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In re Kapsinow

Supreme Court of Rhode Island

December 11, 2019

In re: Lynette Kapsinow

         Certified Question by the United States Bankruptcy Court for the District of Rhode Island BK 16-11859.

         This case came before the Supreme Court pursuant to a question certified by the United States Bankruptcy 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.

          For Trustee: Stacy B. Ferrara, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, Robinson, and Indeglia, JJ.

          OPINION

          Robinson, Justice.

         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)."

         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 Travel[3]

         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 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.

         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." Ma ...


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