What is Tenants by the Entirety?
Tenants by the entirety is a form of joint ownership between married couples that is protected from creditors. With tenants by entireties, both spouses own an undivided interest in 100% of the property. A creditor of just a single spouse cannot go after the tenancy by entireties asset.
Courts have in fact described tenants by entireties as simply joint tenancy with right of survivorship plus marriage.
Owning property as tenants by entireties is one of the simplest and most effective asset protection tools available for debtors in Florida.
- Tenancy by the entireties protects marital property from the debts of a single spouse.
- Only married couples can own property as tenants by the entireties.
- If both spouses are liable for a particular debt, then tenants by entireties does not provide any protection.
Understanding Tenants by the Entirety
In Florida, tenants by entireties ownership provides an asset protection benefit to married debtors. 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 married 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 do not constitute a joint judgment against both spouses.
Joint Tenants with Right of Survivorship
Joint tenants with right of survivorship is a form of joint ownership that automatically transfers real or personal property to the surviving owner upon the other owner’s death. Owning property as joint tenants with the right of survivorship is allowed in every state in the country under common law.
However, property owned as joint tenants with the right of survivorship is not protected from the judgment creditors of one of the owners. A judgment creditor can use various creditor collection methods to levy or attack the value of the 50% interest of the debtor owner.
People do not have to be married to own something as joint tenants with the right of survivorship.
However, unlike JTWORS, tenants by entireties ownership is only available to married couples. One 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, to qualify as a tenancy by the entirety, the property in question must have the following characteristics:
- joint ownership and control,
- the spouse must have identical interest in the property,
- the spouse’s interests in the asset must have originated in the same instrument,
- the spouse’s interests must have commenced simultaneously,
- the joint owners 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.
(1) Unless otherwise expressly provided in a contract, agreement, or signature card executed in connection with the opening or maintenance of an account, including a certificate of deposit, a deposit account in the names of two or more persons shall be presumed to have been intended by such persons to provide that, upon the death of any one of them, all rights, title, interest, and claim in, to, and in respect of such deposit account, less all proper setoffs and charges in favor of the institution, vest in the surviving person or persons. Any deposit or account made in the name of two persons who are husband and wife shall be considered a tenancy by the entirety unless otherwise specified in writing.
(2) The presumption created in this section may be overcome only by proof of fraud or undue influence or clear and convincing proof of a contrary intent. In the absence of such proof, all rights, title, interest, and claims in, to, and in respect of such deposits and account and the additions thereto, and the obligation of the institution created thereby, less all proper setoffs and charges in favor of the institution against any one or more of such persons, upon the death of any such person, vest in the surviving person or persons, notwithstanding the absence of proof of any donative intent or delivery, possession, dominion, control, or acceptance on the part of any person and notwithstanding that the provisions hereof may constitute or cause a vesting or disposition of property or rights or interests therein, testamentary in nature, which, except for the provisions of this section, would or might otherwise be void or voidable.Section 655.79, Florida Statutes
Tenancy by the Entireties Bank Accounts
In 2001, the Florida Supreme Court issued an opinion in Beal Bank, S.S.B. vs. Almand and Associates, that solidified tenants by entireties protection for bank accounts in Florida. The decision established a presumption that jointly acquired property by a married couple in Florida is held as tenants by entireties. A creditor can 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.
Specifically to bank accounts, the Court held:
As between the debtor and a third-party creditor (other than the financial institution into which the deposits have been made), if the signature card of the account does not expressly disclaim the tenancy by the entireties form of ownership, a presumption arises that a bank account titled in the names of both spouses is held as tenancy by the entireties as long as the account is established by husband and wife in accordance with the unities of possession, interest, title, and time and with right of survivorship.Beal Bank, SSB vs. Almand and Associates , 780 So. 2d 45 (Fla. 2001)
Opening a bank account as tenants by the entireties can be trickier than it sounds. Incorrectly filling out a bank account application or signature card may prevent entireties ownership. If your financial account application indicates an alternative form of ownership, a court may find that you and your spouse did not want a T.B.E. account. The Supreme Court of Florida provided four example situations based on how the account is opened:
- An express designation on the signature card that the account is held as a tenancy by the entireties definitely establishes the account as held by the entireties. A creditor cannot present contrary extrinsic evidence is disallowed.
- If the account holders sign an express statement that tenancy by the entireties is not intended, along with an express designation of another form of legal ownership, then there is no presumption of a tenancy by the entireties. However, if the account holders show that the bank did not offer tenants by the entireties, then they can present other evidence that the accounts were intended to be owned by the entireties.
- If the signature card does not expressly disclaim tenancy by the entireties, there is a rebuttable presumption that a tenancy by the entireties exists (as long as the other unities are established).
- If the financial institution offers the option of tenancy by the entireties ownership, and the account holder and spouse elect another form of joint ownership (such as joint tenants with right of survivorship), then there is no tenancy by the entirety or presumption.
In practical terms, it may be helpful to have an attorney look over the titling and creation of joint accounts intended to be held as a tenancy by the entireties. Spouses should attempt to expressly designate entireties ownership when possible.
Tip: Although Florida law does not require the name on a bank account to have the words “tenants by entireties,” some financial institutions do offer to add the tenancy by entireties designation to the account.
Owning a Business as Tenancy by the Entireties
The same presumption for bank accounts applies to stock certificates held by both spouses, even if the term “tenants by the entireties” is not on the actual certificate. The most important cases on this subject are Cacciatore v. Fisherman’s Wharf Realty Ltd Partnership and In re Mathews.
LLCs are more complicated. The company operating agreement should expressly provide for tenants by entireties ownership. Furthermore, the LLC operating agreement should ensure that the LLC interests actually operate as a tenancy by the entirety. In other words, both spouses should have equal control over the LLC interests and equal economic and voting interests. Furthermore, upon the death of one spouse, the surviving spouse should automatically inherit all of the LLC interests held by the entireties.
Tenants by Entireties Treatment of Tax Refunds
Tax refunds can be tenancy by the entireties property. A bankruptcy court in one case, In re Kossow, states that “a rebuttable presumption arises that all personal property, including a joint tax refund, is held as a tenancy by the entireties as long as the personalty is acquired by husband and wife in accordance with the unities of possession, interest, title, and time with right of survivorship.” Courts have reached similar conclusions in other cases as well.
Courts have also held that the presumption of a tenancy by the entireties ownership of a tax refund exists even if the refund is attributable to the activity of just one of the spouses (for example, if there is only one working spouse).
Can Cars Be Owned as Tenants by the Entireties?
Unlike most personal property, the presumption of a tenancy by the entirety does not exist with automobile ownership. Section 319.22(2)(a) of the Florida statutes provides that title to automobiles can be held by two people with the designation of either “and” or “or.” The designation of “and” allows tenancy by the entireties ownership, but the designation of “or” does not.
Unfortunately, the default designation when acquiring ownership of vehicles jointly tends to be “or.” Florida residents should ensure that jointly acquired vehicles designate “and” in the title.
Some vehicles do not have titles, such as off-road vehicles, race cars, and certain equipment. Florida debtors can use other documentation, such as agreements, contracts, and bills of sale, to evidence entireties ownership.
Regardless of whether vehicles can be held by the entireties, it often makes more sense for a married couple to own vehicles separately, rather than jointly, because vehicles are a source of liability.
Tenants in Common in Florida
The default form of joint ownership in Florida is tenants in common, or tenancy in common. When property is owned as tenants in common, each joint owner owns a separate, divisible interest in the property. In Florida, unless stated otherwise, the joint interests in tenants in common property is assumed to be equal.
For example, if two siblings jointly own a house, the siblings will own the property as tenants in common. The ownership will be equal, 50/50, unless the deed specifies a different percentage.
When a different form of joint ownership is destroyed, the resulting form is tenants in common.
For example, say two people own property as joint tenants with the right of survivorship. If a judgment creditor gets a lien against one of the owner’s share of the property, the attachment of the lien destroys the joint tenants with the right of survivorship. The result will be a tenancy in common.
In Florida, for a married couple, the presumption is that jointly acquired property is held as tenants by the entireties rather than as tenants in common. However, if the married couple divorces, then the tenancy by the entireties is destroyed, and the two ex-spouses will hold the property as tenants in common.
Advantages and Disadvantages of Tenants by Entireties
In Florida, tenants by entireties ownership is a relatively quick and simple form of asset protection for individual judgments against either spouse. There is little legal work or expense in arranging property ownership by the entireties.
However, tenancy by the entirety 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 debtor’s share of the property would immediately be exposed to creditors. Likewise, the death of one spouse terminates tenants by the entireties and vests the property solely in the surviving spouse. The entire asset would be exposed to a surviving spouse’s judgment creditors. Sometimes tenants by the entireties ownership creates issues for estate planning when spouses want different estate plans.
Advanced Issues Regarding Tenancy by the Entirety
Florida bankruptcy debtors cannot claim Florida’s statutory creditor 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 the debtor owns jointly with a non-filing spouse as tenancy by the entirety.
Married bankruptcy debtors do not have to reside in Florida for two years before protecting entireties assets in bankruptcy. Entireties assets are exempt only when one spouse files bankruptcy individually and when the couple has no joint unsecured debts.
Collection of judgments issued by a federal court generally is governed under state court rules and exemptions. Collection of federal civil judgments must recognize Florida asset exemption law. However, different rules apply in special situations where the creditor is the United States government or a federal agency. One example is during a federal criminal prosecution, where the U.S. government obtains an order against a defendant for forfeiture of the defendant’s assets obtained through a criminal enterprise. Criminal defendants are required to forfeit their interests in assets that would be otherwise exempt from collection in civil collection.
In one recent Florida case, the U.S. government obtained a judgment of criminal forfeiture against a man who pled guilty to money laundering. Prior to the prosecution, the man and his wife purchased a property jointly as tenants by entireties. Subsequently, the wife conveyed her interest to her separate revocable living trust as part of her separate estate planning. Properties owned by a debtor and non-debtor spouse are exempt from claims against the debtor spouse under Florida law.
The Court said that tenants by entireties ownership in Florida does not protect property from criminal forfeiture under federal statute 18 U.S.C. 853. Even if tenants by entireties ownership protected against forfeiture, the wife severed the entireties when she conveyed her property interest to an individual revocable trust; reasonable estate planning often interferes with asset protection. The U.S. District Court ordered the government to liquidate the property and allocate 50% of the net proceeds to the defendant’s spouse.
I.R.S. tax collection law is similar to criminal forfeiture collection. Tenants by entireties and other Florida exemptions, including homestead, do not prevent the I.R.S. from liquidating the taxpayer’s property interest.
Real Estate for Married Couples
Under Florida law, real estate held by married couples is almost always held as tenants by the entireties. This form of ownership has the following important features:
- 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 owned 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.
- Tenants by entireties asset protection is lost after divorce or death of one spouse.
- 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.
Note that a non-resident of Florida can own real estate in Florida as tenants by the entireties. Residency is not required to take advantage of tenancy by the entireties law in Florida.
Moving to Florida
In Florida, a joint account owned by a married couple is presumed to be held as tenants by entireties. It is immune from collection of a judgment against either spouse individually. But some states do not recognize or exempt tenants by entireties assets.
So what happens when an account is opened while the married couple lives in another state that does not recognize tenants by entireties, and then the couple moves to Florida?
At least two courts have previously addressed this question, and their decisions appear to reach different conclusions. One bankruptcy case said that the intent of married couples is the key issue. The couple could not have intended an entireties asset when they lived in a state that did not permit tenants by entireties ownership. Another bankruptcy court considering a jointly owned promissory note held that the location in Florida of a married couple changed the ownership of the note to tenants by entireties, especially since a note is a movable asset. It’s not clear whether the same court would consider a financial account to be movable for the same purpose.
The best answer may be that an asset does not change its character to entireties when the owners move to Florida. Courts might find that legal ownership and characteristics of personal property are fixed upon acquisition under the laws of the state where the asset is acquired.
Tenancy by the Entirety States
Tenancy by entireties ownership is not recognized in every state. In fact, only about half of the states in the U.S. recognize tenants by entireties at all.
Instead, other states use a form of marital property called community property. Under community property laws, all property acquired or created during the marriage is considered the property of both spouses. However, community property is not protected from creditors.
Tenancy by the Entirety States for Real and Personal Property
States that offer tenants by entireties ownership for both real and personal property include:
- New Jersey
- Rhode Island
States with Tenants by Entireties for Real Estate Only
These states offer tenants by entireties ownership, but only for real estate:
- New York
- North Carolina
- North Dakota
States that Do Not Have Any Form of Tenancy by Entireties Ownership
Finally, the following states do not have any form of tenancy by entireties:
- New Hampshire
- New Mexico
- South Carolina
- South Dakota
- West Virginia
Important Court Cases About Tenants by Entireties
Beal Bank SSB v. Almand and Associates, 780 So. 2d. 45 (Fla. 2001): Presumption of Married Couple’s Tenants by Entireties Ownership
The Florida Supreme Court said that real and personal property owned jointly by a married couple is presumed to be owned as tenants by entireties, or TBE, unless the couple has expressly disclaimed entireties ownership. Tenants by entireties property is exempt from the creditors of either spouse but is not exempt from joint creditors.
In the case of joint marital financial accounts, if the account application provided a tenants by entireties ownership option, and the married owners chose another joint ownership option such as joint tenants with survivorship, the court presumes that the married owners rejected entireties ownership. If the application did not offer tenants by entireties, or if the financial institution does not offer TE, the court presumes that the married owners intended entireties ownership unless there is contrary evidence.
This Florida Supreme Court case is one of the bedrocks of Florida asset protection planning for married couples.
In re Cauley, 374 B.R. 311 (Bankr. M.D. Fla. 2007): Florida Residency Not Required For Tenants by Entireties Exemption
The bankruptcy court held that a debtor does not have to be a Florida resident to claim exemption of property owned tenants by entireties with a spouse. Tenants by entireties is a form of property ownership that applies to all property located in Florida without regard to the domicile of the owners. Entireties property protections are common law traditions. Tenants by entireties is not an exemption given to Florida residents under Florida statutory law.
In re Davis, 403 B.R. 914 (Bankr. M.D. Fla. 2009): Separate Judgments Against Each Spouse Does Not Create Joint Debt
A creditor that has separate judgments against both spouses is not permitted to execute against exempt tenants by entireties property as if the debt was a joint debt.
FAQs about Tenancy by the Entirety in Florida
Below are some commonly asked questions about tenancy by the entireties in Florida.
Can you create a tenancy by the entirety by adding your spouse to title?
The legal elements of entireties ownership require that both spouses acquire their joint ownership interests in an entireties asset simultaneously during their marriage. Adding a spouse to an account or title of an asset owned before 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 as part of an overall asset protection plan.
What happens to tenants by the entirety property after death?
After the death of a spouse owning property as tenants by the entirety, the property will immediately vest in the name of the surviving spouse. This vesting is no different than if the property was held as joint tenants with the right of survivorship. In fact, tenants by entireties is often described as “joint tenants with right of survivorship plus marriage.”
Can all property be owned as tenants by entireties?
Most states that protect from creditors tenants by entireties property 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. 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 protect real estate or financial accounts acquired in Florida and titled as tenants by entireties.
What is the difference between joint tenants and tenants by the entirety?
Tenants by entireties is sometimes referred to as joint tenants with the right of survivorship plus marriage. Marriage is the key element of tenants by entireties ownership. Without marriage, you cannot own something as tenants by the entireties.
More importantly, property that is held as joint tenants or joint tenants with the right of survivorship is not protected from creditors of one of the spouses. Only tenants by entireties has that form of protection.
You do not need to be married to own property as joint tenants, but you do need to be married to own property as tenants by entireties.
What exactly does tenants by entirety mean?
Tenants by entireties is a legal term referring to certain kinds of jointly owned property by married spouses. For jointly owned property to be classified as tenants by the entireties, it must be acquired simultaneously, in the same document, with the same percentages, during the marriage.