Posts Categorized: Exemptions

THIS TUESDAY, November 12th from 12 – 1 PM, Join Us at the BBA for a Homestead Overview in Bankruptcy and Trusts and Estates

This program will focus on the Massachusetts Homestead Act and how it protects or does not protect property in the event of a bankruptcy. The speakers will also review how T&E attorneys make certain transfers with respect to a primary residence and how it may be impacted by a future bankruptcy. To register click HERE.

When: Tuesday, November 12, 2019, from 12:00 to 1:00 p.m.

Where: Boston Bar Association, 16 Beacon Street, Boston, MA


-Adam J. Ruttenberg, Arent Fox LLP

-Elizabeth A. Caruso, Baker, Braverman & Barbadoro, P.C.

Registration Categories:

-BBA Member – Free. Included as part of your membership.

-Non-Member – $100.00

Sponsoring Section/Committee(s):

-Trusts & Estates Section

-Estate Planning Committee

-Bankruptcy Law Section

Contact: Jenna Kim,

Case Summary: Daniels v. Agin, No. 12-2376 (1st Cir. November 25, 2013) — Limits Placed on Exemption of Retirement Accounts

This summarizes a new First Circuit case of interest, Daniels v. Agin, No. 12-2376 (Nov. 25, 2013), relating to challenges to a debtor’s exemption of retirement accounts and, ultimately, his discharge.

The Debtor was the trustee and sole participant in a company profit-sharing plan (“Plan”) from which he transferred $470,000 into two IRA accounts held in his name six months prior to his bankruptcy filing.  While administering the Plan, the Debtor had, among other things, accepted an assignment of funds from a nominee trust of which his wife was beneficiary, wrongfully transferred funds to the Plan from an account held with an uncle, and loaned Plan money to a disqualified person.  Prior to the filing, the IRS had audited the Plan’s 2006 tax return and “accepted the return as filed.”  After the bankruptcy filing the Debtor submitted forms and testified in a way that failed adequately to disclose the existence of the IRAs or explain what had transpired once information began to surface.  While the Debtor received a discharge, the Trustee sought a turnover of the Plan and IRA assets as non-exempt property of the estate, alleging that (i) neither warranted exempt status because of violations of the IRC’s qualifications for favorable tax treatment, and (ii) the Debtor had forfeited his exemption claim because of deliberate concealment of the allegedly exempt assets.  The US Trustee then sought to revoke the discharge, alleging the same deliberate concealment.

The bankruptcy court determined that the assets were not exempt on both theories noted above and ordered that the discharge would be revoked.  The district court affirmed, as did the First Circuit.  The Court first held that where the Debtor had entered into numerous transactions prohibited by sections 401 and 4975 of the IRC, such as making loans to disqualified persons and accepting a transfer of assets from a family trust, the assets of a profit sharing plan of which the Debtor was sole beneficiary would not qualify for favorable tax treatment and would therefore not be exempt from inclusion in the bankruptcy estate, including IRAs that had been spun off from the Plan’s assets.  A closed tax audit, without more, may not be deemed a “favorable determination” of the Plan for purposes of 11 U.S.C. § 522(b)(3)(C) and (4), which would have created a presumption that the Plan was exempt. 

Alternatively, the Court accepted the parties’ understanding that a bankruptcy court could deny an exemption purely for bad faith by a debtor either (i) intentionally concealing the relevant assets, where material, or (ii) being recklessly indifferent to the truth in respect to the assets.  See In re Wood, 291 B.R. 219, 226 (1st Cir. BAP 2003).  With that, the Court determined that the Debtor’s omissions were material as “pertinent to the discovery of assets,” and that his failure to clarify information when able and necessary showed a reckless indifference to the truth.  Lastly, based on the collateral estoppel effect of the bad faith holding in the Trustee’s turnover action relating to the Plan and IRAs, the lower court was found correct in granting summary judgment on the motion to revoke the discharge.

The significant practice pointers from this case are (i) do not accept allegedly qualified retirement plans at face value, as investigation might show them to be unqualified and not exempt, and (ii) do not skimp on adequate and timely disclosure, especially as to assets which are arguably either exempt or not even property of the estate.

Guy B. Moss, Esq.
Riemer & Braunstein LLP
Three Center Plaza
Boston, MA 02108

2009-2010 Legislative Update: Homestead and Personal Property Exemption Bills

The following summary was prepared by Diane N. Rallis of Holland & Knight LLP and Susan Grossberg of the Law Offices of Susan Grossberg, co-chairs of the Law and Public Policy Committee. The summary reflects the professional views of the authors and does not reflect the position of the Boston Bar Association or the Boston Bar Association Bankruptcy Law Section. The summary is provided for informational purposes only and should not be construed as legal advice on any subject matter.
— The Editors

There are two bills currently pending this legislative session that update both the Massachusetts Homestead and Personal Property Exemption Statutes. The current versions of the Homestead (M.G.L. c. 188 §1, et seq.) and Personal Property Exemption (M.G.L. c. 235 §34) Statutes are greatly in need of modernization and the proposed updates would provide additional financial protections to individuals in Massachusetts. If ultimately passed, these bills will have a significant impact on the consumer side of bankruptcy practice in Massachusetts. Below are links to the text of the pending bills, as well as a summary of the proposed changes to the current statutes.

Homestead Legislation (House Bill No. 1584 and Senate Bill No. 1619:
An Act Relative to the Estate of Homestead)

Significant Proposed Changes to Homestead Statute

Automatic homestead protection, without the need for recording a declaration, in an amount not to exceed $125,000, which amount corresponds to some of the limitations on homestead exemptions enacted in 2005 in the Federal Bankruptcy Code as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”). Individuals and families with more equity in their homes will still have a significant incentive to record a declaration to protect up to $500,000 of their equity (the amount of the declared exemption under current law).

Beneficiaries of trusts are entitled to homestead protection

Mortgages cannot terminate previously filed homesteads – instead, any provision in a mortgage that purports to terminate a homestead is deemed merely to subordinate the homestead to such mortgage

Proceeds from the sale of a home, or insurance proceeds, are entitled to homestead protection (for up to a year for sale proceeds, and two years for insurance proceeds)

Transfers among family members will not terminate a previously declared homestead – even if the homestead isn’t reserved in the deed

Manufactured homes are eligible for protection under all provisions of the statute

Massachusetts Personal Exemption Legislation (House Bill No. 1585: An Act Increasing the Value and Kind of Personal Property Exemption From Execution)

Significant Proposed Changes to Personal Exemptions Statute

Increases most of the personal property exemptions in order to partially adjust for the cost of living since the exemptions were last revised in the 1970’s. For example, the exemption amount in an automobile increases from $700 to $7,500.

Recommends new exemptions to account for items necessary to a modern household

Creates two new sections that provide for a “wildcard” exemption to cover personal property not covered by a more specific exemption and a limited exemption for jewelry

Includes an automatic triennial cost of living adjustment, which is crucial to keep the Massachusetts exemption scheme current

Brings the Massachusetts personal exemption statute more in line with other states