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.

Sample Tenancy by the Entireties Provisions for a Joint Trust

A tenancy by the entireties article is a standalone article in a joint revocable trust that defines what counts as entireties property. It conditions every transfer of that property on its keeping entireties character, and it takes precedence over conflicting trust provisions.

Four provisions from such an article appear below, each with the reason it is drafted the way it is. The full article also covers the entireties presumption, joint control while both spouses are alive, dissolution of marriage, and what happens at the first death. It uses Trustmakers for the married couple who create the trust; a document that says Settlors or Grantors carries its own term throughout.

Purpose and Material Inducement Clause

A joint trust drafted from a standard template carries provisions written without entireties property in mind: beneficiary designations, trustee powers, directions about how income gets distributed. The precedence sentence subordinates all of them, so a creditor cannot pull one boilerplate provision out of the document and argue it shows a contrary intent. The material inducement recital states that the couple would not have transferred the property at all had the article not been there, which is the premise for the conditional transfer provision that follows.

Conditional Transfer Clause

Every transfer of entireties property into the trust is conditional. If a court holds that the property lacked any entireties characteristic during the couple’s joint lifetime, the condition fails immediately before that transfer. The transfer is then void from the beginning, and the spouses are treated as having held title all along as tenants by the entireties. The property never entered the trust.

The clause also states what the condition is not, and that list comes from federal bankruptcy law. The Bankruptcy Code disregards a provision in an agreement or transfer instrument that is conditioned on the debtor’s insolvency or financial condition and works a forfeiture, modification, or termination of the debtor’s interest, 11 U.S.C. § 541(c)(1)(B). That interest becomes part of the bankruptcy estate regardless. The condition here turns on the property’s character rather than on either spouse’s finances.

Exclusive Beneficial Ownership Clause

During the couple’s joint lifetime, the two spouses hold the entire beneficial interest in entireties property and nobody else holds anything. The clause names every category a creditor could point to: other lifetime beneficiaries, remainder and contingent beneficiaries, and the couple’s own children. It also removes the softer beneficiary rights. Nobody else can demand information about a distribution or object to one. The trustee owes those people no duty as to entireties property while both spouses are alive.

Exemption Preservation Clause

Florida’s trust code makes the property of a revocable trust reachable by the settlor’s creditors during the settlor’s lifetime only to the extent it would not be exempt if the settlor owned it directly. That rule is § 736.0505(1)(a) of the Florida Trust Code.

The clause spells out how the couple wants that comparison run. The exemption to test is the entireties exemption itself, which stops a creditor holding a claim against one spouse but does not stop the couple’s joint creditors. No court has to accept the comparison, and a trust agreement that never names the exemption leaves the court nothing to work from.

Drafting cannot answer the question the case law has left open. What these provisions do is take away the arguments a creditor can build out of the trust agreement itself.

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 chapter 739 of the Florida Statutes. 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.

To be effective under chapter 739, a disclaimer must be a signed writing that declares itself a disclaimer and describes the disclaimed interest. The signature must be witnessed and acknowledged the way a deed is, and § 739.301 governs delivery. Florida law sets no filing deadline.

The nine-month deadline is federal tax law: § 2518 of the Internal Revenue Code makes a disclaimer qualified only if it is delivered within nine months after the death and before the surviving spouse accepts any benefit. Florida also bars the disclaimer if the surviving spouse is insolvent when it becomes irrevocable, § 739.402(2)(d).

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.