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Tenants by the Entirety is a special form of joint ownership between married couples here in Florida that provides a significant amount of asset protection for any assets owned as Tenants by the Entirety. While roughly twenty states have laws that allow for Tenants by the Entirety ownership, state laws vary widely as to which assets can be owned as tenants by the entirety. Only fifteen of the twenty states that allow Tenants by the Entireties ownership provide for some asset protection when an asset is owned as Tenants by the Entireties.
Florida is unique in that married couples can own real or personal property as tenants by the entirety. We always give the example that a married couple can own a pen in Florida as tenants by the entirety. The importance of owning assets as tenants by the entirety is that married couples can add a free, extra layer of asset protection to their assets. Additionally, since tenants by the entireties is a joint tenancy, if one spouse predeceases the other spouse, the surviving spouse (the joint tenant) will receive the tenants by the entireties property without the property passing through probate.
Tenants by the Entireties is a non-statutory protection against creditors here in Florida. Non-statutory just means that the exemption is found in Florida’s common law. So in Florida, when you own an asset as Tenants by the Entireties, both spouses are treated as owning an undivided 100% interest in the asset.
This 100% ownership interest in the asset is different than Joint Tenants with Rights of Survivorship or Tenants in Common since a joint owner would be treated as only owning 50% of the asset (assuming there are only two owners). While it’s mathematically impossible for each separate spouse to own an undivided 100% interest in the asset, this 100% undivided interest provides the Tenants by the Entireties asset with creditor protection.
The importance of the Tenants by the Entireties creditor protection is that a creditor of one spouse alone cannot sever or reach out and grab a Tenants by the Entireties owned asset.
Example: Terry and Jordan are a married couple living here in Florida. Terry is driving around Tampa Bay and happens to get into an accident with an infamous personal injury attorney’s son. The infamous personal injury attorney immediately files a lawsuit against Terry and Jordan. Since all of Terry and Jordan’s assets are owned as Tenants by the Entireties, the infamous personal injury attorney is unable to seize any of Terry and Jordan’s jointly owned assets because the judgement is only against Terry.
There are three forms of joint ownership that are allowed here in Florida:
Joint Tenants with Rights of Survivorship simply means that upon the death of one joint tenant, the asset passes directly to the surviving joint tenant. This is the most common form of ownership between married couples in the United States (although you don’t have to be married to use this form of joint tenancy). Joint Tenants with Rights of Survivorship ensures that the asset does not go through probate when one spouse dies. However, Joint Tenants with Rights of Survivorship provides zero asset protection for an asset.
Tenancy in Common—also known as Tenants in Common—means that upon the death of one tenant in common, the asset passes to the deceased tenant’s beneficiaries or heirs. The asset does not pass to the other Tenants in Common. Tenancy in Common also provides zero asset protection for an asset.
Caution: A lot of people own assets as Tenants in Common without even knowing the potential pitfalls of a Tenancy in Common. Often times one Tenant in Common will die and that Tenant in Common’s share of the asset will have to pass through probate before a new owner steps into that deceased owner’s position. Not only does Tenancy in Common cause probate, but it also can cause future issues of ownership if a new Tenant in Common assumes ownership that an original Tenant in Common does not want to own the asset with.
As you can see, both Joint Tenants with Rights of Survivorship and Tenancy in Common provide zero asset protection for an asset. This is why married couples in Florida should own all jointly owned assets as Tenants by the Entireties—married couples will receive a free layer of asset protection not provided by the other forms of joint ownership.
Tenants by the Entireties ownership in Florida requires six “unities.” These six unities must exist for the asset to be treated as owned by Tenants by the Entireties:
If one of these six unities is not present, then ownership as Tenants by the Entireties fails and the asset will be subject a spouse’s creditors.
Caution: Speak with a competent estate planning or asset protection attorney here in Florida before trying to convert an asset to Tenants by the Entireties ownership. There are a lot of exceptions and ways to prevent an asset from being owned as Tenants by the Entireties.
There are four main exceptions to the Tenants by the Entireties creditor protection exemption. The first exception is for a joint creditor of both spouses. For example, if both spouses have a joint credit card that they owe money on, the credit card company can pierce Tenants by the Entireties owned property.
The second exception is for what we call super creditors. These super creditors are usually government entities like the IRS. For example, the IRS can levy and seize Tenants by the Entireties property even if only one spouse has tax debt.
The third exception to Tenants by the Entireties creditor protection occurs when one spouse dies and the surviving spouse has a judgment against the surviving spouse. When one spouse dies, the Tenants by the Entireties ownership ends. The Tenants by the Entireties ownership ending is what allows the surviving spouse’s creditor to seize the previously owned Tenants by the Entireties asset.
The fourth exception is probably the most important exception: We like to call this the Tenants by the Entireties disclaimer exception. Remember, we talked about earlier in this article about how in Florida a married couple can own any asset as Tenants by the Entireties. However, if the married couple specifically disclaims the Tenants by the Entireties ownership when creating an asset, then the Tenants by the Entireties ownership fails.
Disclaiming Tenants by the Entireties ownership typically happens when a married couple opens a new account at a financial institution—such as a joint bank account or a joint investment account. Whenever a new account is opened at a financial institution, joint owners must choose the type of ownership for the account. Most financial institutions do not offer Tenants by the Entireties ownership, they typically only offer Joint Tenants with Rights of Survivorship and Tenants in Common.
If the financial institution only offers Joint Tenants with Rights of Survivorship or Tenants in Common ownership, it is still possible to own the asset here in Florida as Tenants by the Entireties, but you have to carefully read the financial institution’s signature card agreement. If the signature card agreement states that the financial institution does not allow Tenants by the Entireties ownership—for example, USAA specifically does not allow Tenants by the Entireties ownership—then you will not be allowed to own the asset as Tenants by the Entireties.
If the financial institution’s signature card agreement is silent on Tenants by the Entireties ownership, then the married couple can choose Joint Tenants with Rights of Survivorship ownership and the account will be treated as being owned as Tenants by the Entireties. Now, if the financial institution allows all three forms of joint ownership—Tenants by the Entireties, Tenants by Rights of Survivorship, and Tenants in Common—then if the married couple chooses Joint Tenants with Rights of Survivorship or Tenants in Common ownership, the Tenants by the Entireties ownership will be disclaimed (lost).
Example: Jim and Jessica just sold a home and want to invest the $200,000 they received from the sale of their home. On advice from their lawyer, Jim and Jessica go to Schwab to open a jointly owned investment account as Tenants by the Entireties. Jim and Jessica are given three options on how they can own the joint investment account: (1) Tenants by the Entireties; (2) Joint Tenants with Rights of Survivorship; and (3) Tenants in Common.
Jim and Jessica mistakenly choose Joint Tenants with Rights of Survivorship. If Jim or Jessica are ever sued—let’s say for a car accident—the $200,000 they invested with Schwab would be fair game to a judgment creditor since they specifically disclaimed the Tenants by the Entireties ownership by choosing Joint Tenants with Rights of Survivorship.
Yes, it’s a rule in Florida that you must be a Florida resident if you want to avail yourself to the Tenants by the Entireties asset protection here in Florida. This is another arrow in the quiver for non-Florida residents who are thinking about becoming Florida residents. Once you become a Florida resident, you can now own all of your jointly owned assets as Tenants by the Entireties to protect the assets.
While the law is still not settled in regards to whether a non-Florida resident can own Florida real property as Tenants by the Entireties, most asset protection attorneys here in Florida believe that a Florida court would still protect a non-Florida resident’s Tenants by the Entireties owned real property here in Florida.
However, the same rationale may not apply if an out of state court is trying to decide whether Tenants by the Entireties applies to a non-Florida resident’s ownership of real property here in Florida.
Yes, if you’re a Florida resident, you should be able to own out of state real property as Tenants by the Entireties if you have the real property owned in a Florida LLC. You have to use an LLC because most states don’t allow Tenants by the Entireties ownership. Then when you use an LLC to own out of state real property, your ownership interest in the LLC is considered personal property, not real property. Because your ownership interest is in personal and not real property, you can structure the LLC so that you and your spouse’s units in the LLC are owned as Tenants by the Entireties.
Caution: We highly recommend contacting a competent asset protection attorney before engaging in this type of planning.
Yes, you can own your Florida homestead as Tenants by the Entireties. In fact, if you look at your property’s deed, it should say you and your spouse’s name, and after it it should say “husband and wife.” The husband and wife language makes your Florida homestead owned as Tenants by the Entireties.
It’s important to make sure your Florida homestead is held as Tenants by the Entireties because if you lose your Florida homestead creditor protection, the Tenants by the Entireties will serve as a back-up to creditor protect your home.
We always advise clients to have boats or vehicles owned by the one spouse who primarily uses the boat or vehicle. Remember, a joint creditor can defeat Tenants by the Entireties ownership. If both spouses have their names on the title to a boat or vehicle and there is a serious accident, a creditor can come after both spouses here in Florida—thus exposing the Tenants by the Entireties asset.
Tip: We highly recommend owning boats in a Florida multi member LLC for asset protection purposes.
Yes, same sex couples can own assets as Tenants by the Entireties in Florida thanks to the Obergefell case in 2015.
We recommend speaking with an asset protection attorney before you convert an account from Tenants by the Entireties to Tenants by the Entireties. But to answer the question, you must open a brand new investment account or bank account as Tenants by the Entireties to obtain the Tenants by the Entireties creditor protection. You cannot just use the same investment account or bank account that was previously owned as Joint Tenants with Rights of Survivorship.
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