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Cypen & Cypen
FEBRUARY 3, 2005

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


Ronald Kent Kunz voluntarily filed for Chapter 7 bankruptcy. He declared his ERISA-qualified retirement plan on the appropriate schedule, but listed it as exempt from the bankruptcy estate. The trustee filed an adversary proceeding in bankruptcy court. Although the trustee stipulated the plan was qualified under ERISA, he sought control over Kunz’s interest in the plan. The bankruptcy court dismissed the proceeding, holding that ERISA-qualified plans are not part of the bankruptcy estate under the Bankruptcy Code. The Bankruptcy Appellate Panel for the Tenth Circuit affirmed. On further appeal to the United States Court of Appeals for the Tenth Circuit, the trustee renewed his argument that Kunz’s powers and rights under the plan constitute property of the bankruptcy estate, and therefore he can withdraw all funds the debtor has power to withdraw from the plan. Again, the trustee lost: The Supreme Court of the United States has held that a debtor may exclude his interest in an ERISA-qualified pension plan from the bankruptcy estate because such plans, by definition, contain a restriction on transfer of a beneficial interest of the debtor in a trust, which is enforceable under applicable non-bankruptcy law. In Re: Kunz, Case No. 04-4117 (U.S. 10th Cir., January 26, 2005).


According to, in 1972, market historian Yale Hirsch coined the phrase “as January goes, so goes the year.” Indeed, in 44 of the last 55 Januaries since 1950, the S&P 500's year-end finish mirrored how it fared in the first month of the year. So, what’s the outlook? Last month, NASDAQ fell 5.20%, the Dow dropped 2.72% and the S&P 500 lost 2.53%.


Reacting to pressure from Congress, the Pentagon has announced plans to increase death payments by nearly $250,000 to families of U.S. troops killed in combat zones. The rise, which will be retroactive to October, 2001, would effectively double -- to $500,000 -- the cash that survivors can receive in immediate government payments and life insurance proceeds. Under the Pentagon’s plan, a one-time, tax-free “death gratuity” paid to survivors of military personnel killed in line of duty would rise from $12,420 to $100,000. The government also would increase the limit of life insurance coverage for service members by $150,000, to $400,000. As of the end of January, 2005, 1,415 Americans had died in Iraq and 156 had died in Afghanistan and other places designated part of the global war on terrorism. The plan requires Congressional approval, which is expected. The gratuity, introduced in 1908, had grown to only $3,000 by time of the Persian Gulf War in 1991. It was raised to $6,000 after that war and boosted to $12,000 in 2003. At the same time, Congress made the gratuity tax-free -- before that, half was taxable -- and tied future increases to military pay raises. (For a perspective, remember that government settlements to families of those killed in the September 11, 2001 terrorist attacks average $2.1 Million.)

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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