The Indiana Supreme Court Friday settled a certified question on whether nondependent spouses and children enjoy the exemption granted to life insurance policy beneficiaries who are “the spouse, children, or any relative dependent upon” the debtor. They do, the court concluded.
The question arose over the disposition of a life insurance policy with a cash value of a little more than $14,000 in a bankruptcy proceeding in the United States Bankruptcy Court for the Northern District of Indiana. The debtor had named a nondependent son as beneficiary, but a bankruptcy trustee objected based on the “dependent upon” language.
“That language undisputedly requires that relatives other than spouses and children must be dependent on the debtor for the exemption to apply, but whether that requirement also applies to spouses and children is less clear,” Chief Justice Loretta Rush wrote for the court in In the Matter of Dennis Alan Howell, 94S00-1405-CQ-321.
“We accepted a certified question asking us to construe whether the ‘dependent upon’ phrase modifies only ‘any relative,’ or also ‘spouse’ and ‘children.’ The statutory language and structure standing alone are inconclusive, but all of the relevant interpretive canons indicate that we should construe ‘dependent upon’ to modify only ‘any relative.’ Accordingly, spouses and children need not be the debtor’s dependents for the exemption to apply,” Rush wrote.