Chilton v. Moser, 2011 U.S. Dist. LEXIS 27002

Shirley Heil established an IRA and named her daughter Janice Chilton as beneficiary; Heil died November 28, 2007.
Chilton opened an inherited IRA on January 21, 2008 to receive her mother's funds; transfers occurred trustee-to-trustee.
Chilton and spouse filed for Chapter 7 bankruptcy (Dec 18, 2008) and claimed $170,000 in a community interest in the inherited IRA as exempt under 11 U.S.C. § 522(d)(12).
Bankruptcy Trustee objected; case converted to Chapter 13 (April 20, 2009); Trustee adopted the objection against the exemption.
Bankruptcy Court ruled March 5, 2010 that inherited IRA was not exempt; Court noted no published case addressed inherited IRAs under § 522(d)(12).
Appellants appealed; District Court reverses and holds inherited IRA exempt under § 522(d)(12) due to § 408(e) tax-exemption.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether an inherited IRA qualifies as retirement funds under § 522(d)(12).	Chilton argues funds are retirement funds even if inherited from another.	Moser contends inherited IRA is not retirement funds for exemption purposes.	Yes; funds are retirement funds under § 522(d)(12).
Whether an inherited IRA is tax-exempt under § 408(e) and thus exempt under § 522(d)(12).	Chilton cites § 408(e) to include inherited IRAs as tax-exempt.	Moser disputes applicability of § 408(e) to inherited IRAs for exemption.	Yes; inherited IRA is tax-exempt under § 408(e).

In re Nessa, 426 B.R. 312 (8th Cir. BAP 2010) (inherits funds can be exempt under § 522(d)(12); funds may be retirement funds and § 408(e) exempt)
In re Kuchta, 434 B.R. 837 (Bkrtcy. N.D. Ohio 2010) (inherits IRA exempt under § 522(b)(3)(C) after direct transfer)
In re Tabor, 433 B.R. 469 (Bkrtcy. M.D. Pa. 2010) (cited to support inherited IRA exemption under § 522(b)(3)(C))
In re SGSM Acquisition Co., LLC, 439 F.3d 233 (5th Cir. 2006) (standard of review for legal conclusions on exemptions)