In re: KEITH A. YERIAN, Debtor.
RICHARD B. WEBBER II, as Trustee, Plaintiff-Appellee. KEITH A. YERIAN, Defendant-Appellant,
from the United States District Court for the Middle District
of Florida D.C. Docket Nos. 6:17-cv-00459-RBD;
MARCUS, GRANT, and HULL, Circuit Judges.
Yerian made some interesting choices with respect to the
management of his individual retirement account. These
choices included titling IRA-owned cars in his own name and
his wife's name, as well as purchasing a condo in Puerto
Rico with IRA funds and then using the condo for his personal
travel needs. Yerian concedes that he incurred over one
hundred thousand dollars in tax penalties for abusing his
IRA. Ordinarily, that abuse would disqualify him from
claiming the wide range of favorable treatment and exemptions
typically offered to IRAs. But Yerian-now in bankruptcy
proceedings-nonetheless seeks to shield the IRA from
distribution to his creditors. He argues that Florida has
exempted IRAs from bankruptcy administration so long as they
were originally established with proper documentation.
Fortunately for Yerian's creditors, and unfortunately for
him, his interpretation of the text cannot be supported; he
forfeited his exemption when he engaged in self-dealing
transactions prohibited by the IRA's governing
instruments. We therefore affirm the district court's
order, which in turn upheld the bankruptcy court's
decision to deny the exemption.
debtor files for Chapter 7 bankruptcy, his assets become
property of the bankruptcy estate, to be distributed among
his creditors. See 11 U.S.C. § 541(a)(1). The
debtor may, however, exempt certain types of property from
the estate. 11 U.S.C. § 522(b). Exempt assets are
"withdrawn from the estate (and hence from the
creditors) for the benefit of the debtor." Owen v.
Owen, 500 U.S. 305, 308 (1991). A Chapter 7 debtor is
not required to turn over exempt assets to the trustee and
can keep them after the bankruptcy case is finished. And
these carve-outs are sturdy; once a debtor invokes an
exemption, a "court may not refuse to honor the
exemption absent a valid statutory basis for doing so."
Law v. Siegel, 134 S.Ct. 1188, 1196 (2014).
bankruptcy code provides a list of federal exemptions, but
also permits a state to opt out and replace the federal
blueprint with an exemption scheme of its own. 11 U.S.C.
§ 522(b). Florida, as an opt-out state, has accepted
that invitation to substitute its own set of exemptions.
See Fla. Stat. § 222.20; In re Valone,
784 F.3d 1398, 1400 n.1 (11th Cir. 2015). One of those
exemptions applies to "pension money and certain
tax-exempt funds or accounts"-including IRAs-so long as
a debtor meets certain statutory requirements. Fla. Stat.
§ 222.21. It is this exemption that we consider here.
relevant facts are not in dispute. In 2012, Keith Yerian
opened a self-directed IRA with IRA Services Trust Company.
The IRA's primary asset was an LLC through which Yerian
purchased, among other things, real estate and two used cars.
Yerian established this account as an IRA, "but then
treated the money as his own." He used IRA funds to buy
a condominium in Puerto Rico, for example, then impermissibly
stayed there "for an un-IRA-related purpose." He
and his wife also took title to two cars, a Smart Car and a
Suburban, both purchased with IRA funds. Yerian then spent
thousands of IRA dollars on car repairs, and he allowed his
wife to drive the Suburban "as her
vehicle." He does not contest that these acts of
self-dealing constituted "prohibited transactions"
under the Internal Revenue Code and thus made his IRA
ineligible for federal tax-exempt status as of January 1,
February 27, 2015, Yerian filed for Chapter 7 bankruptcy.
After failing to disclose his IRA on the asset schedules
originally accompanying his petition, Yerian eventually
amended his filings to disclose the IRA-and also to claim a
Florida-law exemption for it. Richard Webber, the bankruptcy
Trustee, objected to the claim of exemption and initiated an
adversary proceeding to resolve the issue.After a two-day
trial in late 2016, the bankruptcy court issued oral findings
of fact and conclusions of law. Concluding that Florida law
does not allow a debtor to claim an exemption for an IRA
operated in violation of the federal tax code, the bankruptcy
court issued a written order sustaining the Trustee's
objection and directing the Trustee to seize the IRA on
behalf of Yerian's creditors. Yerian sought review of the
order denying his claim for the IRA exemption, and the
district court affirmed. This appeal followed.
bankruptcy appeal, this Court "sits as a second court of
review and thus examines independently the factual and legal
determinations of the bankruptcy court and employs the same
standards of review as the district court." In re
Hood, 727 F.3d 1360, 1363 (11th Cir. 2013) (internal
quotation marks and citation omitted). Accordingly, we
"review the bankruptcy court's findings of fact for
clear error and its conclusions of law de novo."
Id. We may affirm the judgment below on any ground
supported in the record. See Jackson v. Bank of Am.,
N.A., 898 F.3d 1348, 1356 (11th Cir. 2018).
speaking, courts construe bankruptcy exemption statutes-both
state and federal-liberally in favor of bankruptcy
debtors." In re McFarland, 790 F.3d 1182, 1186
(11th Cir. 2015). The "burden is on the party objecting
to exemptions to prove, by a preponderance of evidence,"
that the exemption cannot be claimed. Id. (citing
Fed.R.Bankr.P. 4003(c)). It is therefore the Trustee's
burden to prove that Yerian was not entitled to shield his
IRA under Florida law.
contends that section 222.21(2)(a)(2) of the Florida Statutes
places his IRA beyond the reach of his creditors. Under that
provision, a debtor may exempt from bankruptcy administration
any money in "a fund or account" that is
[m]aintained in accordance with a plan or governing
instrument that has been determined by the Internal Revenue
Service to be exempt from taxation under s. 401(a), s.
403(a), s. 403(b), s. 408, s. 408A, s. 409, s. 414, s.
457(b), or s. 501(a) of the Internal Revenue Code of 1986, as
amended, unless it has been subsequently determined that the
plan or governing instrument is not exempt from taxation in a
proceeding that has become final and nonappealable.
Fla. Stat. § 222.21(2)(a)(2) (footnote omitted).
408 of the Internal Revenue Code is the relevant provision in
this case. That statute, among other things, sets out the
requirements for an IRA to receive tax-exempt status under
federal law. See 26 U.S.C. § 408. Section 408
first sets out six minimum requirements for the terms of the
"written governing instrument" that legally
establishes the IRA. See id. § 408(a). These
requirements are important, but may read as rather arcane to
the uninitiated. They range from permitting only cash
contributions (and only in an amount corresponding to the
limit in effect for that taxable year), to mandating
particular rules relating to incidental death benefits.
See id. § 408(a)(1)-(6). We will not belabor
these requirements, however, because none of them are
directly at issue ...