In re Golz

In re Golz, 2015 MT 318 (Nov. 10, 2015) (Shea, J.) (7-0, cert. ques. answered)

Issue: Whether a bankruptcy debtor may claim an exemption in an inherited Individual Retirement Account under § 25-13-608(1)(e), MCA.

Short Answer: No.

Certified question from U.S. Bankruptcy Court answered

Facts: Christopher Golz filed for chapter 7 bankruptcy in December 2014. Golz is 40 years old and employed by Simms Fishing Products. Golz’s spouse did not file bankruptcy with him.

Golz inherited an ORA account from his mother upon her death, the value of which was listed by Golz as $6,905.65. Golz claimed the IRA as exempt property, and the trustee objected. Golz has not contributed to the account and cannot invest additional money in the account. He is required to withdraw money fro the account no matter how far he is from retirement, and may withdraw the entire balance at any time without penalty.

Procedural Posture & Holding: The bankruptcy trustee objected to Golz’s claim that the IRA account is exempt from the bankruptcy estate, and the Bankruptcy Court certified a question to this Court, which held the inherited IRA account is not exempt. 

Reasoning: States may opt out of the federal bankruptcy exemption statutes under 11 U.S.C. § 522(b)(2). Montana has opted out. Debtors may claim exemptions in individual retirement accounts to the extent of deductible contributions made before the suit resulting in judgment was filed. MCA § 25-13-608(1)(e). The U.S. Supreme Court has held that inherited IRAs are not exempt from a bankruptcy estate, and distinguished traditional and Roth IRAs from inherited IRAs. In making the distinction, the U.S. Supreme Court noted that the holder of an inherited IRA may never invest money in the account, that funds may be withdrawn at any time, and that the entire balance may be withdrawn at any time without penalty. The Montana Legislature has similarly distinguished inherited IRAs by exempting IRAs “as defined in 26 U.S.C. 408(a).” The federal statute does not define inherited IRAs. Thus, under the plain language of the Montana statute, inherited IRAs are not exempt from the bankruptcy estate.