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Click here for the full text of this decision FACTS: Sharon Jones divorced her husband, Leslie Jones, in 1995. The divorce court entered a qualified domestic relations order directing American Airlines, Leslie’s employer, to pay a portion of Leslie’s pension funds, with interest, to Sharon. Sharon directed American to distribute the taxable proceeds of her lump-sum payments by wire transfer to a rollover individual retirement account or other qualified retirement plan. Once she got the money, she transferred it to a securities broker for investment. Leslie filed suit against American in federal court, arguing that under ERISA, American should have paid him the proceeds instead of Sharon. American brought Sharon into the suit as a third-party defendant on the theory that if the federal court sided with Leslie, American would be entitled to equitable reimbursement from Sharon for the amounts already paid. American eventually settled with Leslie, then pursued their third-party claims against Sharon. The federal court sided with American, finding they were entitled to recover more than $400,000 from Sharon. Sharon did not appeal this ruling. American learned that Sharon not only withdrew the funds wired to her and transferred them to the accounts managed by the securities company, but she also converted some of the proceeds into cash and redeposited them into several bank accounts in the weeks leading up to the trial. American initiated a collection suit in the same federal court. That court declined to extend jurisdiction, so American filed an application for turnover in a state trial court. In her response, Sharon claimed the funds were exempt from turnover proceedings under Civ. Prac. & Rem. Code �31.002(f) and Property Code �42.0021. The trial court ruled against her and ordered her to pay the $400,000, plus post-judgment interest, into the court registry. Sharon now appeals, arguing the trial court erred: 1. by its implied finding that her IRA did not qualify under the applicable provisions of the Internal Revenue Code; and 2. by its implied finding that the funds ordered turned over were not exempt from turnover as the proceeds of exempt property. HOLDING: Affirmed. The court explains that the turnover statute, �31.002, is a procedural device used by judgment creditors to reach a debtor’s assets that are otherwise difficult to attach or levy on by ordinary legal processes. The statute’s reach is limited, however. It cannot extend to property exempt under any statute, including Property Code �42.0021. Section 42.0021 deals with exemptions for retirement plans. It includes within its broad exemption contributions made to an individual retirement account and any accrued earnings on such accounts. The section was enacted to protect retirement benefits from the claims of creditors, including judgment creditors, the court explains. It was not, however, intended to create a safe-haven for sham retirement plans created to defraud creditors. Applying the law to the facts, the court agrees with American that Sharon cannot claim an exemption to funds that she has no right to. Sharon admitted that in addition to the proceeds she had transferred to the securities broker, she also made some gifts and expenditures with the money, and she converted funds into cash to open new bank accounts. Two checks showed that Sharon had withdrawn at least $460,000 from those accounts, and she admitted at trial that she had more than $400,000 in a safe in her home. Though Sharon insisted that she had created the various accounts for tax purposes, she also admitted that she understood that if the money was found to have been wrongly paid to her that she was required to repay American. Sharon did not offer any evidence that she had a legal right to the funds. Because the amount Sharon received was incorrectly calculated, the portion of the funds used to create the new accounts did not qualify as eligible rollover distributions under Internal Revenue Code �402(c). The court adds that American is entitled to $3,500 in appellate attorneys’ fees. OPINION: Gardner, J.; Dauphinot, Gardner and Walker, JJ.

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