Article Discusses Tenants By Entireties in a Joint Living Trust

Florida property owned by a husband and wife with rights of survivorship is presumed to be “tenants by entireties” property which is protected from the creditors of either spouse, but not protected from joint creditors. If a husband and wife contribute money to a revocable living trust, does the change of ownership terminate the entireties protection?

Many years ago I reported in a blog post a court decision in the Passalino v. Protective Group Services case which held that money deposited jointly in an attorney’s trust account did not terminate entireties ownership. The court decision implied that assets in the spouse’s living trust preserved entireties protection.

The current (May, 2013) issue of the Florida Bar Journal includes in article by R. Craig Harrison discussing whether a revocable living trust may hold tenants by entireties assets which are exempt from individual spouse’s creditors. The article concludes that a living trust may include protected entireties property.

The article’s conclusion applies to joint living trust. If spouses create separate living trust where only the trustmaker spouse may amend or revoke their own trust then there is no entireties ownership. The article does not specifically address separate living trust where the spouses serve as joint trustees of each other’s trust and the trust document requires joint consent to revoke or amend the provisions of either trust.

The article also makes several suggestions to attorneys drafting joint entireties living trust. For example, the trust document should express the intent to retain entireties ownership within the joint trust and the trustee should not be required to pay estate expenses related to the trust share of the first spouse to die.

There is no court decision which has held that joint living trusts may hold tenants by entireties property. The Bar Journal’s article in convincing, but there is always a risk that a particular court may disagree with the argument. I have read joint trust agreements that clearly separate the trust shares of each spouse, and I believe that language and other overlooked trust agreement provisions may be used by a creditor to attack a debtor’s property in a joint living trust.

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