The opinion of the court was delivered by: Pisano, District Judge
Pursuant to 28 U.S.C. § 158(a)(1), Debtor Phyllis Hill ("Hill") has appealed the United States Bankruptcy Court's June 14, 2006 orders granting summary judgment in favor of the Trustee and denying Hill's request that her interest in two annuities be excluded from her bankruptcy estate. The issue presented here is whether Hill's interest in the annuities qualifies for exclusion from the bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2). Resolving some disagreement among the bankruptcy courts in this district, the Court holds that an asset is excluded from the bankruptcy estate under § 541(c)(2) if (1) the asset represents the debtor's beneficial interest in a trust, (2) there is a restriction on transfer, and (3) the restriction is enforceable under an applicable non-bankruptcy law. See 11 U.S.C. § 541(c)(2). This involves a case-by-case approach requiring the bankruptcy courts to analyze the terms of the particular annuity at issue and determine whether it satisfies the elements necessary for exclusion. As explained below, the Court finds that Hill's annuities do not satisfy the requirements of § 541(c)(2) because they do not qualify as trusts. Accordingly, Hill's annuities are not excluded from her bankruptcy estate and the orders of the Bankruptcy Court are affirmed.
On June 16, 2004, Hill filed a voluntary bankruptcy petition under Chapter 7 of the Bankruptcy Code. Among the assets Hill listed in her original petition was an annuity with Guardian Insurance and Annuity Company, Inc. ("GIAC"), which she improperly identified as Park Avenue Securities. As of June 30, 2004, the GIAC Annuity had a value of $73,202.79. Hill later amended her petition to include an American Express Privileged Asset Annuity Certificate ("AMEX Annuity"), which had a value of $31,415.05 as of June 30, 2004. In her petition, Hill stated her belief that both annuities were excluded from her bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2).
The Trustee filed a complaint on June 13, 2005 seeking a determination that both annuities were property of the bankruptcy estate. After Hill filed an answer on September 23, 2005, both parties filed motions for summary judgment wherein the Trustee requested an order that the annuities were assets of the debtor estate and Hill sought an order that the annuities were excluded from the estate. At the close of oral argument on June 12, 2006, the Bankruptcy Court rendered a decision in favor of the Trustee. After reviewing the terms of the AMEX Annuity, the Bankruptcy Court determined that the annuity was not excluded from Hill's bankruptcy estate because it had none of the indicia of a trust. Specifically, the Court found that the annuity was not a trust because "it doesn't have a fiduciary relationship, there's no manifest intent to create a trust, and there's no duty on the part of [AMEX] to deal with the property for the benefit of any person." Transcript of Hearing at 17, Dobin v. Hill (In re Hill), Ch. 7 Case No. 04-30325, Adv. No. 05-19401 (Bankr. D.N.J. June 12, 2006). Similarly, upon examining the GIAC Annuity documents, the Court noted that the annuity did not give rise to a fiduciary relationship, there was no trustee, and GIAC held the funds as an asset of the company, not as trust property. Id. at 22-23. The Court concluded, therefore, that Hill had no more than a "contractual debtor creditor relationship" with GIAC. Id. On June 14, 2006, the Court entered orders granting summary judgment in favor of the Trustee and denying Hill's cross-motion for summary judgment. Hill timely filed an appeal of these orders on July 19, 2006.
The Court has jurisdiction over this appeal pursuant to Rule 8001(a) of the Federal Rules of Bankruptcy Procedure and 28 U.S.C. § 158(a). The district court reviews a bankruptcy court's legal conclusions under a plenary standard. See J.P. Fyfe, Inc. of Fla. v. Bradco Supply Corp., 891 F.2d 66, 69 (3d Cir. 1989). Factual determinations, however, may be set aside by the district court only if they are clearly erroneous. See Fed. Rule Bankr. Proc. 8013; J.P. Fyfe, Inc. of Fla., 891 F.2d at 69. The issue presented in this appeal is a question of law: whether Hill's annuities should be excluded from her bankruptcy estate pursuant to 11 U.S.C. § 541(c)(2). Thus, the Court will apply a plenary standard of review.
B. Section 541 of the Bankruptcy Code
Pursuant to Section 541(a)(1) of the Bankruptcy Code, 11 U.S.C. § 541(a)(1), a bankruptcy estate includes "all legal or equitable interests of the debtor in property" as of the creation of the bankruptcy estate "[e]xcept as provided in subsections (b) and (c)(2)." Subsection (c)(2) states that "[a] restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable non-bankruptcy law is enforceable in a case under this title." Several courts have addressed the question of whether § 541(c)(2) covers annuities and the results vary. Compare In re Barnes, 264 B.R. 415 (Bankr. E.D. Mich. 2001) (finding that TIAA annuity did not qualify as a trust and thus was not excluded from the debtor estate under § 541(c)(2)); In re Neto, 215 B.R. 939 (Bankr. D.N.J. 1997) (finding that lottery annuity is part of debtor estate); In re Simon, 170 B.R. 999 (Bankr. S.D. Ill. 1994) (concluding that annuity, which court determined was not a trust, is part of debtor estate); Walro v. Striegel, 131 B.R. 697 (S.D. Ind. 1991) (same) with In re Quinn, 327 B.R. 818 (W.D. Mich. 2005) (finding a pension plan annuity excluded from the bankruptcy estate under § 541(c)(2); In re Schuster, 256 B.R. 701 (Bankr. D.N.J. 2000) (finding the annuities at issue were trusts and thus excludable under § 541(c)(2)). Further, neither the Supreme Court nor the Third Circuit has dealt squarely with this issue.
In Patterson v. Shumate, 504 U.S. 753 (1992), the Supreme Court analyzed § 541(c)(2) and held that the antialienation provision in an ERISA-qualified plan "constitute[d] an enforceable transfer restriction for purposes of § 541(c)(2)'s exclusion of property from the bankruptcy estate." Patterson, 504 U.S. at 757-60. In so holding, the Court noted that the "natural reading of [§ 541(c)(2)] entitles a debtor to exclude from property of the estate any interest in a plan or trust that contains a transfer restriction enforceable under any applicable non-bankruptcy law." Id. at 758. Focusing on the Court's use of the phrase "plan or trust," some courts have concluded that § 541(c)(2)'s trust requirement no longer applies when the asset at issue is an ERISA-qualified plan.*fn1 Another line of cases espouses the view that non-ERISA qualified employer pension plans are not subject to a strict trust requirement.*fn2 There is, however, nothing in Patterson, or the statute for that matter, suggesting that the trust requirement does not apply to a non-ERISA annuity. See generally id.; Barnes, 264 B.R. at 425 ("Rather than 'categorically' eliminating § 541(c)(2)'s trust requirement, . . . the most that one can plausibly infer from Shumate . . . is that the requirement is not applicable to ERISA-qualified plans.").
In In re Yuhas, 104 F.3d 612, 613 (3d Cir. 1997), the Third Circuit held that a New Jersey statute "that protects a qualified individual retirement account (IRA) from claims of creditors constitutes a 'restriction on the transfer of a beneficial interest of the debtor in a trust' within the meaning of 11 U.S.C. § 541(c)(2) and thus result[ed] in the exclusion of the IRA from a bankruptcy estate." Notably, the Court did not address the issue of whether IRAs qualify as trusts for the purpose of § 541(c)(2); instead, the Court assumed that the IRA satisfied the trust requirement because the parties did not raise that issue on appeal. Subsequent to the Yuhas decision, however, some bankruptcy courts within the Third Circuit have concluded that IRAs are not trusts and thus not eligible for exclusion under § 541(c)(2). See, e.g., In re Haney, 316 B.R. 827, 829 (Bankr. E.D. Pa. 2004); In re Williams, 290 B.R. 83, 87 (Bankr. E.D. Pa. 2003); In re Fulton, 240 B.R. 854, 865-66 (Bankr. W.D. Pa. 1999).
In any event, there is no doubt that the Yuhas decision preserves the trust requirement set forth in § 541(c)(2). In deciding whether the IRA at issue was excluded from the bankruptcy estate, the ...