                        United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                   ___________

                               Nos. 07-2064/07-2727
                                   ___________

In re: Lance V. Addison,                *
                                        *
               Debtor                   *
                                        *
--------------------                    *
                                        *
Lance V. Addison,                       *
                                        *
               Appellant,               * Appeal from the United States
                                        * Bankruptcy Appellate Panel
       v.                               * for the Eighth Circuit.
                                        *
Randall L. Seaver,                      *
                                        *
               Appellee.                *
                                   ___________

                             Submitted: March 10, 2008
                                Filed: August 7, 2008
                                 ___________

Before BYE, SMITH, and COLLOTON, Circuit Judges.
                            ___________

SMITH, Circuit Judge.

      Shortly before Lance Addison filed his bankruptcy petition, he converted a
portion of his nonexempt assets into exempt assets. After the bankruptcy trustee
("Trustee") filed an objection to Addison's claimed exemptions, the bankruptcy court
concluded that Addison converted the assets with the intent to hinder, delay, or
defraud a creditor. As a result, the bankruptcy court reduced Addison's homestead
exemption by $11,500, and denied the exemption claimed in his Roth IRA. The
bankruptcy court also ruled that two college tuition savings accounts Addison had
established for his children were property of his bankruptcy estate and not exemptible.
Addison appealed the bankruptcy court's decision, and the Bankruptcy Appellate
Panel (BAP) affirmed.

       Subsequently, the Trustee initiated an adversary proceeding objecting to
Addison's discharge. The bankruptcy court denied Addison's discharge, ruling as a
matter of collateral estoppel that Addison had acted with the intent to hinder, delay or
defraud one or more creditors when he converted his nonexempt assets to exempt
assets within one year prior to filing bankruptcy. Addison also appealed this decision
to the BAP and immediately requested that the BAP transfer the appeal to this court.
The BAP did so, and we now hear Addison's consolidated appeals. We affirm in part,
reverse in part, and remand for further proceedings.

                                    I. Background
       Addison, a part-owner of a cable company, had personally guaranteed some of
his company's debt. In early 2005 the business was unable to pay its debts, and JP
Morgan Chase ("Chase"), a company creditor, began to pursue Addison on a $1.3
million personal guarantee. Around June 2005, Addison first sought the advice of
bankruptcy counsel in an effort to protect himself from Chase's attempts to enforce the
guarantee. On or about July 21, 2005, Addison used $4,000 of his nonexempt funds
to establish a Roth IRA for himself and used another $4,000 of the nonexempt funds
to establish a Roth IRA for his wife. The funds came from a brokerage account that
contained $45,476.71 in nonexempt funds prior to these transfers.

       On October 14, 2005, Addison instructed his wife to use $11,500 in nonexempt
funds to make a voluntary principal payment on their home mortgage. Addison's wife
transferred $9,000 of this payment from the brokerage account mentioned above, and
$2,500 came from a bank account at U.S. Bank. Later that same day, Addison filed

                                          -2-
an individual Chapter 7 bankruptcy petition. He chose the Minnesota state exemptions
and claimed his Roth IRA1 and the equity in the house as exempt.

       In May 2004, Addison had established a college tuition savings account,
pursuant to 26 U.S.C. § 529 ("Section 529 accounts"), for each of his two children.
Section 529 account balances fluctuate with the equity markets, but on the date of his
bankruptcy filing, the accounts were worth approximately $22,000 combined.
Addison listed the Section 529 accounts on his bankruptcy schedules but claimed that
the accounts were owned by his children and thus were not property of his bankruptcy
estate. To the extent that the Section 529 accounts were property of the estate,
however, Addison claimed them as exempt.

       The Trustee objected to Addison's homestead and Roth IRA exemptions, and
asserted that the Section 529 accounts were property of the estate not subject to any
exemption. The bankruptcy court held an evidentiary hearing on the Trustee's
objection and subsequently ruled in favor of the Trustee on all three issues. The court
found that Addison made the $11,500 house payment and the $4,000 Roth IRA
payment with the intent to hinder, delay, or defraud his creditors, and thus denied, in
full, Addison's claimed exemption in the Roth IRA and ordered that the homestead
exemption be reduced by $11,500. The bankruptcy court also ruled that the Section
529 plans were property of Addison's bankruptcy estate and that they were not subject
to any applicable exemption.

       The BAP affirmed, ruling that the bankruptcy court's finding that Addison had
the intent to hinder, delay, or defraud his creditors when he converted the nonexempt
assets into exempt assets was not clearly erroneous. The BAP also affirmed the
bankruptcy court's determination that the Section 529 accounts were property of the
estate and not subject to exemption. Addison timely appealed to this court.


      1
       The Roth IRA opened in Addison's wife's name is not at issue in this case.

                                         -3-
       After the bankruptcy court found that Addison intended to hinder, delay, or
defraud a creditor when he converted his nonexempt assets into his homestead and
Roth IRA, the Trustee initiated an adversary proceeding to deny Addison's discharge
under 11 U.S.C. § 727(a)(2). Because a debtor's discharge can be denied under §
727(a)(2) if "the debtor, with intent to hinder, delay, or defraud a creditor . . . has
transferred . . . property of the debtor, within one year before" his bankruptcy filing,
and the bankruptcy court had already concluded that Addison transferred nonexempt
property to exempt property with the intent to hinder, delay, or defraud a creditor
within a year before his bankruptcy filing, the court denied Addison's discharge under
§ 727(a)(2) on collateral estoppel grounds. Addison also appealed this ruling to the
BAP, which certified the appeal directly to this court. We now consider both of
Addison's appeals.

                                    II. Discussion
       Addison argues that the bankruptcy court erroneously found that he converted
nonexempt assets to exempt assets with the intent to hinder, delay, or defraud one or
more creditors. More specifically, Addison contends that the bankruptcy court's
disallowance of his Roth IRA exemption claim and its reduction of his homestead
exemption should be reversed along with the denial of his discharge. Further, Addison
asserts that the bankruptcy court erred in ruling that the Section 529 accounts that he
established for his children are property of his bankruptcy estate and in ruling that
they are not subject to any exemption. Like the BAP, we review the bankruptcy court's
conclusions of law de novo and its findings of facts for clear error. Official Comm. of
Unsecured Creditors v. Farmland Indus., Inc. (In re Farmland Indus., Inc.), 397 F.3d
647, 650 (8th Cir. 2005).

                     A. Disallowance of Claimed Exemptions
       The bankruptcy court found that Addison acted with the intent to hinder, delay,
or defraud one or more of his creditors. Shortly before filing for bankruptcy, Addison
converted nonexempt funds from a brokerage account and a bank account to pay down

                                          -4-
the mortgage on his home thereby increasing his homestead exemption. Also, he
converted nonexempt funds from his brokerage account into an exemptible Roth IRA.

       Under § 522(b) of the Bankruptcy Code, "a debtor can choose to exempt from
property of the bankruptcy estate that property which is exempt under the applicable
state or federal law." Sholdan v. Dietz, 108 F.3d 886, 888 (8th Cir. 1997) ("Sholdan
I"); 11 U.S.C. § 522(b). Here, Addison elected to use the Minnesota state exemptions,
and claimed a homestead exemption of $91,250 under Minn. Stat. Ann. § 510.022 and
claimed his $4,000 Roth IRA as exempt under Minn. Stat. Ann. § 550.37(24).3 These
claimed exemptions were within the permissible amounts as provided by Minnesota
law. See In re Sholdan, 217 F.3d 1006, 1008 (8th Cir. 2000) ("Sholdan II") ("The
scope of a state-created exemption is determined by state law"). However, under
Minnesota's enactment of the Uniform Fraudulent Transfers Act (UFTA), a debtor
may not claim an exemption in property obtained through a transfer made by the
debtor "with actual intent to hinder, delay, or defraud any creditor of the debtor."
Minn. Stat. Ann. § 513.44; see also Sholdan II, 217 F.3d at 1008 ("[U]nder section
513.44 of Minnesota's enactment of the Uniform Fraudulent Transfer Act (UFTA), a
debtor may not claim a homestead exemption when he or she transfers the property
'with actual intent to hinder, delay, or defraud' creditors"); In re Tveten, 402 N.W.2d
551, 556 (Minn. 1987) ("[I]t clearly appears that under Minnesota law a debtor in
contemplation of bankruptcy may convert nonexempt property into exempt property,
so long as the conversion does not violate the Uniform Fraudulent Conveyance Act").


      2
      At the time of Addison's bankruptcy filing, Minnesota law provided for a
homestead exemption (in a non-agricultural homestead) up to $200,000 in value.
Minn. Stat. § 510.02. Although it has no impact on this case, we note that the
maximum homestead exemption (for non-agricultural homesteads) was increased to
$300,000 when § 510.02 was rewritten in 2007.
      3
         Minn. Stat. Ann. § 550.37(24) allows a debtor to exempt his "right to receive
present or future payments, or payments received by the debtor, under a . . . Roth IRA
. . . up to a present value of $30,000 . . . ."

                                         -5-
Section 513.44(b) "contains a lengthy list of factors or 'badges of fraud' which a court
may look to for help in determining actual intent." Sholdan II, 217 F.3d at 1008 (citing
Minn. Stat. Ann. § 513.44(b)). Thus, Addison's claimed exemptions in his homestead
and Roth IRA are not permitted if those assets were obtained by transfers made "with
actual intent to hinder, delay, or defraud any creditor." Minn. Stat. Ann. § 513.44(a).

      Additionally, when Congress passed the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA),4 it added, among other things,
subsection (o) to § 522 of the Bankruptcy Code ("Code").5 Under § 522(o) of the


      4
       On April 20, 2005, President Bush signed BAPCPA into law. While the
majority of BAPCPA's provisions did not take effect until October 17, 2005, §
1501(b) of the Act provided that certain amendments, including the provisions of 11
U.S.C. § 522(o), (p), and (q), "shall apply with respect to cases commenced under
Title 11, United States Code, on or after the date of the enactment of this Act." Pub.
L. 109-8 § 1501(b) (2005). Because Addison filed his bankruptcy petition on October
14, 2005—after BAPCPA was enacted—§ 522(o) applies to his case.
      5
       Section 522(o), in pertinent part, states that:

      [T]he value of an interest in--

      (1) real or personal property that the debtor or a dependent of the debtor
      uses as a residence; [or]
                                          ...
      (4) real or personal property that the debtor or a dependent of the debtor
      claims as a homestead
                                          ...
      shall be reduced to the extent that such value is attributable to any
      portion of any property that the debtor disposed of in the 10-year period
      ending on the date of the filing of the petition with the intent to hinder,
      delay, or defraud a creditor and that the debtor could not exempt, or that
      portion that the debtor could not exempt, under subsection (b), if on such
      date the debtor had held the property so disposed of.

                                          -6-
Code, the amount of a state homestead exemption is reduced to the extent that the
value of the exemption is attributable to nonexempt property that the debtor converted
into the homestead within 10 years of filing for bankruptcy, if the conversion was
made "with the intent to hinder, delay, or defraud a creditor." 11 U.S.C. § 522(o).6
Thus, while the exemption Addison claimed in his Roth IRA is allowable unless it
violates Minn. Stat. Ann. § 513.44(a), the claimed homestead exemption is subject to
both 11 U.S.C. § 522(o) and Minn. Stat. Ann. § 513.44(a).

                               1. Homestead Exemption
       The question here is whether the $91,250.00 that Addison claimed as his
homestead exemption must be reduced by $11,500, under either Minnesota law or §
522(o) of the Code, due to the day-of-filing mortgage payment. For purposes of §
522(o), the issue turns on whether Addison acted "with the intent to hinder, delay, or
defraud a creditor" when he transferred nonexempt funds to reduce the mortgage on
his homestead. Congress did not provide any guidance regarding the construction of
the phrase "with the intent to hinder, delay, or defraud" when it enacted § 522(o), but
the statutory language is similar, if not identical, to the language used in § 548 and §
727 of the Code, as well as Minn. Stat. Ann. § 513.44(a).




11 U.S.C. § 522(o).
      6
        Addison asserts that § 522(o) should not reduce the amount of a state
homestead exemption because the scope of state exemptions have traditionally been
determined by state law, see Sholdan II, 217 F.3d at 1008. We must reject this
argument in light of the express language in § 522. See 11 U.S.C. § 522(b)(3)
(providing that debtors who use a state's exemptions do so "subject to subsection (o)
and (p)") (emphasis added). "The Congressional purpose is clear: debtors seeking the
protection of state exemptions must meet their state exemption provision requirements
as limited by § 522(o) and (p)." In re Maronde, 332 B.R. 593, 599 (Bankr. D. Minn.
2005) (emphasis added).

                                          -7-
       Section 548 of the Code provides that a trustee may avoid a pre-petition transfer
of assets by the debtor if the debtor made the transfer "with actual intent to hinder,
delay, or defraud" any past or future creditor. 11 U.S.C. § 548(a)(1)(A). Similarly, §
727(a)(2) bars a debtor's discharge if he takes certain actions, including transferring,
concealing, or removing property of the estate within one year before filing, "with
intent to hinder, delay, or defraud a creditor." 11 U.S.C. § 727(a)(2). Due to the
similar wording of those statutes, numerous bankruptcy courts have looked to the
body of case law construing §§ 548(a)(1) and 727(a)(2) to determine the meaning of
"with intent to hinder, delay, or defraud a creditor" in § 522(o). See Maronde, 332
B.R. at 599 ("It is only logical to assume that Congress intended that by using
essentially the same phrase in § 522(o), cases construing the fraudulent conveyance
and discharge provisions also would apply to add body to the bare words of this new
Congressional language"); In re Fehmel, No. 07-60831, 2008 WL 2151797, at *7
(Bankr. W.D. Tex. May 22, 2008) ("The phrase 'with the intent to hinder, delay or
defraud a creditor' contained in § 522(o) is . . . not defined in the Bankruptcy
Code . . . . Therefore, in interpreting the meaning of the phrase as contained in §
522(o), it is appropriate to look to case law interpreting [§ 727(a)(2) and §
548(a)(1)(A)]"); In re Agnew, 355 B.R. 276, 284 (Bankr. D. Kan. 2006) (construing
the meaning of "intent to hinder, delay, or defraud a creditor" in § 522(o) from cases
construing the meaning of intent to hinder, delay, or defraud in §§ 722(a)(2) and
548(a)(1)); In re Lacounte, 342 B.R. 809, 814 (Bankr. D. Mont. 2005) (same); In re
Sissom, 366 B.R. 677, 691–92 (Bankr. S.D. Tex. 2007) (same).

      Because direct evidence of fraudulent intent is rarely available, our cases have
used the inferential "badges of fraud" approach to determine whether a debtor acted
with "intent to hinder, delay, or defraud," a creditor regardless of whether the intent
language came from a state fraudulent transfer statute or applicable bankruptcy law.
See Sholdan II, 217 F.3d at 1009 (approving badges of fraud approach to determine
whether debtor acted with "actual intent to hinder, delay, or defraud" under Minnesota
fraudulent transfer statute in ruling on objection to homestead exemption); Jackson

                                          -8-
v. Star Sprinkler Corp. of Florida, 575 F.2d 1223, 1237 (8th Cir. 1978) (using badges
of fraud analysis to determine whether debtor made transfers with intent to hinder,
delay, or defraud creditor under fraudulent transfer section of the then-applicable
Bankruptcy Act); see also Graven v. Fink (In re Graven), 936 F.2d 378, 383 (8th Cir.
1991) (comparing § 548(a)'s "actual intent to hinder, delay, or defraud" language with
"intent to hinder, delay or defraud" in Missouri's then-applicable state fraudulent
conveyance statute, noting that the two statutes use the "same standard"). Given the
similarity of the language among these statutes, we conclude that the badges of fraud
approach should also apply to determine a debtor's intent under § 522(o).7

       Although both § 522(o) and Minn. Stat. Ann. § 513.44, like §§ 548(a)(1) and
727(a)(2), use the disjunctive "hinder, delay, or defraud," our circuit has been
reluctant to deny a homestead exemption without a finding of intent to defraud. See
Sholdan I, 108 F.3d at 888 (reversing bankruptcy court's finding that debtor converted
nonexempt property into exempt homestead with intent to hinder or delay, and
remanding for bankruptcy court to determine whether debtor acted with intent to
defraud); Panuska v. Johnson (In re Johnson), 880 F.2d 78, 80 n.1 (8th Cir. 1989)
(noting that courts "generally view" the phrase "hinder, delay, or defraud" as "a single
test" and refusing "to separate out the terms fraud, hinder and delay").8 In Sholdan I,
a 90-year old debtor, who had been sued for injuries caused by an automobile
accident, sold substantially all of his nonexempt assets and used those proceeds to


      7
       We reject the Trustee's position that § 522(o) provides a new standard for
determining what type of evidence establishes a debtor's "intent to hinder, delay, or
defraud" a creditor when the debtor converts nonexempt assets into his homestead.
Rather, in our view, § 522(o) merely establishes a 10-year look-back period, from the
date of the bankruptcy filing, from which such evidence may be considered.
      8
       See also Coder v. Arts, 213 U.S. 223, 242 (1909) (explaining that "hinder,
delay, or defraud" is a "form of expression . . . familiar to the law of fraudulent
conveyances . . . and has always been held to require, in order to invalidate a
conveyance, that there shall be actual fraud").

                                          -9-
purchase a home with cash. Id. at 887. At all times while living in his new home,
Sholdan had the assistance of a nurse. Id. For approximately a year prior to purchasing
the house the debtor had been living in an assisted living facility, and on nights when
a nurse was not available to stay with him in his newly purchased home, the debtor
would return to the assisted living facility to spend the night. Id. Additionally, for the
13 years prior to residing at the assisted living facility, the debtor had not owned a
home, but had lived in an apartment. Id.

       Three months after purchasing the new home the debtor filed for bankruptcy
and claimed his house as exempt. Id. The trustee objected to the homestead
exemption, asserting that the debtor had purchased the home with the intent to hinder,
delay or defraud a creditor. Id. The bankruptcy court sustained the trustee's objection
and disallowed the claimed homestead exemption, finding that the debtor had acted
with the intent to "hinder or delay" a creditor when he purchased the home. Id. The
bankruptcy court did not rule on whether the debtor acted with intent to defraud a
creditor. Id. at 887–88. The district court affirmed, holding that it was not necessary
to find an intent to defraud. Id. at 888. We then reversed and remanded for the
bankruptcy court to consider whether the debtor acted with the intent to defraud. Id.
In reversing, we stated that "we do not mean to say that the test of 'hinder or delay'
might not prevail under another set of facts," but ruled that the facts of that case "d[id]
not support such a finding." Id.

      In the instant case, the bankruptcy court found sufficient evidence to establish
that Addison acted with the intent to hinder, delay, and defraud a creditor.9 However,


      9
        In granting the Trustee's motion to reduce Addison's homestead exemption the
court stated:

      I find and conclude that the transfers to the mortgage holder through any
      reduction of the mortgage debt were transfers of property made with the
      intent to hinder, delay, or defraud. It doesn't have to be fraud. Everyone

                                           -10-
Addison took less aggressive actions than those present in Sholdan10—wherein we
concluded that the facts did not support a finding of intent to hinder or delay.
Applying our precedent, we conclude that the record here does not support the
reduction of Addison's homestead exemption based on an intent to hinder or delay. Id.

       Thus, we are left with the bankruptcy court's determination that Addison
converted $11,500 in nonexempt funds into his homestead with the intent to defraud
a creditor. "The question of whether an individual acted with intent to defraud in
converting non-exempt property into exempt property is a question of fact, on which
the bankruptcy court's finding will not be reversed unless clearly erroneous." Sholdan
II, 217 F.3d at 1010 (citing Hanson v. First Nat'l Bank, 848 F.2d 866, 868 (8th
Cir.1988)). "It is well settled that the mere conversion of non-exempt assets to exempt
assets is not in itself fraudulent." Id.; see also Hanson, 848 F.2d at 868 ("It is well
established that . . . a debtor's conversion of non-exempt property to exempt property
on the eve of bankruptcy for the express purpose of placing that property beyond the
reach of creditors, without more, will not deprive the debtor of the exemption to which
he otherwise would be entitled"); Norwest Bank Nebraska, NA v. Tveten, 848 F.2d
871, 873–74 (8th Cir. 1988) ("It is well established that under the Code the conversion
of non-exempt to exempt property for the purpose of placing the property out of the
reach of creditors, without more, will not deprive the debtor of the exemption to which




      seems to focus on fraud, but hinder or delay is sufficient and I think all
      of those are present here.

Hearing Tr. at 61–62 (emphasis added).
      10
        Both Sholdan and Addison took steps to protect their assets after being sued,
but unlike Sholdan, Addison did not create an exempt asset by purchasing a home he
did not previously have; rather, Addison made an additional lump-sum payment
toward the mortgage on his existing home. Further, Addison did not convert
substantially all of his nonexempt assets into the home as Sholdan had done.

                                         -11-
he otherwise would be entitled"). Nevertheless, "[w]here the debtor acts with actual
intent to defraud creditors, his exemptions will be denied." Hanson, 848 F.2d at 868.

      "Before actual fraudulent intent can be found 'there must appear in evidence
some facts or circumstances which are extrinsic to the mere facts of conversion of
non-exempt assets into exempt and which are indicative of such fraudulent purpose.'"
Sholdan II, 217 F.3d at 1010 (quoting Tveten, 848 F.2d at 875 (in turn quoting
Forsberg v. Security State Bank, 15 F.2d 499, 502 (8th Cir. 1926))). In finding that
Addison had the requisite intent to defraud, the bankruptcy court properly looked to
the badges of fraud enumerated in Minn. Stat. Ann. § 513.44(b),11 and found four

      11
        Minn. Stat. Ann. § 513.44(b), provides a nonexclusive list of "badges of
fraud" that may be considered, among other things, in determining a debtor's intent to
defraud. These "badges" are whether:

      (1) the transfer or obligation was to an insider;
      (2) the debtor retained possession or control of the property transferred
      after the transfer;
      (3) the transfer or obligation was disclosed or concealed;
      (4) before the transfer was made or obligation was incurred, the debtor
      had been sued or threatened with suit;
      (5) the transfer was of substantially all the debtor's assets;
      (6) the debtor absconded;
      (7) the debtor removed or concealed assets;
      (8) the value of the consideration received by the debtor was reasonably
      equivalent to the value of the asset transferred or the amount of the
      obligation incurred;
      (9) the debtor was insolvent or became insolvent shortly after the transfer
      was made or the obligation was incurred;
      (10) the transfer occurred shortly before or shortly after a substantial
      debt was incurred; and
      (11) the debtor transferred the essential assets of the business to a lienor
      who transferred the assets to an insider of the debtor.

Minn. Stat. Ann. § 513.44(b).

                                         -12-
badges of fraud resulting from Addison's day-of-filing mortgage payment: (1) the
transfer was to an insider; (2) Addison retained control of the property after the
transfer; (3) the transfer was made after Addison had been sued on his personal
guarantee; and (4) Addison was insolvent at the time he transferred the funds to his
homestead. Additionally, the bankruptcy court noted that Addison already had
significant equity in his home before he made the transfer and that the payment only
increased Addison's equity in the home, but did not reduce his monthly mortgage
payment. While the bankruptcy court noted that there were badges of fraud favoring
both sides, it found that the homestead transfer was made with the intent to hinder,
delay, or defraud Addison's creditors, as his intent was "to keep value away from
creditors."

       The bankruptcy court's underlying factual findings are themselves not clearly
erroneous; however, they do not identify any "extrinsic evidence of fraud." In the
absence of extrinsic evidence of fraud, we find clear error in the bankruptcy court's
ultimate determination of intent to defraud. As discussed above, "[i]t is well
established that . . . a debtor's conversion of non-exempt property to exempt property
on the eve of bankruptcy for the express purpose of placing that property beyond the
reach of creditors, without more, will not deprive the debtor of the exemption to which
he otherwise would be entitled." Hanson, 848 F.2d at 868. Rather, for fraudulent
intent to be found "there must appear in evidence some facts or circumstances which
are extrinsic to the mere facts of conversion of non-exempt assets into exempt and
which are indicative of such fraudulent purpose." Sholdan II, 217 F.3d at 1010
(quotations and citations omitted).

       Here, only the fact that Addison had been sued or threatened with suit prior to
making the mortgage payment was extrinsic to the fact of conversion—all of the other
facts cited relate to a debtor's simple conversion of nonexempt property to exempt




                                         -13-
property on the eve of bankruptcy, which we have long held to be permissible.12 If
these facts alone constitute extrinsic evidence of intent to defraud Hanson and
Johnson would have reached that same result. See Hanson, 848 F.2d at 867–68
(rejecting argument that extrinsic evidence established debtor's intent to defraud where
debtors, after defaulting on bank loans and talking to bankruptcy counsel, converted
approximately $20,000 into life insurance policies a couple of weeks prior to filing
and prepaid an additional $11,033 on their homestead mortgage two days before
filing); Johnson, 880 F.2d at 79 ("agree[ing] that there is no fraud as to [debtor's]
homestead exemption," where debtor, in contemplation of filing bankruptcy, talked
to bankruptcy attorney and paid off $175,000 in debts against his home after creditors
obtained judgments against him). Moreover, the bankruptcy court's finding that
Addison converted his nonexempt property to exempt property with the intent "to
keep value away from creditors" does not provide extrinsic evidence of fraud as such
an intent is not automatically impermissible. Hanson, 848 F.2d at 868; Tveten, 848
F.2d at 873–74.

       This case resembles Hanson. The Hansons, married farmers, defaulted on
several bank loans when financial difficulties arose. 848 F.2d at 867. Before they filed
for bankruptcy, the Hansons consulted an attorney, and on the advice of counsel, they
sold several nonexempt items to family members for fair-market value. Id. A couple
of weeks before filing for bankruptcy, the Hansons took the proceeds from the sales
of the nonexempt assets and bought life insurance policies on each of them with a
cash-surrender value of approximately $10,000 each. Then two days prior to filing for
bankruptcy they prepaid $11,033 on their homestead mortgage. Id. Upon filing for


      12
        A debtor's conversion of his own nonexempt property into exempt property
also owned by him could always be viewed as a transfer to an insider. Likewise, after
that conversion, the debtor would continue to control the property after the
conversion. And, a debtor converting nonexempt property to exempt property "on the
eve of bankruptcy" will almost always be insolvent. Thus, these "badges of fraud,"
without more, cannot support a finding of intent to defraud.

                                         -14-
bankruptcy, the Hansons claimed their life insurance policies and their homestead as
exempt. Id.

       A creditor objected to these exemptions, claiming that the debtors had
converted nonexempt property to exempt property on the eve of bankruptcy with
intent to defraud their creditors. Id. The bankruptcy court denied the objection to the
exemptions, finding that the Hansons had done what was permissible under the law
and that their actions did not constitute extrinsic evidence of fraud. Id. at 868. After
the district court affirmed, the creditor appealed to this court. Id.

        The Hanson panel focused on whether extrinsic evidence established that the
Hansons converted their property with the intent to defraud their creditors and
concluded that the bankruptcy court was not clearly erroneous in finding no fraudulent
intent by the Hansons. Id. at 869. In reaching this conclusion, we noted that the
bankruptcy court had found that the creditor did not establish any indicia of fraud and
further noted that "the Hansons did not borrow money to place into exempt properties;
they accounted for the cash they received from the sales; they had a preexisting
homestead; and they did not obtain goods on credit, sell them, and then place the
money into exempt property." Id. Concluding that the debtors "sold their [nonexempt]
property for its fair market value and then used this money to take advantage of some
of the limited exemptions available under South Dakota law on the advice of counsel,"
we held that the bankruptcy court was not clearly erroneous in finding that the debtors
lacked the intent to defraud and permitting the debtors to claim their full exemptions.
Id.

      Similar to the Hansons, Addison became insolvent (albeit due to a personal
guarantee being called rather than defaulting on loans) and prior to filing for
bankruptcy he sought the advice of counsel. After discussing prebankruptcy planning
with his attorney, Addison transferred some of his nonexempt assets in a brokerage
account to fund Roth IRAs for himself and his wife in the amount of $4,000 each.

                                         -15-
This mirrors the Hansons' conversion of non-exempt assets into life insurance policies,
except that Addison converted a lesser amount into the Roth IRAs than the Hansons
did for their life insurance policies. Additionally, Addison made an $11,500 principal
mortgage payment on the day he filed his bankruptcy petition—nearly identical to the
$11,033 mortgage payment the Hansons made two days prior to their bankruptcy
filing. As in Hanson, there has been no extrinsic evidence produced here that Addison
had any indicia of fraud other than the suit or threat of suit resulting from personal
liability on a defaulted loan: Addison did not borrow money to place into exempt
assets; he had a preexisting homestead; he did not obtain goods on credit, sell them,
then place the money into exempt property; and he did not attempt to conceal the
transfers in his bankruptcy filings.

       "The sort of indicia of fraud necessary to find fraudulent use on an exemption
would be, inter alia, conduct intentionally designed to materially mislead or deceive
creditors about the debtor's position or use of credit to buy exempt property." Matter
of Armstrong, 931 F.2d 1233, 1237 (8th Cir. 1991) (citations omitted). Additionally,
"[c]onverting a very great amount of property could also be an indication of fraud,"
as could "[t]he existence of conveyances for less than adequate consideration." Id. In
the present case, the record contains no extrinsic evidence of any of these indicia of
fraud. The record only indicates that Addison's intent was to convert some of his
nonexempt property to exempt property on the eve of bankruptcy, something that is
"well established" in this circuit that he is allowed to do. Hanson, 848 F.2d at 868 ("It
is well established that . . . a debtor's conversion of non-exempt property to exempt
property on the eve of bankruptcy for the express purpose of placing that property
beyond the reach of creditors, without more, will not deprive the debtor of the
exemption to which he otherwise would be entitled"). Accordingly, we conclude that
it was clear error for the bankruptcy court to find that Addison had the requisite intent
to hinder, delay, or defraud a creditor when he converted some nonexempt property
into his homestead on the day he filed bankruptcy.



                                          -16-
      Additionally, circuit precedent upholding findings of fraudulent intent differ
factually from this case. For example, in our most recent decision on the issue,
Sholdan II, which came back before the court after our remand in Sholdan I, discussed
above, we upheld the bankruptcy court's finding of intent to defraud, stating:

      It is one thing to convert non-exempt assets into exempt property for the
      express purpose of holding it as a homestead and thereby putting the
      property beyond the reach of creditors. However, it is quite another thing
      to acquire title to a house for no other reason than to defraud creditors.

Sholdan II, 217 F.3d at 1011.13

       In the present case, however, Addison did not "acquire title to a house for no
other reason than to defraud creditors" as Sholdan had. Addison had owned his house
for years prior to his bankruptcy filing and merely converted nonexempt assets into
the homestead to protect it from the reach of creditors—the exact action that we
implied was permissible in upholding the finding of intent to defraud in Sholdan II.
Id.

       Moreover, in Tveten, we upheld the finding of intent to defraud based on the
evidence surrounding the debtor's conversion of nonexempt assets to exempt assets
prior to bankruptcy.14 848 F.2d at 876. In that case, the debtor was a physician who

      13
         As discussed above, the debtor in Sholdan was a 90-year old who, after being
sued, liquidated nearly all of his nonexempt assets and used the proceeds to purchase
a home in cash, just prior to filing for bankruptcy protection, even though the debtor
had been living in an assisted living facility for a year prior to the home purchase, and
in an apartment for the 13 years prior to that.
      14
       Although Tveten dealt with the denial of discharge under § 727(a)(2) and not
the objection to exemptions, because both issues are governed by identical
language—intent to hinder, delay, or defraud a creditor—the standard applied to
determine whether a discharge should be denied on the basis of intent to hinder, delay,

                                          -17-
owed creditors nearly $19 million, mostly on personal guarantees. Id. at 872. When
a number of the debtor's investments declined in value, he met with a bankruptcy
attorney, and then, on counsel's advice, converted almost all of his nonexempt
property (approximately $700,000) into exempt life insurance policies and annuities,
through a series of 17 transactions on the eve of bankruptcy. Id. After Tveten filed for
bankruptcy, the trustee objected to his claimed exemptions in the property, and a
creditor moved to deny his discharge. Id. at 873. The bankruptcy court denied Tveten's
discharge, prior to ruling on the objection to exemptions, finding that he had
converted his nonexempt property to exempt property with the intent to defraud a
creditor. Id. We affirmed the denial of discharge, ruling that the finding of intent to
defraud was not clearly erroneous, noting that Tveten's attempt to shield $700,000
from creditors while attempting to discharge over $18 million in debt went well
beyond the purposes for which exemptions are permitted. Id. at 876. Although not
citing to specific extrinsic evidence of intent to defraud, we noted that "the entire
pattern of conduct" surrounding the conversions demonstrated fraudulent intent. Id.

       Tveten differs markedly from the present case. Unlike Tveten, Addison did not
attempt to convert "almost his entire net worth" into exempt assets prior to
bankruptcy. Rather, Addison left substantial nonexempt assets for his creditors to
recover. In fact, the Trustee-initiated auction of some of Addison's nonexempt assets
brought in proceeds in excess of $10,000. Moreover, the total amount of converted
assets at issue in this case is less than $20,000, only a fraction of the amount present
in Tveten.

or defraud is the same as the determination in this case as to whether Addison's
exemption should be allowed. See Tveten, 848 F.2d at 874 ("Although the
determination as to whether a discharge should be granted or denied is governed by
federal law, the standard applied consistently by the courts is the same as that used to
determine whether an exemption is permissible, i.e. absent extrinsic evidence of fraud,
mere conversion of non-exempt property to exempt property is not fraudulent as to
creditors even if the motivation behind the conversion is to place those assets beyond
the reach of creditors").

                                         -18-
       In sum, we conclude that the bankruptcy court clearly erred in finding that
Addison converted nonexempt property into his homestead with the intent to hinder,
delay, or defraud a creditor. On the record before us, there is no extrinsic evidence of
intent to hinder, delay, or defraud a creditor sufficient to uphold that finding. The
evidence only suggests that Addison was converting nonexempt assets to exempt
assets to place some (but not all or substantially all) of those assets beyond the reach
of creditors—something our precedent permits.

                                 2. Roth IRA Exemption
       The bankruptcy court also denied Addison's claimed exemption in his $4,000
Roth IRA, finding that Addison had transferred nonexempt funds into the Roth IRA
with the intent to hinder, delay, or defraud a creditor. Again, the determination of
intent is a finding of fact reviewed for clear error. Sholdan II, 217 F.3d at 1010.

       The bankruptcy court found Addison acted with intent to hinder, delay, or
defraud regarding the transfer of funds to the Roth IRA "for the same reasons" as it
found intent to hinder, delay, or defraud regarding the payment on the home mortgage.
As discussed above, that finding of intent was clearly erroneous, and thus the
disallowance of the Roth IRA exemption must be reversed as well. Likewise, the
bankruptcy court's additional finding that Addison's real reason15 for converting
nonexempt assets into the Roth IRA was "just [to] keep the money out of the hands
of creditors," will not suffice to establish intent to hinder, delay, or defraud as a debtor
may intentionally convert nonexempt assets to exempt assets for the express purpose
of keeping the money out of the hands of creditors, unless there is extrinsic evidence
of fraud. See Hanson, 848 F.2d at 868 ("It is well established that . . . a debtor's
conversion of non-exempt property to exempt property on the eve of bankruptcy for
the express purpose of placing that property beyond the reach of creditors, without


       15
        Addison's stated reason for converting the nonexempt funds to the Roth IRA
was to provide for his retirement.

                                           -19-
more, will not deprive the debtor of the exemption to which he otherwise would be
entitled").

                              B. Denial of Discharge
       Following the bankruptcy court's ruling on the Trustee's objections to
exemptions, wherein it found that Addison had converted nonexempt assets into his
homestead and Roth IRA with the intent to hinder, delay, or defraud a creditor, the
Trustee filed an adversary proceeding objecting to Addison's discharge under §
727(a)(2) of the Code. Section 727(a)(2) of the Bankruptcy Code states, in relevant
part, that:

      (a) The court shall grant the debtor a discharge, unless–
                                         ...
      (2) the debtor, with intent to hinder, delay, or defraud a creditor . . . has
      transferred, removed, destroyed, mutilated, or concealed, or has
      permitted to be transferred, removed, destroyed, mutilated, or
      concealed--

      (A) property of the debtor, within one year before the date of the filing
      of the petition
                                        ...

11 U.S.C. § 727(a)(2) (emphasis added).

       The Trustee's objection to discharge cited, among other things, Addison's
conversion of nonexempt assets into his homestead and Roth IRA. As there was no
dispute that Addison had made the transfers to his homestead and the Roth IRA within
one year before his bankruptcy filing and that the transfers were made from property
of the debtor, the only issue before the bankruptcy court was whether these transfers
had been made "with intent to hinder, delay, or defraud a creditor." Because the
bankruptcy court had already determined, in ruling on the Trustee's objections to
exemptions, that Addison had made the transfers to his homestead and Roth IRA with

                                          -20-
the intent to hinder, delay, or defraud a creditor, the bankruptcy court granted the
Trustee's motion for summary judgment on collateral estoppel grounds and denied
Addison's discharge.

       In this case, the same standard applies to determine whether a discharge should
be denied or whether a transfer of nonexempt property to exempt property should be
voided; both require proof that the debtor acted with the intent to hinder, delay, or
defraud a creditor. Tveten, 848 F.2d at 874.16 Because we reversed the bankruptcy
court's determination of intent to hinder, delay, or defraud a creditor on the exemption
issues, the denial of discharge based on the collateral estoppel effect of that finding
must also be reversed.

                               C. Section 529 Accounts
      Lastly, the bankruptcy court ruled that the two Section 529 tuition savings
accounts17 that Addison opened in 2004 for the benefit of his children were property
of Addison's bankruptcy estate and not subject to any exemption. Whether the Section
529 accounts are property of the bankruptcy estate is a legal conclusion reviewed de
novo. See Drewes v. Vote (In re Vote), 276 F.3d 1024, 1026 (8th Cir. 2002) ("Whether
property is included in the bankruptcy estate is a question of law.") (citation omitted).


      16
         "Although the determination as to whether a discharge should be granted or
denied is governed by federal law, the standard applied consistently by the courts is
the same as that used to determine whether an exemption is permissible, i.e. absent
extrinsic evidence of fraud, mere conversion of non-exempt property to exempt
property is not fraudulent as to creditors even if the motivation behind the conversion
is to place those assets beyond the reach of creditors." Tveten, 848 F.2d at 874.
      17
         Section 529 of the Internal Revenue Code exempts certain qualified tuition
programs from taxation, and permits each State (or an agency or instrumentality
thereof) to establish and maintain such programs. 26 U.S.C. § 529. Pursuant to § 529,
Minnesota established its college savings plan, and set forth the rules of its plan by
statute. See Minn. Stat. Ann. § 136G.01 et seq.

                                          -21-
       Addison listed the Section 529 accounts in his amended bankruptcy schedules
with a notation that he believed that the accounts were owned by his children, and thus
not property of his bankruptcy estate. Nevertheless, in case the accounts were
determined to be property of the estate, Addison claimed them as exempt under Minn.
Stat. Ann. § 136G.09(12). We conclude that the Section 529 accounts are nonexempt
property of Addison's estate.

       Section 541(a)(1) of the Code, which was unchanged by BAPCPA, states that
"[e]xcept as provided in subsections (b) and (c)(2) of this section" a debtor's
bankruptcy estate is comprised of "all legal or equitable interest of the debtor in
property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Addison asserts
that because he established the accounts for the benefit of his children, he had no legal
or equitable interest in the accounts. Addison relies on 26 U.S.C. § 529(c) to support
his position. That section, which regards tax treatment of designated beneficiaries and
contributors of Section 529 accounts, provides that "[a]ny contribution to a qualified
tuition program on behalf of any designated beneficiary . . . shall be treated as a
completed gift to such beneficiary which is not a future interest in property." 26
U.S.C. § 529(c). Because any contribution to a Section 529 account on behalf of a
beneficiary is treated as a completed gift to the beneficiary, Addison argues that the
accounts are property of the beneficiaries and not of the contributor or owner of the
account. We find this argument unavailing for several reasons. First, § 529(c) deals
with the "tax treatment" of contributions to Section 529 accounts, not ownership of
the accounts. Second, the accounts Addison established for his children list Addison
as the "owner" of the accounts and the Minnesota statutes governing the accounts
provide that the owner of the account—not the beneficiary—is the only person
entitled to select or change the beneficiary of the account or request distributions from
the account. Minn. Stat. Ann. § 136G.09(2). Third, contributions to the accounts
"made by persons other than the account owner become property of the account
owner," not the beneficiary. Id. at § 136G.09(1). Additionally, as the account owner
Addison "may request a nonqualified distribution from an account at any time . . .

                                          -22-
subject to a federal additional tax" on the earnings portion of the nonqualified
distribution. Minn. Stat. Ann. § 136G.13(3). For all of these reasons, Addison retained
a legal and equitable interest in the Section 529 accounts. Therefore, the accounts are
property of his bankruptcy estate unless they are excluded from the estate under either
11 U.S.C. § 541(b) or (c)(2). 11 U.S.C. § 541(a)(1).

       Section 541(b)(6), added by BAPCPA, expressly excludes, with certain
exceptions, Section 529 accounts from property of the estate. Section 541(b)(6),
however, did not take effect until October 17, 2005.18 Because Addison filed his
bankruptcy petition on October 14, 2005—three days before § 541(b)(6) became
effective—§ 541(b)(6) does not apply to his case.19 As no applicable provision in §
541(b) or (c)(2) excludes Section 529 accounts from property of the estate, the
accounts are property of Addison's bankruptcy estate. See In re Quackenbush, 339
B.R. 845, 848 (Bankr. S.D.N.Y. 2006) ("[I]t does not appear that the Bankruptcy
Code, as it existed prior to October 17, 2005[,] provided any rationale for excluding
[Section 529 accounts] from property of the estate"); In re Sanchez, No. 05-48721,
2006 WL 395225, at *1 n.1 (Bankr. D. Mass. Feb. 14, 2006) ("There is no basis for
determining that funds deposited into a Section 529 Plan are excluded from property
of the estate prior to the recent amendments to the Bankruptcy Code").

       Property of the estate, however, may still be exempted from the reach of
creditors. 11 U.S.C. § 522(b). As noted above, Addison elected to use the Minnesota
state exemption scheme. Minnesota law provides no exemption for these accounts, yet

      18
        See Pub. L. 109-8 § 1501(a) (2005) ("EFFECTIVE DATE–Except as
otherwise provided in this Act, this Act and the amendments made by this Act shall
take effect 180 days after the date of enactment of this Act").
      19
         See Pub. L. 109-8 § 1501(b)(1) (2005) ("Except as otherwise provided . . . the
amendments made by this Act shall not apply with respect to cases commenced under
title 11, United States Code, before the effective date of this Act").


                                         -23-
Addison claimed the Section 529 accounts as exempt under Minn. Stat. Ann. §
136G.09(12). Section 136G.09(12) provides:

      All assets of the plan, including contributions to accounts and matching
      grant accounts and earnings, are held in trust for the exclusive benefit of
      account owners and beneficiaries. Assets must be held in a separate
      account in the state treasury to be known as the Minnesota college
      savings plan account or in accounts with the third-party provider selected
      pursuant to section 136G.05, subdivision 8. Plan assets are not subject
      to claims by creditors of the state, are not part of the general fund, and
      are not subject to appropriation by the state. Payments from the
      Minnesota college savings plan account shall be made under sections
      136G.01 to 136G.13.

Minn. Stat. Ann. § 136G.09(12).

       This statute only protects Section 529 account assets from "claims by creditors
of the state." Id. It does not exempt the accounts from all creditors. Therefore, we
conclude that the Section 529 accounts are nonexempt property of Addison's
bankruptcy estate.

                                  III. Conclusion
      Accordingly, we affirm in part, reverse in part, and remand for further
proceedings consistent with this opinion.
                      ______________________________




                                         -24-
