The Chapter 7 trustee appeals the bankruptcy court’s order overruling his objection to a debtor’s claimed exemption of life insurance proceeds and denying his motion for turnover.
Husband and wife Larry J. Erickson (“Erickson”) and Betty L. Moore (“Moore”) (collectively “Debtors”) filed a petition for Chapter 7 relief on March 30, 2010. At the time the petition was filed, Erickson owned several insurance policies on his life with respect to which Moore was the designated beneficiary.3 Debtors neither scheduled the life insurance policies as assets, nor claimed them as exempt. Erickson died on May 24, 2010, within 180 days of filing the petition, thereby implicating Bankruptcy Code Section 541(a)(5)(C), which operates to include the life insurance proceeds into Moore’s bankruptcy estate.
Moore did not notify the Chapter 7 trustee, Christopher J. Redmond (“Trustee”), of Erickson’s death, or of her receipt of the life insurance proceeds as beneficiary. Trustee learned of these events from an interested third-party creditor.
Although the life insurance proceeds from the policies on Erickson’s life were brought into beneficiary Moore’s bankruptcy estate pursuant to Section 541(a)(5)(C), Moore is entitled to exempt them pursuant to Kansas Statutes § 40-414 and § 60-2313. Therefore, the bankruptcy court’s order denying Trustee’s objection to Moore’s claimed exemption of the life insurance proceeds and Trustee’s motion for turnover of the same is hereby AFFIRMED.