpose of defining the terms “individual retirement
account” and “individual retirement annuity[.]” The Internal Revenue Code’s treatment of tax
distributions is not referenced in § 9-26-4(11) and has no bearing on the issue at hand. In order
to draw the conclusion that inherited IRAs are exempt under § 9-26-4(11), a reader would have
to first add a term into the statute that is not presently there, and second consult § 408 and read
into its depths before finding a reference to the term. As such, I would conclude that
§ 9-26-4(11) is unambiguous and does not include inherited IRAs.
Second, an inherited IRA is clearly distinct from a noninherited IRA, such that it should
not be included under the umbrella of the term “IRA.” An IRA is meant to be saved for
retirement; accordingly, “Congress made certain withdrawals from both types of accounts
subject to a 10 percent penalty if taken before an accountholder reaches the age of 59½.” 12 Clark
v. Rameker, 573 U.S. 122, 125 (2014) (citing §§ 72(t)(1)–(2) of the Internal Revenue Code).
Funds in an inherited IRA, in contrast, are available to an individual, without qualification, at
any time. See id. An owner of an inherited IRA actually “must either withdraw the entire
12 Here, “both” refers to an IRA and a Roth IRA, which I addressed supra.
- 12 - balance in the account within five years of the original owner’s death or take minimum
distributions on an annual basis.” Id. (emphasis added) (citing §§ 408(a)(6), 401(a)(9)(B); 26
CFR § 1.408–8 (2013)). In this way, an inherited IRA is income, not a retirement account, as the
traditional IRA is designed to be. See Commissioner of Internal Revenue v. Glenshaw Glass
Company, 348 U.S. 426, 431 (1955) (defining taxable income as “instances of undeniable
accessions to wealth, clearly realized, and over which the taxpayers have complete dominion”).
Furthermore, “the owner of an inherited IRA may never make contributions to the account.”
Clark, 573 U.S. at 125. Therefore, I would conclude that traditional IRAs are clearly distinct
from those that are inherited.
Additionally, unlike the exemption of traditional IRAs in the Bankruptcy Code, which
supports the policy considerations by helping to prevent debtors from becoming “destitute and a
public charge[,]” the exemption of inherited IRAs would give debtors a “cash windfall[,]”
because funds in this account are not set aside for the day when one can no longer work. See
Clark, 573 U.S. at 129, 129 n.3. Rather, as set out supra, funds in an inherited IRA are available
to debtors with certain minimums, but nothing prevents a debtor from withdrawing the money all
at once. See id. at 125. Functionally, there is hardly a distinction between an inherited IRA and
any ordinary bank account—and by my count, no jurisdiction in this country exempts ordinary
bank accounts to this extent. Thus, a construction that treats an IRA and an inherited IRA as
equal is incompatible with the policy considerations supporting the bankruptcy exemptions.
Inherited IRAs should, therefore, not be read into § 9-26-4(11) as just another type of IRA.
- 13 - 3
Third, the policy underlying bankruptcy exemptions supports limiting § 9-26-4(11) to
only include “an individual retirement account or individual retirement annuity.” While I do not
disagree with the majority’s observation that this Court construes remedial statutes liberally, we
have said that this Court “will not construe a remedial statute in a manner that would ‘defeat its
evident purpose.’” Prew v. Employee Retirement System of City of Providence, 139 A.3d 556,
563 (R.I. 2016) (quoting McCarthy v. Environmental Transportation Services, Inc., 865 A.2d
1056, 1062 (R.I. 2005)). It helps to remember that § 9-26-4 is an exemption statute. As such, it
is reasonable to assume that the General Assembly’s purpose in providing for it is akin to
Congress’s purpose in enacting the exemptions, set out in the United States Bankruptcy Code:
“to provide a debtor ‘with the basic necessities of life’ so that she ‘will not be left destitute and a
public charge.’” Clark, 573 U.S. at 129 n.3 (quoting H.R. Rep. No. 95-595, p. 126 (1977)). The
exemptions are meant to “effectuate a careful balance between the interests of creditors and
debtors.” Id. at 129.
I find support for my view from the United States Supreme Court’s unanimous holding in
Clark. While the federal statute regarding exemptions is not identical to our own, it too refers to
§ 408 and, under Clark, the Supreme Court decided that, in spite of the reference to § 408,
inherited IRAs are not exempt. Although not binding on this Court, as the majority points out,
Clark does speak to the underlying policy of excluding inherited IRAs from exemption in
bankruptcy proceedings. See Clark, 573 U.S. at 129-30.
In Clark, the Supreme Court concluded that a federal exemption allowing “debtors to
protect ‘retirement funds to the extent 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
- 14 - Code[,]’” did not exempt inherited IRAs because funds in such accounts do not constitute a
debtor’s “retirement.” Clark, 573 U.S. at 124 (emphasis added) (quoting § 522(b)(3)(C),
(d)(12)). The Supreme Court’s opinion did not consider the issue of whether inherited IRAs
were “exempt from taxation under any of the Internal Revenue Code sections listed[,]” including
§ 408, because the Court was satisfied that the federal exemption’s reference to “retirement
funds” foreclosed the exemption of any nonretirement account. Id. at 126 n.2. The Court
supported its opinion by considering the historic purpose for bankruptcy exemptions: Ensuring
that a debtor is not left without the basic necessities of life or left to be destitute and a public
charge. Id. at 129 n.3 (quoting H.R. Rep. No. 95-595).
In my view, the purpose of the exemption statute is to provide debtors with a “fresh start”
after bankruptcy by allowing them to still have a retirement fund to fall back on and to ensure
that creditors cannot take everything. See Clark, 573 U.S. at 130. It is plain to me that
§ 9-26-4(11) delineates that only IRAs, and not inherited IRAs, are exempt, because such a result
is consistent with this intent. A reading to the contrary gives debtors a windfall and, thus, the
policy of ensuring that debtors have a “fresh start” is perverted into granting debtors a “free
pass[.]” Id. Thus, in my view, inherited Individual Retirement Annuities are clearly outside the
ambit of § 9-26-4(11).
For these reasons, I must respectfully dissent. Accordingly, I would answer the certified
question in the negative.
- 15 - STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
SUPREME COURT – CLERK’S OFFICE
ORDER COVER SHEET
Title of Case In re: Lynette Kapsinow No. 2018-94-M.P. Case Number (BK 16-11859) December 11, 2019 Date Order Filed Suttell, C.J., Goldberg, Flaherty, Robinson, and Justices Indeglia, JJ. N/A Certified Question by the United States Bankruptcy Source of Appeal Court for the District of Rhode Island
This case came before the Supreme Court pursuant to a question certified by the United States Bankruptcy Judicial Officer From Lower Court Court for the District of Rhode Island in accordance with Article 1, Rule 6 of the Supreme Court Rules of Appellate Procedure. For Debtor:
Christopher M. Lefebvre, Esq. Attorney(s) on Appeal For Trustee:
Stacy B. Ferrara, Esq.
SU‐CMS‐02B (revised November 2016)