FLORIDA ASSET PROTECTION
- Tenants By Entireties
Most married persons
own property as joint tenants with rights of survivorship. Upon
the death of one spouse, ownership is vested by operation of
law in the surviving spouse. Many married people incorrectly
believe that their jointly owned property is protected from
their creditors. This belief is incorrect. Joint ownership with
rights of survivorship offers no asset protection. A creditor
of either spouse may seize the interest the debtor spouse holds
in joint tenant property.
Unlike joint ownership
with rights of survivorship, “tenants by entireties” ownership
affords excellent asset protection benefits. Tenants by entirety
is a special form of joint tenancy ownership which is available
only to married persons. Some states have statutes that
define and protect tenants by entireties property. In Florida,
tenants by entireties protection has been established by judicial
decisions interpreting the common law. Under Florida judicial
law, in order to qualify as tenants by entireties property,
the property in question must have certain characteristics:
In the case where
both spouses are jointly indebted to a particular creditor,
that creditor can involuntarily seize tenants by entireties
property. Tenants by entireties protection exists only if a
creditor has a claim against only one of the spousal owners.
A 2011 Florida case pointed out that a lender may violate federal lending laws if it demands a spouse's signature on loan documents to avoid future entireties protection if the applicant spouse is creditworthy.
Most states with
entireties protection afford the protection only to real property.
In Florida, unlike most other states, all types of property,
including all real property, tangible personal property, and
intangible personal property, may be owned by a married couple
as tenants by entireties. Whether a married couple owns property
as unprotected joint tenants with survivorship or as protected
tenants by entireties depends on the intent of the spouses.
The Florida Supreme Court has said that any real or personal
property owned jointly by a hustand and wife is presumed to
be owned as tenants by entireties. A creditor could rebut
this presumption by showing that the property ownership does
not possess all six entireties characteristics or that the husband
or wife indicated an intent to own the property in some other
manner.
In Florida, tenants
by entireties is the quickest and simplest asset protection
for married persons. This form of ownership, however, may not
provide secure asset protection over the long term. First, a
divorce between the spouses immediately converts the tenants
by entireties into a joint tenancy between the former spouses.
In that case, the assets of the debtor spouse would immediately
be exposed his or her creditors. Likewise, a death of one spouse
terminates the tenants by entireties and vests the property
solely in the surviving spouse. If the surviving spouse has
creditors, the asset protection afforded by the tenants by entireties
ownership is lost. Secondly, tenants by entireties ownership
creates issues for estate planning and interferes with estate
tax avoidance. There are some estate planning techniques which properly combine entireties asset protection and optimal estate tax planning after the first spouse's death.
Florida residents who maintain property or accounts in states other than Florida are subject to exemption laws of the state where the property is located. Most states do not offer unlimited tenants by entireties protection. On the other hand, Florida's tenants by entireties protection is afforded to real property located in Florida and owned by debtors who reside permanently outside Florida.
