United States Bankruptcy Appellate Panel of the Eighth Circuit
In re: Brian A. Lerbakken Debtor.
Sieloff and Associates, P.A. Interested Party - Appellee Brian A. Lerbakken Debtor - Appellant,
Submitted: September 21, 2018
from United States Bankruptcy Court for the District of
Minnesota - Duluth
SCHERMER, NAIL and SHODEEN, Bankruptcy Judges.
SHODEEN, BANKRUPTCY JUDGE
Debtor, Brian Lerbakken, appeals the bankruptcy
court's Order dated May 29, 2018 disallowing his
claimed exemptions in a Wells Fargo 401K and an IRA account.
September 2014 Lerbakken retained Sieloff & Associates,
P. A. (Sieloff) to represent him in his divorce proceeding in
Lake County, Minnesota. The state court's order
dissolving the marriage adopted the parties' stipulated
property settlement which awarded Lerbakken one-half of the
value in his ex-wife's Wells Fargo 401K and an entire IRA
account (Accounts). The order directed counsel to submit a
Qualified Domestic Relations Order related to these assets.
Based upon the available record, the briefing and
representations of counsel this was not accomplished and
Lerbakken has undertaken no other action to obtain title or
possession of the accounts.
filed a voluntary Chapter 7 petition on January 23, 2018. His
Schedule C claimed the Accounts as exempt retirement funds
for the values agreed to under the property settlement.
Sieloff was listed as a creditor for its unpaid fees. It
objected to Lebarkken's claim of exemption in the
Accounts. The bankruptcy court disallowed the exemption on
the basis that the Accounts were not retirement funds as
defined by Clark v. Rameker, 134 S.Ct. 2242 (2014).
This appeal followed.
Lerbakken is entitled to claim of an exemption in the
Accounts presents a question of law which is subject to
de novo review. Rucker v. Belew (In re
Belew), 588 B.R, 875, 876 (B.A.P. 8th Cir. 2018).
permitted, Lerbakken elected to use federal law in support of
his claim of exemption in the identified Accounts. Whether a
claim of exemption is proper begins with the relevant
statutory authority which states: "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." 11
U.S.C. §522(d)(12)(2018). Lerbakken contends that his
interest in the Accounts satisfies this statutory definition
because the proceeds are not taxable to his ex-wife and this
status inures to his benefit.
parties supply extensive arguments related to the potential
tax consequences, penalties and ERISA provisions applicable
to the Accounts. Standing alone, these issues are not
dispositive of their exempt status. 11 U.S.C.
§522(d)(12) contains two requirements: (1) that the
amount must be retirement funds; and (2) that the retirement
funds must be in an account that is exempt from taxation
under one of the provisions of the Internal Revenue Code set
forth therein. Rice v. Allard (In re Rice), 478 B.R.
275, 280 (E.D. Mich. 2012). In order for the Accounts to be
exempt both of these elements must be established.
Clark v. Rameker,134 S.Ct. 2242 (2014) the Supreme
Court considered whether an inherited IRA qualified as a
retirement fund for purposes of exemption under federal law.
The Court's unanimous ...