Tenancy by the Entirety and Trusts

Transferring tenancy by the entirety property into a revocable living trust can destroy the creditor protection that made TBE ownership valuable. A trust is not a married person, so a creditor can argue that the transfer breaks the unity of marriage—one of the six unities required for TBE ownership under Florida law.

Florida courts have reached conflicting conclusions on whether TBE protection survives in a joint revocable trust, and no Florida appellate court has issued a definitive ruling. The answer depends on the type of trust, the trust’s terms, and how the property is titled.

Does Transferring TBE Property to a Trust Destroy the Protection?

Tenancy by the entirety requires six unities: possession, interest, title, time, marriage, and survivorship. A common example: a couple’s deed changes from “John Smith and Jane Smith, husband and wife” to “John Smith and Jane Smith, as Trustees of the Smith Revocable Trust.” Legal title now belongs to the trust, and a trust cannot be married.

The question is whether the spouses, as trustees and beneficiaries, retain enough incidents of TBE ownership for the creditor protection to carry over. Florida’s existing case law offers three answers depending on the trust structure.

Separate Trusts Destroy TBE Protection

Splitting TBE property between each spouse’s separate revocable trust eliminates TBE protection entirely. In In re Anderson, a bankruptcy court held that a bank account owned jointly by a husband’s trust and his wife’s separate trust could not be held as TBE because trusts are not married individuals.

The result follows from basic TBE principles. When property is divided between two separate trusts, neither trust holds the entire property, which defeats the unity of interest. Two separate trusts are two separate legal entities, not a married couple, so the unity of marriage cannot exist.

Married couples who use separate trusts for estate planning should keep TBE-titled property out of those trusts entirely and leave it in the spouses’ personal names.

Joint Trusts: Conflicting Case Law

A joint revocable trust where both spouses are co-settlors, co-trustees, and lifetime beneficiaries presents a harder question. Three bankruptcy court decisions illustrate the uncertainty.

In Passalino v. Protective Group Services, 886 So. 2d 295 (Fla. 4th DCA 2004), the court held that money deposited jointly in an attorney’s trust account did not terminate TBE ownership. The property remained under the joint control of both spouses for their joint benefit, and the court’s reasoning suggests that a joint trust with similar features may preserve TBE character.

In In re Givans, 623 B.R. 635 (Bankr. M.D. Fla. 2020), the court held that TBE protection was destroyed when the couple transferred property to their joint trust. The court reasoned that by creating the trust and naming their children as future beneficiaries, the couple gave up certain legal rights in exchange for others—including the creditor protection that TBE had afforded. Because the children held equitable interests in the trust property, the exclusive spousal ownership required for TBE no longer existed.

In In re Romagnoli, 2021 WL 2762812 (Bankr. S.D. Fla. 2021), the court took a different approach. Rather than deciding whether TBE property survives in a trust, the court focused on what rights a bankruptcy trustee actually acquires. The court held that a creditor stepping into the debtor’s shoes as a trust beneficiary cannot reach trust property that would have been shielded had the debtor owned it directly. The practical result was the same as TBE protection, even though the legal theory was different.

The conflicting reasoning across these cases means that a couple transferring TBE property to a joint trust is taking a risk that no Florida appellate court has resolved.

What Is an Entireties Savings Clause?

An entireties savings clause is a provision in a joint trust agreement that expressly states the settlors’ intent to maintain TBE ownership over all property transferred to the trust. The clause should declare that both spouses intend for all trust property that was TBE at the time of contribution to retain its TBE character while both spouses are alive and married.

Several additional provisions strengthen the argument that TBE protection survives. The trust should require that both spouses are co-trustees and that all trustee actions require joint approval—preserving the TBE requirement that neither spouse can act unilaterally. The trust should keep full equitable title in the co-trustees during their joint lifetimes, and it should not create any present interests in remainder beneficiaries while both spouses are alive. The existence of children’s beneficiary interests was a factor that weighed against TBE protection in In re Givans.

Most standard living trust forms do not include an entireties savings clause or these related provisions. A trust drafted from a generic template is unlikely to preserve TBE protection. The trust needs to be drafted by an attorney who understands both TBE law and trust law and can address the specific issues raised by the Givans and Romagnoli decisions.

The Disclaimer Approach

The disclaimer approach avoids the TBE-in-trust question entirely by keeping TBE property out of the trust during both spouses’ lifetimes. The couple retains TBE ownership in their personal names, preserving full creditor protection while both are alive and married.

When the first spouse dies, TBE ownership terminates automatically and the property passes to the surviving spouse by right of survivorship. The surviving spouse then disclaims the inherited property under Florida Statutes § 739.402. The disclaimed property passes to the decedent’s trust as though the surviving spouse had predeceased, allowing the property to fund a bypass trust or other estate planning vehicle without ever having been inside a trust during both spouses’ lifetimes.

A valid disclaimer must be irrevocable and in writing, filed within nine months after the decedent’s death. The surviving spouse must not have accepted any benefit before disclaiming. The disclaimer strategy must be coordinated with the trust document so that the disclaimed property flows to the intended destination.

The Delaware Tenancy by Entireties Trust

Delaware addressed the TBE-in-trust problem by statute. Under 12 Del. C. § 3334, TBE property contributed to a revocable trust retains its entireties character while both spouses are alive. If a creditor successfully challenges the transfer, the only remedy is an order directing the trustee to return the property to both spouses as TBE—the creditor still cannot reach it.

The Delaware statute removes the uncertainty that Florida courts have struggled with. A Florida couple could potentially use a Delaware trust to preserve TBE protection, though a question remains: whether a Florida court would apply Delaware law in a collection action against a Florida debtor. The debtor’s position is strongest when the trust assets are held at Delaware financial institutions, anchoring the trust in Delaware’s jurisdiction.

Delaware is not the only state to resolve this issue by statute. Missouri and Illinois have enacted similar provisions expressly authorizing trusts to hold TBE property. Florida has not.

Which Approach Is Best?

Keeping TBE property in the spouses’ personal names and using the disclaimer strategy is the safest option for couples with creditor concerns.

Situation	Recommended Approach
Both spouses alive, no litigation pending	Keep TBE assets in personal names; use disclaimer strategy for estate planning
Joint trust already in place	Add entireties savings clause; require joint trustee action; eliminate present remainder interests
Separate trusts for each spouse	Do not transfer TBE property into either trust
One spouse has serious creditor exposure	Do not transfer TBE assets to any trust; maximize TBE ownership in personal names

The safest approach for married couples with creditor concerns is also the simplest: keep TBE property titled in the spouses’ personal names and use the disclaimer approach after the first death. This avoids the case law uncertainty entirely and preserves the full strength of tenancy by the entirety protection.

Roughly 25 states recognize tenancy by the entirety, but the rules for how TBE interacts with trusts vary by state. Titling errors at the account or deed level are one of the most common ways TBE protection fails—a problem that compounds when trust transfers are involved. Couples where one spouse has creditor exposure should also understand the risks TBE faces at divorce, since TBE ownership ends when the marriage does.