Disadvantages of Tenancy by the Entirety

Tenancy by the entirety protects married couples from creditors of one spouse, but the protection has structural limits that no amount of careful titling can fix. Divorce, death, joint liability, and federal tax claims all create gaps that leave assets exposed.

Married couples who rely on tenancy by the entirety as their only asset protection strategy face risks that the ownership form cannot address, regardless of how strong the state’s entireties law is.

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 more often than most couples expect. A personal guarantee signed by both spouses on a business lease or line of credit creates joint liability. An automobile accident involving a vehicle titled in both names exposes both spouses. Premises liability claims at the marital home or jointly owned rental property can create joint exposure. Tax obligations on jointly filed returns are joint debts by default. Commercial lenders routinely require both spouses to co-sign guarantees, which creates joint liability and eliminates entireties protection.

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 to reach entireties property. Separate judgments against each spouse are not the same as joint liability, but the line between the two is narrow enough that a single shared obligation can erase the protection entirely.

Death of One Spouse Terminates the Protection

Tenancy by the entirety includes an automatic right of survivorship. When one spouse dies, the surviving spouse becomes the sole owner of the property immediately. The tenancy ceases to exist, and the surviving spouse’s creditors can reach the asset without restriction.

If the debtor spouse survives the non-debtor spouse, every asset the couple previously held as tenants by the entirety becomes immediately available to judgment creditors. A creditor that could not touch the property yesterday can execute against it today. There is no grace period and no window to restructure. The exposure opens the moment death occurs.

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. Couples in the process of divorce who have creditor concerns should address asset protection before the dissolution is finalized. Once the tenancy by the entirety terminates, the creditor protection is gone permanently for those assets.

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 debtor spouse’s interest in entireties property. The IRS can reach entireties assets regardless of how strongly the state protects them. Florida’s complete creditor immunity for tenancy by the entirety does not bind the federal government.

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—to support lien attachment. Federal tax liens and IRS collection actions override Florida’s entireties protection under the Supremacy Clause.

Federal criminal forfeiture orders similarly override tenancy by the entirety. Florida courts have held that entireties ownership does not prevent forfeiture of a defendant’s interest in property connected to criminal activity.

Neither Spouse Can Act Unilaterally

Tenancy by the entirety requires both spouses to act together on any transaction involving the property. Neither spouse can sell, mortgage, lease, or transfer an entireties asset without the other spouse’s written consent and joinder. The mutual consent requirement is the legal foundation of the creditor protection—because a debtor spouse cannot voluntarily transfer the property, a creditor cannot compel an involuntary transfer either.

The same restriction limits the couple’s flexibility. If one spouse wants to sell an investment property, refinance the home, or liquidate a brokerage account, the other spouse must agree. Disagreements between spouses about how to manage entireties property cannot be resolved by either spouse acting alone. If one spouse becomes incapacitated and has not executed a durable power of attorney authorizing the other to act, entireties property can become effectively frozen—neither sellable nor refinanceable without a court-appointed guardianship.

Estate Planning Conflicts in Second Marriages

Tenancy by the entirety’s right of survivorship 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 will transfer 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. Tenancy by the entirety provides creditor protection but eliminates any ability to direct those assets to chosen heirs.

Trust Transfers May Destroy the Protection

Transferring entireties property into a revocable living trust creates legal uncertainty in Florida. A trust is a separate legal entity, not a married person, and trust ownership is inconsistent with the unity of marriage that tenancy by the entirety requires. If a married couple deeds their home from their individual names to the trustee of their joint living trust, the entireties protection may be lost.

Some courts have held that a transfer to a joint trust where both spouses are co-trustees and retain joint control does not necessarily destroy the tenancy. Others have reached the opposite conclusion, finding that equitable title passed to the trust—an entity that cannot be married—and the entireties protection terminated. Florida has not definitively resolved this question. 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. The marriage requirement excludes a substantial portion of the population from the protection entirely.

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 Voidable Transactions 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 timing of the transfer is the critical factor. A debtor who retitles individually owned real estate into joint names shortly after receiving a demand letter, being sued, or learning about a potential claim will face scrutiny. Courts evaluate whether the transfer was made with actual intent to hinder, delay, or defraud creditors, or whether the debtor received reasonably equivalent value in exchange.

Tenancy by the entirety works best as a proactive ownership structure established well before any creditor issues arise. Reactive transfers made in response to existing or imminent claims are the ones most likely to be unwound.

Bankruptcy Introduces Additional Uncertainty

Tenancy by the entirety in bankruptcy raises questions that state-law creditor protection alone does not answer. When only one spouse files for bankruptcy, entireties property enters the bankruptcy estate under federal law. The debtor can claim an exemption for the property to the extent state law would protect it from individual creditors, but how courts apply that exemption varies.

Some bankruptcy courts in Florida have allowed debtors to exempt entireties property fully when no joint creditors exist. Others have permitted trustees to administer entireties assets when joint debts are present in the case, even if the specific creditor holding the joint claim did not initiate the bankruptcy. The outcome can depend on which judge hears the case.

Protection Varies Dramatically by State

Roughly twenty-five states and the District of Columbia recognize tenancy by the entirety, but the protection each state provides differs substantially. Florida extends entireties protection to both real and personal property and provides complete creditor immunity against individual judgments. Many other states limit the protection to real estate only. Some allow creditors to place liens on the debtor spouse’s survivorship interest even though they cannot force a sale during the marriage.

Illinois restricts tenancy by the entirety to the couple’s primary residence. New York and New Jersey recognize the ownership form but apply enforcement rules that weaken its protective value. States like California, Texas, and Nevada do not recognize tenancy by the entirety at all. Roughly twenty-five states recognize tenancy by the entirety, but protection strength and property coverage vary widely across jurisdictions.

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 precise compliance with the six unities at the time the property is acquired. 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. A bank’s customer agreement that disclaims entireties ownership overrides the statutory presumption. A brokerage account opened with a JTWROS designation when a TBE option was available constitutes a rejection of entireties ownership under Beal Bank.

Improper account titling, bank agreement disclaimers, and timing errors are among the most frequent ways married couples inadvertently lose entireties protection. These operational risks compound the structural limitations. A couple may believe their assets are protected when the tenancy was never properly created in the first place.