2015 IL App (1st) 141297
Ill. App. Ct.2015Background
- Georgia Xenakis Branit obtained post‑divorce awards: contribution for daughter’s college expenses and attorneys’ fees; judgments became subject of supplementary proceedings.
- Xenakis served three citations to discover assets on Pershing, custodian of an IRA Jeffry Branit inherited from his deceased mother (a non‑spousal inherited IRA).
- Branit moved to discharge the citations, asserting the inherited IRA is exempt from collection under 735 ILCS 5/12‑1006; Pershing answered the citations claiming the account exempt.
- Xenakis argued the inherited IRA is not an IRA for purposes of exemption (relying on Clark v. Rameker) and alternatively sought to enforce the judgment under the Income Withholding for Support Act (750 ILCS 28/15(d)).
- The circuit court discharged the citations; the appellate court reversed, holding an inherited non‑spousal IRA is not exempt under §12‑1006 and that Xenakis failed to satisfy the procedural notice requirements of the Income Withholding Act.
Issues
| Issue | Xenakis (plaintiff) | Branit (defendant) | Held |
|---|---|---|---|
| Whether funds in a non‑spousal inherited IRA are exempt from collection under 735 ILCS 5/12‑1006 | Inherited IRA is not a retirement plan under §12‑1006 (Clark controls); thus not exempt | Inherited IRA is an IRA/retirement plan intended to qualify under the IRC and therefore exempt | Court: Not exempt. Adopted Clark reasoning; inherited IRAs lack retirement characteristics and §408 distinguishes inherited IRAs from IRAs. |
| Whether Xenakis may enforce the contribution judgment against the IRA under the Income Withholding for Support Act, 750 ILCS 28/15(d) | §15(d) covers periodic ‘‘income’’ and operates as an exception to other exemptions; she can use Act procedures to reach the IRA | Act does not apply because the contribution was a lump sum for college; or procedures not followed | Court: Xenakis failed to comply with Act’s notice/withholding procedures, so she cannot enforce under §15(d) now. |
Key Cases Cited
- Clark v. Rameker, 134 S. Ct. 2242 (U.S. 2014) (inherited IRAs are not "retirement funds" for bankruptcy exemption purposes; beneficiary may withdraw without penalty and cannot contribute)
- Schultz v. Performance Lighting, Inc., 2013 IL 115738 (Ill. 2013) (procedural requirements for valid income withholding notices under the Income Withholding for Support Act)
- In re Dzielak, 435 B.R. 538 (Bankr. N.D. Ill. 2010) (Illinois exemption scheme replaces federal exemptions; context for treating §12‑1006 consistent with bankruptcy exemption policy)
- United States v. Security Industrial Bank, 459 U.S. 70 (U.S. 1982) (exemptions aim to protect debtor’s basic necessities; cited for exemption policy)
- Land v. Board of Education of the City of Chicago, 202 Ill. 2d 414 (Ill. 2002) (statutory interpretation principles — review de novo; give effect to legislature’s intent)