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Silliman v. Cassell (In re Cassell)
Citation:United States Court of Appeals for the 11th Circuit, Case No. 11-13115 The case was decided on March 22, 2013, and will be published.
The District Court ruled that an annuity purchased by the Debtor with inherited funds one year before filing bankruptcy was exempt as an “annuity” under the Georgia bankruptcy exemption statute. The Bankruptcy Trustee appealed the District Court ruling to the 11th United States Circuit Court of Appeals. Because the term "annuity" is defined in the Georgia bankruptcy exemption statute, the 11th Circuit certified two questions to the Georgia Supreme Court for the purpose of determining whether the annuity purchased by the Debtor prior to bankruptcy was exempt under Georgia law. The Georgia Supreme Court responded to the certified questions in Silliman v. Cassell, 2013 WL 593512 (Ga. Feb. 18, 2013). Based on the answers given by the Georgia Supreme Court, the Circuit Court of Appeals held that the annuity which was purchased by the Debtor with inherited funds one year before filing bankruptcy was exempt. The annuity contract,which was purchased when the Debtor was 65 years old provided that monthly payments would begin one month after the purchase and continue until the death of the Debtor. The contract also provided that the payments would continue for ten years, even if the Debtor died at an earlier age. The 11th Circuit Court of Appeals held that the annuity was an “annuity” within the meaning of the Georgia bankruptcy exemption statute and the annuity payments were on account of age. The annuity was therefore exempt. The Circuit Court of Appeals affirmed the judgment of the District Court.
The Debtor filed bankruptcy in the Northern District of Georgia. The Debtor listed as exempt an annuity she purchased with inherited funds prior to bankruptcy. The Trustee objected to the exemption, claiming that the annuity was not exempt under Georgia law because it did not fit within the statutory definition of an "annuity." The Bankruptcy Court found that the annuity was exempt as provided by the Georgia bankruptcy exemption statute. The Trustee appealed the ruling to the United States District Court. The District Court also concluded that the annuity was exempt. The Trustee then appealed the ruling of the District Court to the 11th U.S. Circuit Court of Appeals. The 11th Circuit certified two questions to the Georgia Supreme Court for the purpose of determining whether the annuity in question would be exempt under Georgia law. The Georgia Supreme Court responded to the certified questions in Silliman v. Cassell, 2013 WL 593512 (Ga. Feb. 18, 2013). Based on the answers to the certified questions, the Circuit Court of Appeals held that the annuity was exempt property.
The Debtor inherited $220,000.00 from her aunt about a year and a half prior to filing bankruptcy. The inheritance was used to purchase an annuity about one year before the Debtor filed bankruptcy. At the time of the purchase, the Debtor was 65 years old. One month after the annuity was purchased the Debtor began receiving monthly payments of $1,389.14. The annuity contract provided that she would receive the payments for the rest of her life, but guaranteed the payments for ten years even if she died at an earlier age. The Debtor filed bankruptcy one year after she purchased the annuity, and listed it as exempt under the Georgia exemption statute. The Trustee objected to the exemption on the bases that: (1) it was purchased with inherited funds rather than her wages, (2) the annuity was not purchased on account of age, (3) the annuity contract was not an “annuity” as defined by the Georgia exemption statute, and (4) the Debtor was not dependent on the annuity for her support. The issues before the 11th Circuit were whether the annuity was exempt under the Georgia exemption statute despite the fact that the annuity was purchased with an inheritance, and whether the annuity was purchased on account of age. The Circuit Court certified two questions to the Georgia Supreme Court: 1. Is a single-premium fixed annuity purchased with inherited funds an "annunity" for the purposes of the Georgia exemption statute; and 2. Is a debtor's right to receive a payment from an annuity on account of age if the annuity payments are subject to federal tax treatment, if the annuitant purchased the annuity because of her age or if the annuity payments are calculated based on the age of the annuitant at the time the annuity was purchased? Based on the “clear and dispositive” answers provided by the Georgia Supreme Court, the Circuit Court held that the annuity was exempt property.
Judge(s):Circuit Judges Carnes, Martin and Jordan