556 B.R. 456
Bankr. C.D. Cal.2016Background
- Debtor Susanne Renee Williams filed Chapter 7 on April 9, 2015; Trustee Diane C. Weil was appointed.
- Debtor amended schedules to claim a $2 million exemption under Cal. Civ. Proc. Code § 703.140(b)(10)(E) for a survivorship stream from her deceased father’s CalPERS pension (monthly $2,207.23).
- Trustee objected, arguing (1) the pension exemption requires the payment be on account of the debtor’s own illness/age/service and (2) inadequate documentation; Trustee has possession of other trust distributions already turned over.
- Court ordered supplemental briefing on whether an inherited pension (survivorship interest) qualifies when payments stem from the decedent’s death rather than the debtor’s own status.
- Court applied the three-part test derived from Rousey: (1) payment from a pension-like plan; (2) payment on account of illness, disability, death, age, or length of service; (3) exemption only to the extent reasonably necessary for support.
- Court found the CalPERS stream is a pension plan payment, the payments are limited to monthly distributions (no lump-sum option), debtor lacks other income and needs the payments for support, and the statute’s plain language includes payments "on account of death," so the survivorship payment is exempt.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Burden of proof for claimed exemption | Debtor: state-law exemption; burden can rest on claimant under CA law | Trustee: Fed. Rule 4003(c) places burden on objector | Court: Because debtor chose state exemption, burden lies on debtor under CA law, though issue was not dispositive here (mainly legal question) |
| Is a survivorship (inherited) pension payment covered by §703.140(b)(10)(E)? | Debtor: statute’s phrase "on account of ... death" permits survivorship payments; statute not limited to debtor’s own death/age/service | Trustee: exemption requires payment based on debtor’s own illness/age/service; inherited interests like inherited IRAs have been held nonexempt | Held: Court construed the statute textually to include payments on account of death (survivorship rights); survivorship pension qualifies under §703.140(b)(10)(E) |
| Does the CalPERS payment satisfy the ‘‘pension or similar plan’’ requirement? | Debtor: CalPERS is expressly a pension plan and characterized as a lifetime death benefit | Trustee: analogizes to inherited IRAs and argues inherited arrangements differ from traditional pensions | Held: CalPERS pension is a covered pension plan; element satisfied |
| Is the payment exempt only to the extent reasonably necessary for support? | Debtor: payments are her sole income, she’s unemployed, ill, and needs funds for basic support; payments are monthly and not withdrawable in lump sum | Trustee: allowing exemption undermines purpose of the statute by protecting pre-retirement windfalls | Held: Court found the payments reasonably necessary for support here and the monthly, non-lump-sum character reduces windfall concerns; exemption allowed (trustee’s objection overruled) |
Key Cases Cited
- Rousey v. Jacoway, 544 U.S. 320 (Sup. Ct. 2005) (sets three-part test for pension-like exemptions under §522 and compares IRAs to pensions)
- Clark v. Rameker, 134 S. Ct. 2242 (Sup. Ct. 2014) (inherited IRAs are not exempt; emphasizes exemption purpose and windfall concern)
- White v. Stump, 266 U.S. 310 (Sup. Ct. 1924) ("snapshot" rule: exemptions fixed at petition date)
- Schwab v. Reilly, 560 U.S. 770 (Sup. Ct. 2010) (exemptions remove assets from creditors; courts must balance debtor and creditor interests)
- In re Jacobson, 676 F.3d 1193 (9th Cir. 2012) (entire state law at filing date determines exemption availability)