Jacqueline L. Taylor -BELOW MED

UNITED STATES BANKRUPTCY COURT

FOR THE WESTERN DISTRICT OF MISSOURI

IN RE: )

)

Jacqueline L. Taylor, ) Case No. 20-40241-can13

)

Debtor. )

________________________________________________)

ORDER SUSTAINING TRUSTEE’S OBJECTION TO EXEMPTIONS

Debtor Jacqueline L. Taylor claims an exemption in a Flexible Premium Deferred Annuity

issued 5/25/04 with Midland National Life Insurance Company (the “Annuity”) under Mo. Rev.

Stat. § 513.430.1(10)(e). The chapter 13 trustee objects to the claimed exemption. At status

conferences held on August 11, 2020 and October 27, 2020, the parties agreed to waive the right

to put on evidence and oral argument and to submit the matter to the court on stipulated facts and

briefing, which is now complete. The court incorporates herein by reference the Joint Stipulation

of Facts Between Debtor, Jacqueline L. Taylor, and Standing Chapter 13 Trustee (the

“Stipulation”).1 For the reasons that follow, the trustee’s Objection to Exemptions2 is

SUSTAINED.

Background

Ms. Taylor filed this chapter 13 bankruptcy case on February 5, 2020, listing the Annuity

on her Schedule A/B with a value of $105,184.28. According to the Stipulation, Ms. Taylor

purchased the Annuity in 2004, funded with $98,888.60 in funds she inherited from her father.3

Also according to the Stipulation, the Annuity had surrender value of $102,979.70 as of its most

1 ECF No. 35.

2 ECF No. 13.

3 Ms. Taylor’s counsel stated at the hearing held on October 27, 2020 that the vast majority, if not all, of the funds to

purchase the annuity came from the inheritance, although that “fact” is not reflected in the Stipulation.

recent quarterly statement. Ms. Taylor’s schedule I shows she was to begin receiving monthly

annuity payments of $800 in February or March of this year, which supplement her social security

and pension income. She claims the Annuity fully exempt pursuant to Missouri Revised Statute §

513.430.1(10)(e).

Burden of Proof

“A claimed exemption is presumptively valid.” In re Danduran, 657 F.3d 749, 754 (8th

Cir. 2011). The party objecting to a claimed exemption – here, the trustee – has the burden of

proving that the exemptions are not properly claimed. Fed. R. Bankr. P. 4003(c). “If the objecting

party fails to produce evidence in support of the objection, any factual issue must be resolved in

favor of the debtor.” In re Danduran, 657 F.3d at 754. “If the Trustee meets his burden to produce

evidence in support of the objection, the burden of production shifts to the debtor to show that the

claimed objection is proper.” Id. The burden of persuasion, however, remains with the trustee. Id.

“[E]xemption statutes must be construed liberally in favor of the debtor and in light of the

purposes of the exemption.” In re Andersen, 259 B.R. 687, 690 (B.A.P. 8th Cir. 2001) (citing In

re Wallerstedt, 930 F.2d 630, 631 (8th Cir. 1991)). Although exemptions are to be liberally

construed in favor of the debtor, Murray v. Zuke, 408 F.2d 483, 487 (8th Cir. 1969), they are also

to be construed for the purpose of achieving the legislative intent, not to “extend the provisions of

the legislative grant.” In re Eilbert, 162 F.3d 523, 526 (8th Cir. 1998) (citations omitted). See also

In re Helming, 567 B.R. 357, 361 (B.A.P. 8th Cir. 2017) (“[A] bankruptcy court must be careful

to not substantially depart from the express language of the exemption or to extend the legislative

grant as expressed by Congress.”) (citations and internal quotation marks omitted).

Mo. Rev. Stat. § 513.430.1(10)(e)

Missouri has opted out of the federal bankruptcy exemption scheme found in 11 U.S.C. §

522. See Mo. Rev. Stat. § 513.427. Ms. Taylor claims the Annuity exempt under Missouri Statute

§ 513.430.1(10)(e), which exempts a person’s right to receive –

Any payment under a stock bonus plan, pension plan, disability or death benefit

plan, profit-sharing plan, nonpublic retirement plan or any plan described, defined,

or established pursuant to section 456.014, the person's right to a participant

account in any deferred compensation program offered by the state of Missouri or

any of its political subdivisions, or annuity or similar plan or contract on account

of illness, disability, death, age or length of service, to the extent reasonably

necessary for the support of such person and any dependent of such person . . ..

Mo. Rev. Stat. § 513.430.1(10)(e).

To claim an exemption under this provision, the right to receive payments must meet three

requirements. The right to receive payments must be:

(1) from a plan or contract of the kind described;

(2) made “on account of illness, disability, death, age or length of service,” and

(3) reasonably necessary for the debtor’s support or for the support of a dependent of

the debtor.

In re Helming, 567 B.R. at 361 (interpreting Missouri’s § 513.430.1(10)(e)) (citing Kuhrts, 405

B.R. 333, 334 (Bankr. W.D. Mo. 2009) (interpreting the Missouri statute); Rousey v. Jacoway, 544

U.S. 320 (2005) (interpreting 11 U.S.C. § 522(d)(E)); Andersen, 259 B.R. 687, 691 (B.A.P. 8th

Cir. 2001) (same)).

The trustee here stipulated to the third requirement – that Ms. Taylor needs the annuity

payments for her support.4 The questions here are whether the Annuity payments are from a plan

or contract of the kind described in the statute, and whether, as Ms. Taylor argues, the payments

are made “on account of” death because the Annuity contains a death benefit.

4 Stipulation (ECF No. 35) at ¶ 9.

Before turning to these two specific requirements, however, the Eighth Circuit has

enunciated what it referred to as “general principles” on the exemptability of annuity payments

under exemption statutes similar to § 513.430.1(10)(e). In re Eilbert, 162 F.3d 523 (8th Cir. 1998).

In Eilbert, the 74-year-old debtor used funds from her deceased spouse’s estate to purchase

a $450,000 single premium annuity, electing at the time to begin receiving annuity payments

shortly after the purchase, and in anticipation that a creditor would obtain a significant personal

injury judgment against her. About a year later, after the creditor obtained the anticipated

judgment, the debtor filed bankruptcy and claimed the annuity exempt under an Iowa statute like

Missouri’s § 513.430.1(10)(e).5

The debtor in Eilbert argued that her annuity was exempt under the Iowa statute because

(i) it was an “annuity,” (ii) she purchased it more than one year before filing bankruptcy, and (iii)

she began receiving payments at age 74, which was “well past” retirement age. She argued that

the annuity payments were thus from a “pension, annuity, or similar plan or contract” and were

being made “on account of” her age, as required by the statute. Id. at 526.

Rejecting that argument, the Eighth Circuit turned to the nearly identical federal

bankruptcy exemption found in 11 U.S.C. § 522(d)(10)(E).6 In so doing, the Eighth Circuit held,

as a “general principle,” that Congress intended the similar federal statute to exempt “certain

benefits that are akin to future earnings of the debtor.” Id. (interpreting 11 U.S.C. § 522(d)

((quoting H.R. Rep. 95-595 at 362 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 6318)).

5 The Iowa statute at issue in Eilbert provided an exemption for: “[t]he debtor's rights in ... [a] payment or a portion

of a payment under a pension, annuity, or similar plan or contract on account of illness, disability, death, age, or

length of service. . . .” Iowa Code § 627.6(8)(e).

6 Section 522(d)(10)(E) of the Bankruptcy Code provides an exemption for “a payment under a stock bonus,

pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of

service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor. . . .” 11

U.S.C. § 522(d)(10)(E).

Acknowledging the liberal construction of exemptions, the Eighth Circuit held that if it

were to accept the debtor’s argument, it “would convert a statute intended to protect ‘benefits that

are akin to future earnings’ – which for the elderly are typically retirement earnings – into a statute

conferring vastly broader bankruptcy protection.” Id. Rather, the Eilbert court held, if the annuity

payments were “on account of age” merely because the debtor purchased the annuity when she

was past retirement age, all persons past retirement age could move their assets into such an

annuity and then file bankruptcy to avoid creditors, clearly a result Congress had not intended. Id.

Courts in Missouri have consistently applied Eilbert’s general directive that these

exemption statutes were intended to replace lost wages, like a retirement plan. See, e.g., In re

Kuhrts, 405 B.R. 333, 335 (Bankr. W.D. Mo. 2009) (holding that structured settlement proceeds

from a personal injury claim was an annuity, which was one of the types of plans described in the

statute, but was not one “on account of disability” because the asset was not related to employment

and was not created to compensate for diminished wage earning potential); In re Stover, 332 B.R.

400, 403 (Bankr. W.D. Mo. 2005) (holding that payments under an annuity that the debtor inherited

from his mother [which she purchased with funds she received from her spouse’s wrongful death]

were not exempt because they were not “received as a result of, or related to, employment”; the

statute was not intended to apply to annuities resulting from estate planning or litigation unrelated

to employment.”); In re Collett, 253 B.R. 452 (Bankr. W.D. Mo. 2000) (holding that annuity

received as an inheritance was not exempt because the payments were nothing more than an

inheritance received in the form of an annuity, and not “on account of death” or as a replacement

for lost wages under § 513.430.1(10)(e)).

Ms. Taylor expressly stipulated here that “[t]he Annuity is not a replacement for lost wages.

. . .” Stipulation at ¶ 13.7 One might argue that the analysis ends there. But Ms. Taylor contends

that despite that concession, the Annuity here is exemptable under § 513.430.1(10)(e) because it

is a “similar plan or contract” and, since it contains a “death benefit,” it is payable “on account of”

death.

Is the annuity a “similar plan or contract” under the statute?

As to the requirement that the Annuity be a “similar plan or contract” under the statute, the

Eighth Circuit held in Eilbert that the word “annuity” is a “purely generic term which refers to the

method of payment and not to the underlying nature of the asset,” which should not be interpreted

to exempt every annuity. 162 F.3d at 526-27 (citations omitted). Rather, the meaning of “annuity”

under the statute should be determined by reference to the words surrounding it, namely, “pension

. . . or similar plan or contract” and, consistent with the general principle discussed above, describes

“a plan or contract to provide benefits in lieu of earnings after retirement” and “other types of

retirement plans or investments that are created to fill or supplement a wage or salary void.” Id. at

527 (citations omitted).

Because the annuity in Eilbert was purchased by the debtor in one lump sum (as opposed

to contributions over time as part of a long term retirement strategy); was purchased with non-

exempt, inherited assets as a prebankruptcy planning measure; and was purchased by a person who

happened to have already reached retirement age, the payments under the annuity were not “akin

7 One final note on Eilbert’s general principle: Some courts have suggested that if Ms. Taylor had been a dependent

of her father before he died, the Annuity might be construed as a replacement for the father’s lost wages. See In re

Collett, 253 B.R. at 455 (holding that because the debtor was not a dependent of the aunt who left him the annuity

before she died, the annuity could not be construed as a replacement for the aunt’s lost wages as Congress intended

the statute to be applied). Here, not only did Ms. Taylor stipulate the Annuity is not a replacement for lost wages,

she also stipulated that she “was not a dependent of her father at the time of his death.” Stipulation at ¶ 7.

to future earnings.” Id. Therefore, the annuity was not a “pension, annuity, or similar plan or

contract” within the applicable statute. Id.

The Eighth Circuit Bankruptcy Appellate Panel expanded on (and distinguished) Eilbert in

In re Andersen, 259 B.R. 687, 690-91 (B.A.P. 8th Cir. 2001). In that case, the debtor used inherited

funds to purchase a $40,000 annuity and sought to claim it exempt under Missouri’s §

522(d)(10)(e). Analyzing what the BAP referred to as “the Eilbert authorities” (meaning, the Court

of Appeals’ decision, along with the BAP’s Eilbert decision below), the BAP in Andersen said

that a court deciding whether a particular annuity is a “similar plan or contract” under the statute

“should examine the facts and circumstances surrounding the purchase of the contract, as well as

the nature and contents of the contract.” Id. at 691.

Courts should not, the BAP said, focus too narrowly on the means by which the annuity is

purchased – such as purchasing it with inherited funds. Id. Rather, courts may consider numerous

factors in the analysis, including:

* Were the payments designed or intended to be a wage substitute?

* Were the contributions made over time? The longer the period of investment, the more

likely the investment falls within the ambit of the statute and is the result of a long standing

retirement strategy, not merely a recent change in the nature of the asset.

* Do multiple contributors exist? Investments purchased in isolation, outside the context

of workplace contributions, may be less likely to qualify as exempt.

* What is the return on investment? An investment which returns only the initial

contribution with earned interest or income is more likely to be a nonexempt investment.

In contrast, investments which compute payments based upon the participant's estimated

life span, but which terminate upon the participant's death or the actual life span, are akin

to a retirement investment plan. That is, will the debtor enjoy a windfall if she outlives her

life expectancy? Is she penalized if she dies prematurely?

* What control may the debtor exercise over the asset? If the debtor has discretion to

withdraw from the corpus, then the contract most closely resembles a nonexempt

investment.

* Was the investment a prebankruptcy planning measure? In this regard, the court may

examine the timing of the purchase of the contract in relation to the filing of the bankruptcy

case.

Id. at 691-92.

The BAP in Andersen held that, since it was undisputed that the debtor there had purchased

the annuity (albeit, with inherited funds) “in lieu of a retirement plan,” that she had no other

retirement benefits to look to other than social security, and that she therefore purchased it with

the intent that the payments were to be a wage substitute, it qualified as the kind of contract covered

by the statute. In so holding, the BAP distinguished Eilbert, where the debtor had “freely admitted”

she purchased the large annuity shortly before the bankruptcy filing to shield the funds in

bankruptcy, and not as any sort of retirement investment. Id. at 692-93.

Applying the Andersen factors to the facts of this case, the parties here stipulated that Ms.

Taylor purchased the Annuity with one lump sum rather than with contributions made over time.

One can also conclude from the Stipulation that she purchased it “in isolation,” and not in the

context of workplace contributions. And, given the timing of the purchase in 2004 in relation to

her bankruptcy filing in 2020, the court can conclude Ms. Taylor did not purchase the Annuity as

a prebankruptcy planning measure. The Stipulation does address the other Andersen factors such

as the return on investment, how payments are computed, and what control Ms. Taylor has over

the asset, and the parties did not supply the court with a copy of the Annuity agreement.

Based on the Stipulation, one of the Andersen factors weighs in favor of Ms. Taylor,

namely, that she did not purchase the annuity as a prebankruptcy planning measure. However,

once again, Ms. Taylor crucially stipulated that the Annuity is not a replacement for lost wages.

Based on the binding authority Eilbert as supplemented by Andersen, this court concludes that the

Annuity is not a “similar plan or contract” under § 513.430.1(10)(5).

Are the annuity payments “on account of” death?

The trustee stipulated that “[t]he Annuity policy contains a death benefit and therefore pays

‘on account of’ death.”8 Ms. Taylor argues that this means the Annuity is payable “on account of”

death under the statute.

Because the parties did not submit the Annuity contract to the court, it is unclear exactly

what the “death benefit” is. That said, it might at first blush seem as though the trustee conceded

the Annuity fits within this element of the statute. But, § 513.430.1(10)(e) exempts “a person’s

right to receive . . . [a]ny payment under” the type of plans described in the statute, not the plan

itself. See In re Helming, 567 B.R. 357, 362 (B.A.P. 8th Cir. 2017) (“The right to receive the

payments under the Annuity that the Debtor claims as exempt must be because [of] one of the

events set forth in the statute.”) (emphasis in original).

In Helming, after the debtor’s spouse passed away, the debtor sold their home and used the

proceeds to purchase a $100,000 single premium annuity, and sought to claim it exempt under

Missouri’s § 513.430.1(10)(e). Turning to the Supreme Court’s interpretation of 11 U.S.C. §

522(d)(10)(E) in Rousey v. Jacoway by comparison, the BAP interpreted the phrase “on account

of illness, disability, death, age, or length of service” to mean “’because of,’ thereby requiring a

causal connection between the term that the phrase ‘on account of’ modifies and the factor

specified in the statute.” Helming, 567 B.R. at 362 (discussing Rousey v. Jacoway, 544 U.S. 320

(2005)). Thus, the BAP said, “on account of” in § 522(d)(10)(E) requires that the right to receive

payment “because” of, or “triggered by” one of those conditions. Id.

8 Stipulation (#35) at ¶ 8.

The BAP held that the annuity payments at issue in Helming were not exempt as being “on

account of” the spouse’s death because they were not “triggered by” the death, but by her choice

to begin receiving payments within 30 days of the payment of the premium. 567 B.R. at 362-63.

Likewise here, despite the fact that the Annuity contains “a death benefit” of some sort

(presumably, a payout to someone designated by Ms. Taylor upon her death), and the trustee

concedes the Annuity “therefore pays ‘on account of’ death,” the trustee does not stipulate that the

payments the debtor is receiving under the Annuity are made “because of” or “triggered by”

anyone’s death. The Annuity therefore fails to meet the requirement that they be “on account of”

death. Accord In re Collett, 253 B.R. 452 (Bankr. W.D. Mo. 2000) (holding that an annuity which

was the result of a testamentary trust was not “on account of death” because it was the result of,

or “on account of,” the trustee’s choice of form in which to give the debtor his inheritance; the fact

that the gift was indirectly triggered by the aunt’s death and took the form of an annuity did not

make it exempt).

Seventh Circuit Law

Ms. Taylor essentially concedes that the Annuity payments are not exempt under Eilbert

and the other cases discussed above. Nevertheless, she urges the court to “reconsider the statutory

analysis behind these decisions and side with the reasoning of the Seventh Circuit Court of

Appeals” in Whittman v. Koenig, 831 F.3d 416 (7th Cir. 2016). This the court cannot do.

Even if this court could consider Seventh Circuit law contrary binding Eighth Circuit

authority, the issue in Whittman was whether the annuities satisfied an additional requirement

under the Wisconsin statute at issue there, namely, whether they complied with certain IRS

provisions not applicable here. The Whittman case does not support the position that payments

under an annuity with a death benefit means the payments under the Annuity are made “on account

of” death or otherwise satisfies the Missouri statute. The other case cited by Ms. Taylor, In re

Bronk, 775 F.3d 871 (7th Cir. 2015), is equally unavailing, and indeed stands for the proposition

that an annuity “must distribute benefits because of or conditioned on age, illness, disability, death,

or length of service.” 775 F.3d at 871 (emphasis in original).9

Conclusion

For the reasons stated above, the court concludes that, based on the undisputed facts, the

trustee has met his burden of proving that Ms. Taylor’s Flexible Premium Deferred Annuity issued

5/25/04 with Midland National Life Insurance Company (the “Annuity”) is not exempt under Mo.

Rev. Stat. § 513.430.1(10)(e). The trustee’s Objection to Exemptions (ECF No. 13) is, therefore,

SUSTAINED.

/s/ Cynthia A. Norton

CYNTHIA A. NORTON

United States Bankruptcy Judge

October 28, 2020

9 The court notes that while neither party cited to Clark v. Rameker, 134 S. Ct. 2242 (2014), that case reinforces the

correctness of the reasoning in Eilbert. Clark held that funds in an inherited IRA were not “retirement funds”

exempt under the federal exemption for IRAs in 11 U.S.C. § 522(d)(12). Noting that the term “retirement” is not

defined, the Supreme Court reasoned that courts should look to the ordinary meaning of the term “and look to the

legal characteristics of the account in which the funds are held, asking whether as an objective matter, the account is

one set aside for the day when an individual stops working.” Clark, 134 S. Ct. at 2246 (comparing Rousey v.

Jacoway, 125 S. Ct. 1561 (2005) (holding that traditional IRAs are exempt under the federal exemption for

retirement accounts as defined in 11 U.S.C. § 522(d)(10) (E), which, as noted above, contains language very similar

to Mo. Rev. Stat. § 513.430.1(10)(e)).