500 B.R. 279
Bankr. S.D. Ga.2013Background
- Debtor purchased Hartford Annuity in 2006 for $150,000, funded from after-tax mutual fund contributions.
- Annuity is a flexible premium variable plan, non-qualified, with deferral of gains taxes; Debtor is both owner and annuitant and his wife is the beneficiary.
- Debtor may change the owner/beneficiary and cancel the contract; he deferred commencement to 2032 to increase the death benefit for his wife.
- As of 2011, the annuity's value was about $170,000; Debtor has not taken withdrawals and claims no need for the funds during lifetime.
- Debtor's wife would lose other income streams at Debtor's death (teacher retirement, disability, Social Security) leading to substantially reduced household income.
- Trustee objected to exempting the Annuity under Georgia O.C.G.A. § 44-13-100(a)(2)(E); prior order denied exemption under GA law § 18-4-22 and stayed ruling on § 44-13-100(a)(2)(E).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Annuity qualifies under O.C.G.A. § 44-13-100(a)(2)(E). | Trustee contends it's not a qualifying annuity under the statute. | Debtor asserts the Annuity is a pension/annuity and thus exempt. | Annuity does not qualify; exemption denied. |
| Whether the payments are reasonably necessary for the debtor or dependents' support. | Trustee argues lack of necessity given other income and non-wage purpose. | Debtor contends the plan provides security for his wife and is part of retirement planning. | Not reached since the Annuity fails the first requirement. |
| Whether the debtor's control over the Annuity affects exempt status. | Control and ability to withdraw or alter terms indicate nonexempt investment. | Some control exists but does not render it exempt under the statute as structured. | Control factors support nonexempt characterization; but the dispositive result is based on the first requirement. |
Key Cases Cited
- Rousey v. Jacoway, 544 U.S. 320 (U.S. 2005) (defined wages and explained penalties’ deterrence in retirement contexts)
- Silliman v. Cassell, 738 S.E.2d 606 (Ga. 2013) (defines annuity for exemption purposes and outlines non-exemption factors)
- In re Cassell, 713 F.3d 81 (11th Cir. 2013) (affirmed non-exemption of a variable annuity under similar facts)