Lesson. Indiana’s tenant by the entireties collection exemption applies only to Indiana domiciliaries.
Case cite. Princeton Alt. Income Fund LP v. Wolfe, 2024 U.S. Dist. LEXIS 137226 (N.D. Ind. Aug. 2, 2024)
Legal issue. Whether certain Indiana real estate was available to satisfy debts of a personal guarantor.
Vital facts. Creditor sued Guarantor for the alleged fraudulent transfer of Guarantor’s interest in real estate to Guarantor’s wife. The real estate previously had been deeded to the couple as “… Husband and Wife.” Later, specifically on 3/16/17, Guarantor transferred his ownership interest to his wife. Questions surrounded whether Guarantor resided in Illinois or Indiana at the time of the transfer.
Procedural history. Creditor claimed that the 3/16/17 transfer was fraudulent – and thus voidable – as a violation of the Indiana Uniform Fraudulent Transfer Act, Ind. Code §§ 32-18-2-1 et seq. Guarantor filed a motion for summary judgment on the theory that, as of 3/16/17, the real estate was held as tenants by the entirety such that the property would have been unavailable to satisfy his individual debts.
Key rules. Indiana case law is settled that “[t]enants by the entirety is a special form of ownership of real property, reserved for husband and wife based on the legal fiction that a husband and wife are a single entity.” This fiction protects real estate “from being seized to satisfy the debts of only one of the spouses.”
Certain property of a debtor domiciled in Indiana is statutorily exempt from being used to satisfy debts. I.C. § 34-55-10-2(c). The exempt property includes: “any interest that the debtor has in real estate held as a tenant by the entireties.” I.C. § 34-55-10-2(c)(5). The Court cited to a 2004 decision providing that “the statute unambiguously limits exemptions to Indiana domiciliaries,” which is to say the protection would not apply to property owned by people who live in other states.
The Wolfe opinion did not discuss what “domicile” means – one of those weird legal terms. Authorities indicate the word denotes something more than residence: “‘domicile’ and ‘residence’ are not synonymous. The domicile is the home, the fixed place of habitation; while residence is a transient place of dwelling.”
Holding. The Court granted Guarantor summary judgment.
Policy/rationale. What makes the Wolfe opinion unique is its discussion of the importance of where Guarantor was domiciled, and when. “If [Guarantor] was domiciled in Indiana [on 3/16/17], then the [real estate] was exempt from satisfying [his] debts, and the transfer was not fraudulent.” Although there were questions as to whether and, if so, when Guarantor may have resided in Illinois, as opposed to Indiana, Creditor’s evidence failed to establish Guarantor was domiciled in Illinois at the time of the operative transfer.
The Court reasoned that the transfer would have been voidable had it reduced the assets available to satisfy Guarantor’s debts, but since Guarantor was domiciled in Indiana on 3/16/17, the real estate was not an available asset. Thus, the transfer from Guarantor to his wife would not have reduced the assets available to pay his individual debts, which is one of the factors for a fraudulent transfer.
*Presumption Of Ownership Through Tenants By The Entirety Can Be Rebutted By Contract
*Execution Upon Indiana Real Estate Owned As “Tenancy By The Entireties”
*Judgment Creditor Entitled To Recover Entire Value Of Real Estate Fraudulently Conveyed
Part of my practice involves personal guaranty-related litigation. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at john.waller@dinsmore.com. Also, don’t forget that you can follow me on X @JohnDWaller or on LinkedIn, or you can subscribe to posts via email as noted on the bottom of this page.