Bankr. W.D.N.C.: In re Foley- Sole Use and Benefit under Life Insurance Exemption

Summary:

Mr. and Mrs. Foley each had several life insurance policies which named as the beneficiary a testamentary trust created by virtually identical wills. These directed the estate trustee to use any income and principal from the trust “for the health, maintenance and support” of the surviving spouse or subsequently their son. A later provision, however, authorized the trustee to “compromise claims”. Based on this provision, the bankruptcy trustee objected to the Foley’s claimed exemption.
The bankruptcy court started from the position that exemptions are to be liberally construed in favor of the debtor, see Elmwood v. Elmwood, 295 N.C. 168, 185, 244 S.E.2d 668, 678 (1978) (citing Goodwin v. Claytor, 137 N.C. 24, 49 S.E. 173 (1904)) and that, pursuant to Bankruptcy Rul2 4003(c), the party objecting to exemptions has the burden of establishing the claim exemption are improper. Despite holdings in In re Foster, No. 11-02711-8- JRL, 2011 WL 5903393, at *2 (Bankr. E.D.N.C. Nov. 1, 2011) and In re Eshelman, No. 11-08925-8-SWH, 2012 WL 1945709 (Bankr. E.D.N.C. May 30, 2012), the bankruptcy court overruled the trustee’s objection. While in both Foster and Eshelman, the estate trustee was specifically authorized to pay claims against the decedents’ estates, here the authority to “compromise claims” was more vague and ambiguous. Further, the Wills here, unlike in the other cases, pointedly directed expenditures and disbursements for th “for the health, maintenance and support” of the spouse and child, which was close enough to restricting funds for the “sole use and benefit” of the spouse and child to fall within a liberal construction of the exemption.

 

For a copy of the opinion, please see:

Foley- Sole Use and Benefit under Life Insurance Exemption

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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