Prior to a judgment being entered against him a judgment debtor owned financial accounts jointly with his wife. He and his wife created a joint living trust for estate planning purposes. They transferred title of the financial account to their joint trust. Property owned jointly by the debtor and his wife is exempt from the judgment against the husband/debtor because the property is deemed to be owned as “tenants by entireties.” The issue is whether the same financial account is tenants by entireties property after it was titled in a joint living trust.
I don’t think the financial account is protected from creditors after transfer to the joint living trust. Homestead property owned by a living trust is still deemed protected homestead according to case law in Florida. The issues in a living trust ownership of homestead are different from trust ownership of marital property. The terms of a typical joint living trust destroy entireties ownership. A typical joint living trust document creates separate shares of ownership for husband and wife, and it divides all assets equally between the separate shares. The separate shares are designed to maximize estate tax savings. Once the living trust document divides a financial account into separate shares there can no longer be qualifying entireties ownership.
There are living trust documents which state that notwithstanding anything else in the trust the married grantors intend to retain tenants by entireties ownership of joint property put into the trust. I know of no court case interpreting the effectiveness of this type of savings clause. I don’t think conveying joint property to a joint trust is effective asset protection. There are other ways to use a living trust for estate planning purposes and also retain tenants by entireties protection. This is one example of the conflict between the goals of asset protection and estate tax planning. Effective asset protection planning preserves both goals.