What is Tenants by the Entirety?
Tenants by the entirety in Florida (also called tenancy by the entirety or TBE) is a form of joint property ownership available only to married couples in Florida and in some other states that protects assets from creditors of an individual spouse. Most jointly owned property includes survivorship rights. Survivorship rights means that when either of the co-owner dies, the legal title to the joint property automatically passes to the surviving owner. Tenants by entireties property is jointly owned marital property with rights of survivorship. You cannot own entireties property with any family member other than a spouse.
How Does Something Become Tenants by the Entirety?
In Florida, tenants by the entireties protection has been established by judicial decisions interpreting common law. Under Florida judicial law, in order to qualify as tenancy by the entirety, property in question must have certain characteristics:
- joint ownership and control,
- identical interest in the property,
- the interest must have originated in the same instrument,
- the interest must have commenced simultaneously,
- the parties must have been married at the time they acquired the property, and
- the surviving spouse will own the property after either spouse dies.
When entireties ownership of joint property is questioned, both spouses must have evidence that they intended to take title as tenants by entireties.
The Florida Supreme Court has said that any real or personal property owned jointly by a husband and wife is presumed to be owned as tenants by the entireties. Additionally, section 655.79 of Florida Statutes states that any bank account owned by husband and wife is presumed to be a tenants by entireties account unless there is clear and convincing evidence of their contrary intent. A creditor could rebut this presumption of entireties bank accounts by showing that the spouses intended to own the account property in some other manner of joint ownership. Incorrectly filling out a bank account application or signature card may prevent entireties ownership. If your financial account application papers indicate an alternative form of ownership a court may find that you and your spouse did not want a TBE account.
Can You Create a Tenancy by the Entirety by Adding Spouse to Title?
The legal elements of entireties ownership requires that both spouses must acquire their joint ownership interests in an entireties asset at the same time during their marriage. Adding a spouse to an account or title of an asset owned prior to your marriage will not create tenants by the entireties ownership or protection. Premarital accounts should be closed, and the married couple should open a new entireties account.
Benefits of Tenants by the Entirety
Entireties ownership gives the owners an asset protection benefit. Florida law provides that any property owned by the spouses as tenants by the entireties is protected from a judgment creditor of either of the individual spouses. Tenants by the entireties protection exists to the extent a creditor has a claim against only one of the spousal owners. When both spouses are jointly indebted to a particular creditor, that joint creditor can involuntarily seize tenants by the entirety property. Separate judgments in favor of one creditor based on separate causes of action against each spouse does not constitute a joint judgment against both spouses.
Can All Property be Tenants by Entireties?
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 the entirety.
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. Some state laws provide tenants by entireties asset protections like Florida. Florida residents may assert entireties protection for property they jointly own in any entireties state. On the other hand, Florida’s tenants by the entireties protection is afforded to real property and tangible personal property located in Florida, even if owned by debtors who reside permanently outside Florida. A non-resident can therefore protect real estate or financial accounts acquired in Florida and titled as tenants by entireties.
Advantages and Disadvantages
In Florida, tenancy by the entirety is relatively quick and simple effective asset protection against individual judgments against either spouse. There is little legal work or expense in arranging property ownership by the entireties.
Tenancy by the entirety, however, may not provide secure asset protection for some people over the long term. First, a divorce between the spouses immediately converts the tenants by the entireties ownership into a joint tenancy as tenants in common between the former spouses. After divorce, the property would immediately be exposed to creditors of the formerly protected debtor spouse. Likewise, a death of one spouse terminates tenants by the entireties and vests the property solely in the surviving spouse. If the surviving spouse has creditors, the asset protection afforded by the tenants by the entireties ownership is lost. Sometimes tenants by the entireties ownership creates issues for estate planning.
Tenants by the Entirety in Bankruptcy
Florida bankruptcy debtors cannot claim Florida exemptions of their assets until they have resided in Florida for two years. Technically, tenancy by entireties is not a property exemption because it is not excluded from execution by Florida statutes. Instead, tenancy by entireties is a form of property title. Therefore, the two-year bankruptcy waiting rule for Florida exemptions does not apply to assets claimed to be exempt because they are held in tenancy by the entirety. Married bankruptcy debtors do not have to reside in Florida for two years or before they can file bankruptcy protect entireties assets. Entireties assets are exempt only when one spouse files bankruptcy individually, and when the couple has no joint unsecured debts.
You should remember this important information about tenants by the entirety in Florida:
- Tenancy by the entirety is a type of joint ownership available to married couples.
- Both spouses must simultaneously acquire their interests in entireties property while married.
- Florida law presumes jointly owned marital property is intended to be owed by the entireties.
- Entireties property is protected from judgment creditors of either spouse but not from joint judgments.
- Real property and tangible property may be owned as tenants by entireties.
- There are limits and disadvantages to tenants by entireties asset protection.
- Entireties protection depends upon the laws of the state where property is located rather than state of debtor’s primary residence.
- Tenants by entireties has advantages in bankruptcy exemption planning.
If you’d like advice about whether your property is protected as tenants by entireties, or about how to better protect your current assets, give us a call to schedule an asset protection planning session.