Disadvantages of Tenancy by the Entirety

Tenancy by the entirety blocks a creditor whose claim runs against one spouse alone. Divorce and the death of either spouse both end it, a judgment against both spouses runs straight through it, and a federal tax lien attaches to the liable spouse’s interest while the marriage is still intact.

Married couples who rely on tenancy by the entirety as their only protection carry another risk that has nothing to do with creditors. A titling error at the moment the account or deed is created can mean the entireties ownership never existed at all.

Joint Debts Eliminate the Protection Entirely

Tenancy by the entirety only shields assets from creditors of one individual spouse. When both spouses are jointly liable on the same obligation, the protection disappears. A creditor holding a joint judgment against both spouses can levy on, garnish, or force the sale of any entireties asset.

Joint liability arises from ordinary transactions. A personal guarantee both spouses sign on a business lease or line of credit is a joint obligation, and commercial lenders routinely ask for exactly that. An automobile accident involving a car titled in both names exposes both spouses. So do premises liability claims at the marital home or at a jointly owned rental. Federal tax on a jointly filed return is joint and several by statute, so either spouse can be pursued for the whole of it.

In In re Davis, 403 B.R. 914 (Bankr. M.D. Fla. 2009), the court held that a creditor holding separate judgments against each spouse individually could not combine them into a joint debt and reach entireties property. The second judgment there was a fraudulent-transfer judgment against the non-filing spouse as the transferee, and it still did not make the creditor a joint creditor.

Death of One Spouse Terminates the Protection

Tenancy by the entirety lasts only as long as both spouses are alive. When one spouse dies, the automatic right of survivorship makes the survivor the sole owner, the entireties ownership ceases to exist, and the survivor’s own creditors can reach the asset on the same terms as anything else the survivor owns.

If the debtor spouse is the one who survives, everything the two of them owned as tenants by the entirety becomes available to that spouse’s judgment creditors the day the other spouse dies. A creditor that could not touch the property the day before can execute against it, and nothing in the ownership form buys time to restructure. The protection that remains is what the survivor can claim alone, such as homestead on a residence or the other Florida exemptions the survivor personally qualifies for.

Married couples who anticipate this risk sometimes pursue more durable strategies while the tenancy by the entirety is still intact, including irrevocable trusts or offshore asset protection trusts that survive the death of either spouse without losing their protective structure.

Divorce Converts the Ownership to Tenancy in Common

Divorce severs tenancy by the entirety and converts it to a tenancy in common regardless of whether either spouse has pending creditor issues. Each former spouse then owns a separate, divisible interest in the property. A creditor of either former spouse can levy on that spouse’s individual share, petition for partition, and force a sale.

The conversion happens automatically upon entry of the final judgment of dissolution, and no further court action is required. Once the entireties ownership converts, the protection is gone permanently for those assets. A transfer of the former entireties property made after that point can be attacked as a fraudulent transfer. The carve-out for entireties property in Florida’s fraudulent transfer statute disappears when the entireties ownership does.

Federal Tax Liens Override State Entireties Protection

The United States Supreme Court held in United States v. Craft, 535 U.S. 274 (2002), that a federal tax lien attaches to a married taxpayer’s interest in entireties property. Under Florida law a creditor of one spouse alone cannot touch the property, but that protection does not bind the federal government. Whether an interest counts as property the lien can reach is a federal question, answered by looking first at what rights state law actually gives the taxpayer.

Under federal law, a tax lien attaches to all property and rights to property belonging to the taxpayer. The Craft Court concluded that a taxpayer holds sufficient rights in entireties property (including the right to use the property, receive income from it, and exclude others) for the lien to attach. Federal tax liens and IRS collection actions override Florida’s entireties protection under the Supremacy Clause.

That reasoning has not carried over to private creditors. The Eleventh Circuit refused in In re Sinnreich to let an ordinary judgment creditor borrow Craft, holding that the decision rested on collection powers Congress gave the IRS alone. In Gibson v. Wells Fargo Bank, a Florida appellate court reached the same result when a bank tried to garnish an entireties account holding the couple’s joint tax refund. Craft has never been extended to a judgment creditor of one spouse.

Federal criminal judgments reach entireties property too. The Eleventh Circuit has held that the substitute-asset forfeiture statute preempts both Florida homestead and Florida entireties law, so a forfeiture can take a defendant’s interest in property that had nothing to do with the crime. A criminal restitution lien works the same way, and one has been held to survive a divorce court’s later transfer of the defendant’s interest to the non-defendant spouse.

Florida’s own forfeiture act is narrower. A husband and wife who hold property jointly keep it unless the seizing agency proves, by a preponderance, that the non-offending spouse knew of the criminal use or would have learned of it on a reasonable inquiry. Federal civil forfeiture reverses the burden and makes the owner prove innocence.

Neither Spouse Can Act Unilaterally

Entireties real estate cannot be sold, mortgaged, or leased on one spouse’s signature alone. That restriction is the legal consequence of entireties ownership, not the source of the protection. The restriction does not extend to money. Either spouse can withdraw the whole balance of an entireties bank account. The Florida Supreme Court has held that the ability to do so does not break the unity of possession the entireties ownership requires, so long as the account agreement lets each spouse act for the other.

If one spouse wants to sell an investment property or refinance the home, the other has to agree, and a disagreement between them cannot be resolved by either acting alone. If one spouse becomes incapacitated without having signed a durable power of attorney authorizing the other to act, entireties real estate can be effectively frozen, neither sellable nor refinanceable until a court appoints a guardian.

Estate Planning Conflicts in Second Marriages

The right of survivorship in a tenancy by the entirety means the surviving spouse automatically inherits the deceased spouse’s interest. The survivorship right overrides any contrary provision in a will, trust, or other estate planning document. For first marriages where both spouses want everything to pass to each other, the survivorship feature is an advantage. For second marriages, it creates a direct conflict.

A remarried spouse who wants to leave assets to children from a prior relationship cannot do so with entireties property. The survivorship right transfers the property to the surviving spouse regardless of what the will or trust says. The surviving spouse then controls the property entirely and has no legal obligation to pass it to the deceased spouse’s children.

Married couples in blended families face a choice between asset protection and estate planning flexibility. The spouses can agree to end the entireties ownership and retitle the property so each share passes under that spouse’s own will, but the creditor protection ends at the same moment.

Trust Transfers May Destroy the Protection

Deeding entireties property into a revocable living trust puts the couple’s protection in doubt. Legal title moves to the trustee, and a creditor will argue that the entireties ownership cannot survive in the hands of a holder that is not a married couple. Whether that argument wins has never been settled by a Florida appellate court.

In Passalino v. Protective Group Securities, a Florida appellate court held that sale proceeds from entireties real estate kept their entireties character while they sat in the couple’s own attorney’s trust account. The spouses still owned the money beneficially and still decided what happened to it. One bankruptcy court held the other way, ruling that a home the couple deeded into their joint revocable trust lost its entireties character on the day of the deed.

That court distinguished Passalino because the attorney there acquired no interest in the money he was holding, while a trustee takes legal title. A second bankruptcy judge protected a couple’s trust assets on a different ground and left the entireties question open. No Florida appellate court has answered it. Preserving entireties protection within a trust requires specific provisions that standard living trust forms typically omit.

Only Available to Married Couples

Tenancy by the entirety is available exclusively to legally married couples. Unmarried individuals, domestic partners, and couples in non-marital relationships cannot use it regardless of how long they have been together or how they title their property. In states that do not recognize common-law marriage, cohabiting couples who believe they are effectively married still cannot create a tenancy by the entirety.

Unmarried individuals facing creditor exposure must rely on other tools: homestead, statutory exemptions, LLCs, or trust-based planning.

Late Transfers Risk Fraudulent Transfer Challenges

Converting individually owned property to tenancy by the entirety after a creditor claim has arisen risks a challenge under Florida’s Uniform Fraudulent Transfer Act. Transfers made when a claim is reasonably anticipated face the same scrutiny. A court can reverse the transfer and restore the asset to its prior unprotected status.

The analysis turns on when the transfer happened relative to the claim. A debtor who retitles individually owned real estate into joint names shortly after a demand letter or a lawsuit will face scrutiny, and so will one who acts after learning that a claim is coming. A creditor can attack the transfer by showing actual intent to hinder, delay, or defraud. It can also attack the transfer by showing the debtor gave up the property for less than reasonably equivalent value while insolvent.

Bankruptcy Introduces Additional Uncertainty

When one spouse files for bankruptcy, the couple’s entireties property comes into the bankruptcy estate, and the filing spouse must claim it as exempt to get it back out. The federal exemption for entireties property in bankruptcy protects the interest only so far as Florida law puts it beyond a creditor’s process, so the exemption stands or falls on whether a joint creditor exists.

A qualifying joint debt opens entireties property to a bankruptcy trustee, and Florida bankruptcy judges disagree about what qualifies. One line of cases requires a creditor who could actually have levied on the property outside bankruptcy. Another treats a creditor who could theoretically have reached it through a prejudgment remedy as enough. The creditor holding the joint claim does not have to be the one who filed the case.

When both spouses file, each estate’s trustee holds the status of a judicial lien creditor, which makes the trustee a joint creditor. On that reasoning, a bankruptcy court has held that non-homestead entireties property is not exempt in a joint case where the couple’s joint obligations exceed its value. That court left open what happens when a couple files together with no joint debts at all.

Protection Varies by State

Twenty-four states and the District of Columbia permit tenancy by the entirety, but the protection each state provides differs substantially. Florida sits at the strong end, reaching bank accounts and other personal property as readily as real estate. Twelve states and the District of Columbia, Florida among them, protect personal property. Elsewhere tenancy by the entirety covers real estate only, or a short list of personal property, or the answer is unsettled. Some states let a creditor lien the debtor spouse’s survivorship interest even though no sale can be forced during the marriage.

Illinois restricts tenancy by the entirety to the couple’s primary residence. New York and New Jersey both recognize tenancy by the entirety but let a judgment creditor of one spouse reach and sell that spouse’s interest, subject to the other spouse’s right of survivorship. California, Texas, and Nevada do not recognize tenancy by the entirety at all. Fourteen of the twenty-five recognizing jurisdictions give a one-spouse judgment nothing, while others let a creditor reach the debtor spouse’s own interest.

Married couples who own property in multiple states or maintain financial accounts across jurisdictions cannot assume that Florida’s strong protection applies everywhere. Real estate is governed by the law of the state where it sits. Personal property is generally governed by the couple’s domicile, though courts have occasionally applied the law of the state where an account is maintained.

Operational Mistakes Can Silently Destroy the Protection

Tenancy by the entirety requires all six unities to be present when the property is acquired or the account is opened. A spousal bank account is the exception, because Section 655.79(1) of the Florida Statutes presumes entireties ownership even without unity of time or title. Errors in how accounts are opened, how titles are recorded, and how account agreements are worded can eliminate the protection without the couple ever realizing it.

Account paperwork defeats the entireties presumption in three ways. The first is a written statement, signed by the couple, disclaiming entireties ownership and naming the form they are choosing instead; boilerplate calling the account something else does not do it. The second is a form that offers tenancy by the entirety as a choice where the couple picks another option. A brokerage account opened as joint tenants with right of survivorship, on a form that offered entireties, is the second kind of disclaimer Beal Bank described.

The third is a disclaimer in the bank’s standard account agreement, which counts as a writing when the signature card the couple signed incorporates that agreement (Storey Mountain, LLC v. George, 357 So. 3d 709 (Fla. 4th DCA 2023)).

Improper account titling, bank agreement disclaimers, and timing errors are the ordinary ways married couples lose entireties protection without meaning to. A couple can believe their assets are protected for years when the entireties ownership was never created in the first place.