What is Tenancy by the Entireties?
TBE is one type of concurrent ownership of property that applies to the joint ownership of assets by husband and wife. In Florida, it is a special form of joint tenancy ownership that is available only to married persons and may provide some degree of protection from creditors. Creditors of an individual spouse may not attach and sell the interest of a debtor spouse in the property owned by TBE. Generally, only creditors of the couple may attach and sell the interest in the property owned by TBE. Most states with TBE protection afford the protection only to real property. In Florida, however, the presumption of TBE may apply to property including all real property, tangible and intangible personal property, stock, and automobiles, as long as the husband and wife both have their names on the title of the asset or appear to have complied with the requirements explained below.
What are the Requirements to Qualify for Tenancy by the Entireties?
As with other exemptions, in order for the husband wife to qualify for TBE, numerous requirements must be met in the State of Florida such as:
- There must be joint ownership, which is also known as unity of possession
- The interests must be identical, also known as unity of interest
- The interests must have originated in the same instrument, also known as unity of title.
- The interests must have commenced simultaneously, also known as unity of time.
- The parties must be married at the time the property became titled in their joint names, also known as unity of marriage.
Under Florida law, failure to meet all of these requirements of the TBE usually causes courts to find that TBE does not exist. Incorrectly filling out financial applications is the most common error resulting in such a situation where it can be found that one of the requirements of TBE has not been met.
In Which Circumstances Would Tenancy by the Entireties May Not Benefit a Married Couple?
TBE protection exists only if a creditor has a claim against assets of only one of the spousal owners. In the case where both spouses are jointly indebted to a particular creditor, that creditor can seize the TBE property. There are various situations where such TBE properties and assets could be exposed to joint liability and owning certain property as TBE can actually be more harmful than helpful. One example would be where a couple jointly owns a motor vehicle. For instance, if husband and wife are both on the title of a motor vehicle, both could be sued regardless of who was driving. A similar result would also occur for commercial property where the couple could be jointly exposed to any tort liability for negligence on their business premises that is owned jointly by them. Further, a joint act of medical negligence committed upon a patient where both the husband and wife are the doctors of that patient may also result in joint liability. In such a situation, the creditor can reach the TBE assets as well as, to some degree, the assets of each spouse individually. Another example of where you may not want TBE would be where a couple applies for joint credit or a loan, which may arise to an unnecessary liability where both individuals may be exposed.
It is also important to note that divorce between the spouses immediately converts the TBE ownership into a joint tenancy between the former spouses. In such a circumstance, the assets of the debtor spouse would immediately be exposed to his or her creditors. Similarly, the death of one spouse terminates TBE and may vest the property solely in the surviving spouse. If the surviving spouse has creditors, the asset protection afforded by the TBE ownership from creditors may be lost.
Obtaining proper legal advice as to TBE and other asset protection strategies useful to you could save you from a big headache and potential legal pitfalls. Regardless of your wealth, asset protection matters should be carefully analyzed the moment you get married. Consequently, it is crucial to retain an experienced attorney to see how the real and personal properties were owned by each spouse prior to marriage and to pay careful attention to how the such properties should be titled and/or transferred under the law after marriage so as to receive the best tax benefits and so as not violate any fraudulent transfer laws. Preserving your marital assets is a critical step toward preserving your marital harmony.
Disclaimer: This article is not intended to be legal advice. Legal advice depends on each and every person's particular circumstance. This article is for informational purposes only and must not be used for avoiding any penalties that may be imposed under the Internal Revenue Code. Arora Law Firm and Radhika Arora, Esq. specifically disclaim any responsibility for positions taken by readers in their individual cases or for any misunderstanding on the part of readers of this article or publication.
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