220 A.3d 1231
R.I.2019Background
- Debtor Lynette Kapsinow filed a voluntary Chapter 7 petition and elected Rhode Island state exemptions.
- She claimed an exemption under R.I. Gen. Laws § 9-26-4(11) for an inherited IRA (about $85–94k) she received from her mother.
- The inherited account was converted to an "Inherited IRA" and later transferred to American Century; Kapsinow could not contribute to it, was required to take minimum distributions, and could withdraw funds without penalty.
- Trustee Stacy Ferrara objected, and the Bankruptcy Court certified the legal question to the Rhode Island Supreme Court.
- Certified question: May a debtor claim an exemption in an inherited IRA, including one inherited from a non‑spouse, under § 9-26-4(11)?
Issues
| Issue | Plaintiff's Argument (Kapsinow) | Defendant's Argument (Trustee) | Held |
|---|---|---|---|
| Whether § 9-26-4(11) exempts inherited IRAs | § 9-26-4(11) exempts “an individual retirement account or annuity as defined in” 26 U.S.C. § 408; § 408(d)(3)(C)(ii) treats accounts acquired by death as “inherited,” so inherited IRAs fall within the § 408 definition and are exempt | The statute refers only to IRAs/annuities; “inherited” is not in § 9-26-4(11) and the § 408 provision cited is a tax/treatment rule, not a definitional provision—plus policy and Clark v. Rameker support excluding inherited IRAs | Yes (majority): § 9-26-4(11) covers IRAs as defined in § 408, including inherited IRAs; dissent would exclude them |
Key Cases Cited
- Mancini v. City of Providence, 155 A.3d 159 (R.I. 2017) (standard for answering certified questions and de novo review)
- Olsen v. DeMayo, 210 A.3d 431 (R.I. 2019) (statutory construction: clear and unambiguous text controls)
- In re Tetreault, 11 A.3d 635 (R.I. 2011) (certified-question jurisdiction principles)
- Clark v. Rameker, 573 U.S. 122 (2014) (U.S. Supreme Court excluded inherited IRAs from federal “retirement funds” exemption; discussed by both sides)
- Powers v. Warwick Public Schools, 204 A.3d 1078 (R.I. 2019) (courts constrained to statutory text)
- Mendes v. Factor, 41 A.3d 994 (R.I. 2012) (statutes not to be construed to reach absurd results)
- Tennessee Valley Authority v. Hill, 437 U.S. 153 (1978) (judicial restraint in second-guessing legislative policy)
- Prew v. Employee Retirement System of City of Providence, 139 A.3d 556 (R.I. 2016) (remedial statutes construed to effectuate their purpose)