Tenancy by the Entirety and Trusts

Married couples in Florida frequently face a tension between two foundational planning strategies: tenancy by the entirety ownership for creditor protection, and revocable living trusts for probate avoidance and estate planning flexibility. The conflict arises because transferring TBE property into a trust can destroy the very creditor protection that made TBE ownership valuable in the first place.

A trust is not a married person. It is a contractual relationship. When a married couple conveys jointly owned property to themselves as trustees of a revocable trust, a creditor can argue that the transfer breaks one or more of the six unities required for TBE ownership. If the argument succeeds, the property becomes reachable by a creditor of either spouse individually.

This article examines when TBE protection survives a transfer to a trust, when it does not, the specific trust provisions that can preserve TBE status, and alternative approaches including the Delaware tenancy by entireties trust.

The Core Problem: Trusts Are Not Married Individuals

TBE ownership depends on six unities: possession, interest, title, time, marriage, and survivorship. The unity of marriage requires that the property be owned by two individuals who are married to each other. A trust, however, is not a person and cannot be married.

When a couple transfers TBE property to a revocable trust, legal title passes from “John Smith and Jane Smith, husband and wife” to “John Smith and Jane Smith, as Trustees of the Smith Revocable Trust.” The trust now holds legal title. The question is whether the spouses, as trustees, retain sufficient incidents of TBE ownership for the creditor protection to survive.

Florida courts have not resolved this question conclusively, and the existing case law sends conflicting signals.

Separate Trusts: TBE Is Destroyed

The clearest situation is where each spouse has a separate revocable living trust and TBE property is divided between them. In this arrangement, TBE protection is destroyed. A bankruptcy court considered a case where a bank account was owned jointly by one spouse’s trust and the other spouse’s separate trust and concluded that because trusts are not married individuals, the trustees could not hold a bank account as TBE.

This result is consistent with basic TBE principles. When property is split between two separate trusts, neither trust holds the entire property, which defeats the unity of interest. The separate trusts are separate legal entities, not a married couple, so the unity of marriage cannot exist.

Married couples who use separate trusts for estate planning should keep TBE property out of those trusts entirely. The property should remain titled in the spouses’ personal names as TBE.

Joint Trusts: Uncertain Territory

The more complex situation involves a single joint revocable living trust where both spouses are co-settlors, co-trustees, and lifetime beneficiaries. Several courts have considered whether TBE property transferred to a joint trust retains its creditor protection, with mixed results.

One line of authority suggests that TBE protection can survive. In Passalino v. Protective Group Services, 886 So. 2d 295 (Fla. 4th DCA 2004), the court held that money deposited jointly in an attorney’s trust account did not terminate TBE ownership because the property remained under the joint control of both spouses for their joint benefit. The implication is that a properly structured joint trust, where both spouses must act together and the property remains for their joint benefit, may preserve TBE character.

Another bankruptcy court in 2020 (Case No. 2020 WL 5833180) considered a joint living trust in detail and analyzed whether the transfer of TBE property to the spouses as joint trustees destroyed the TBE character. The court acknowledged that transferring equitable title to a trust does sever the traditional TBE ownership because the trust is not a party to a marriage. However, the court ultimately found that creditors stepping into the shoes of the debtor as a beneficiary of a joint revocable trust cannot assert claims against trust property if the same property would have been shielded from those creditors had the debtor owned it directly. The result was protection for the debtor, though the reasoning was grounded in bankruptcy law rather than a clean endorsement of TBE within a trust.

A third case reached the opposite conclusion. In In re Romagnoli (Bankr. S.D. Fla. 2021), the court held that when a married couple transferred their property to a trust, they gave up TBE ownership in exchange for the benefits the trust provided. The court stated directly that a trust cannot own property as TBE because a trust lacks the unity of marriage. By transferring property to the trust, the couple lost the creditor protection that TBE had previously afforded.

The conflicting results from Passalino, the 2020 bankruptcy opinion, and Romagnoli create genuine uncertainty. No Florida appellate court has issued a definitive ruling on whether a properly drafted joint trust preserves TBE protection, and no Florida statute addresses the question.

Entireties Savings Clause

For couples who choose to use a joint revocable living trust, an “entireties savings clause” is the most important drafting provision for preserving creditor protection.

An entireties savings clause is a provision in the trust agreement that expressly states the settlors’ intent to maintain TBE ownership over all property transferred to the trust. The clause should state that both spouses intend for all trust property that was TBE at the time of contribution to retain its TBE character while both spouses are alive and married. The clause should also require that both co-trustees must jointly approve any action regarding trust property, preserving the TBE requirement that neither spouse can unilaterally dispose of the property.

Beyond the entireties savings clause itself, several additional provisions strengthen the argument that TBE protection survives. The trust should provide that both spouses serve as co-trustees and that all trustee actions require the joint approval of both co-trustees. The trust should preserve full equitable title in the co-trustees during their joint lifetimes. The trust should not create any present interests in remainder beneficiaries (such as children) while both spouses are alive, because the existence of third-party beneficiary interests was a factor that weighed against TBE protection in Romagnoli.

Most standard living trust forms do not include an entireties savings clause or any of these protective provisions. A trust drafted from a generic template is unlikely to preserve TBE protection. Couples concerned with asset protection need an attorney who understands the intersection of TBE law and trust law and can draft provisions specifically designed to address the case law uncertainty.

The Disclaimer Approach

An alternative to transferring TBE property into a trust during both spouses’ lifetimes is the disclaimer approach. Under this strategy, the married couple retains TBE ownership of their assets in their personal names during their joint lifetimes, preserving full creditor protection. No property is transferred to the trust while both spouses are alive.

When the first spouse dies, TBE ownership terminates automatically and the property passes to the surviving spouse by right of survivorship. At that point, the surviving spouse disclaims the inherited property under Section 739.402 of the Florida Statutes, and the disclaimed property passes to the decedent’s trust as though the surviving spouse had predeceased. This allows the property to flow into the estate plan (funding a bypass trust, for example) without ever having been inside a trust while both spouses were alive.

The disclaimer approach preserves TBE creditor protection for the full duration of the marriage because the property remains titled in the spouses’ names as TBE. The estate planning objectives are achieved after the first death through the disclaimer mechanism.

There are technical requirements for a valid disclaimer under Florida law, including a nine-month deadline after the decedent’s death and the requirement that the surviving spouse has not accepted any benefit from the property before disclaiming. The disclaimer must be irrevocable and in writing. An attorney must coordinate the disclaimer strategy with the trust document to ensure the disclaimed property flows to the correct trust.

Practical Recommendations

Situation	Recommended Approach
Both spouses alive, no litigation pending	Keep TBE assets in personal names; use disclaimer strategy for estate planning
Joint trust already in place	Add entireties savings clause; require joint trustee action; eliminate present remainder interests
Separate trusts for each spouse	Do not transfer TBE property into either trust
One spouse has significant creditor exposure	Do not transfer TBE assets to any trust; maximize TBE ownership in personal names

The safest approach for married couples with creditor concerns remains the simplest: keep TBE property titled in the spouses’ personal names and use the disclaimer approach to accomplish estate planning objectives after the first death. This strategy avoids the case law uncertainty entirely and preserves the full strength of Florida’s TBE creditor protection.

For a comprehensive overview of TBE protection, see the Tenancy by the Entirety in Florida guide. The Common Mistakes When Opening TBE Accounts article covers errors that can defeat TBE protection at the account level. Couples concerned about TBE loss at divorce should also review the TBE and Divorce article.