Annuity Payments to Debtor Aren’t Exempt From Bankruptcy

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By Diane Davis

A widow’s annuity payments aren’t exempt from a bankruptcy case under Missouri law, the U.S. Bankruptcy Appellate Panel for the Eighth Circuit held ( Helming v. Reed (In re Helming) , 2017 BL 148733, B.A.P. 8th Cir., No. 16-6033, 5/4/17 ).

The Bankruptcy Code allows debtors to exempt certain property from their bankruptcy estate, Judge Barry S. Schermer wrote May 4. States may opt out of the federal bankruptcy law exemption scheme, which Missouri has done.

Carol Helming purchased a single premium annuity from Kansas City Life Insurance Company a few months after her husband’s death. She bought the policy with proceeds from the sale of her home.

Helming elected for the annuity to pay her $436 per month for her life with a guaranty of 20 years of payments. She claimed an exemption for that amount when she filed for Chapter 7 liquidation.

But the trustee in bankruptcy argued the annuity didn’t qualify for an exemption under Mo. Rev. Stat. § 513.430.1(10)(e).

Under Missouri law, to claim a right to receive payment under an annuity, it must be from a specific plan or contract, made due to illness, disability, death, age or length of service, and reasonably necessary to support a debtor or a dependent, the court said.

The court focused on whether the payment was made “on account of illness, disability, death, age or length of service,” and determined that it didn’t meet this requirement.

The payments under the annuity weren’t triggered by her husband’s death but by her choice to begin receiving payments within 30 days of paying the premium, the court said.

The right to receive payments was “two steps removed” from her husband’s death and followed the sale of her house and choice of when to begin receiving payments, the court said.

Her husband’s death was “simply part of the background,” it said.

Helming’s reason for purchasing the annuity wasn’t important, the court said. Her right to receive payment must be because of, or triggered by, her age under the Missouri law, the court said.

Chief Judge Thomas L. Saladino and Judge Anita Louise Shodeen joined the opinion.

Johnston & Smith and Young Legal Services, L.L.C. represented Helming; Pletz & Reed represented Trustee John C. Reed; Adam E. Miller represented Office of the United States Trustee.

To contact the reporter on this story: Diane Davis in Washington at DDavis@bna.com

To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com

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