Asset Protection Planning

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Tenancy by the Entirety States

The definition of Tenancy by the Entirety is a form of ownership between spouses where they own property jointly with rights of survivorship. The rights of survivorship plays out when when either one of the co-owners die. That is, the legal title to the joint property automatically transfers to the surviving owner.
Tenancy by the Entirety States Map

Tenancy by the Entirety and Asset Protection

Tenancy by the Entirety (TBE or T by E) is a form of property ownership for married couples. In addition, property titled under TBE is legally separate from the property that each individual owns. For example, in TBE states spouse number one is person. Spouse number two is another person. The TBE unit of ownership, in turn, symbolizes a third, separate, person. So, creditors with a judgment against just one spouse are restricted from seizing the TBE assets. Further, even if creditor A has a judgment against one spouse and creditor B has a judgment against the other spouse, the TBE assets are still theoretically safe. A couple’s TBE assets are only vulnerable when the same creditor has a judgment against both spouses at once. In tenancy by the entirety, both partners wholly own the entire property concurrently.

Another trait is Right of Survivorship. This means that when one spouse dies, the law entitles the other spouse to receive the share of the one who died. In contrast are the Community Property States

Most notably, this legal doctrine applies only to marital property. So, a couple must be legally married in order to take advantage of this type of property ownership. Tenancy by the entirety agreements entered into by couples who are not legally married, even if they fall into the category of common law marriage, will not hold up in court.


Don’t Rely on TBE for Asset Protection

Depending on tenancy by the entirety for asset protection can result in disaster. So, resist using it as a stand-alone method of safeguarding wealth.

If you are a lawyer, business owner or other professional, beware. That is, ask yourself if the tenancy by the entireties form of ownership is an adequate means of protecting assets. The immediate answer should be no. The all too common habit that some practitioners have of recommending tenants by the entireties as a wealth preservation technique is not only ill advised but possibly catastrophic.

Thus, lawyers who advise their clients to create estates using tenancy by the entireties are speculative at best and committing malpractice at worst. Here are some of the many reasons.

Dangers of Depending on TBE

  1. There is a plethora of results-oriented judges who tend to pick and choose their own versions of the ever-changing theories of legal liability. If an attorney can convince a judge that your TBE was structured as a sham to defraud creditors, the judge’s whim may carry more weight than your counsel’s interpretation of the statutes. One can wax poetic about judicial compulsions. But explain that to a judge with no qualms about crafting his own case law.
  2. What if your spouse wakes up one day and reveals he or she has decided to leave the relationship? Upon divorce, T by E protection automatically goes out the window. Consider this. Keep in mind, a judgment against you is most likely acquired through litigation. As you can imagine, the emotional pressure of a lawsuit multiplies the odds of marital disruption. As a result, many a spouse has been caught off guard by the sudden revelation of an affair, or other conflict, that tore the relationship asunder.
  3. Everyone dies. So, in the blink of an eye your so-called tenancy by the entireties protection could evaporate into thin air. Just ask the spouse who was visited by the sheriff twice in one day. The first was to inform him if his wife’s tragic death in an auto accident. The second visit was to serve a property seizure order.

The bottom line? Don’t rely on tenancy by the entireties as a primary means of asset protection. It can be thought of as only a small part of an overall master asset protection plan.

list of states

Tenancy By the Entireties States List

The following is a table of the the Tenancy by the Entirety States. It also displays how each state applies T by E to real estate and personal property.

States Tenancy
by the Entirety
Alabama No
Alaska Yes Yes Yes
Arizona No
Arkansas Yes Yes Yes
California No
Colorado No
Connecticut No
Delaware Yes Yes Yes
District of
Yes Yes Yes
Florida Yes Yes Yes
Georgia No
Hawaii Yes Yes Yes
Idaho No
Illinois Yes Yes No
Indiana Yes Yes No
Iowa No
Kansas No
Kentucky Yes Yes No
Louisiana No
Maine No
Maryland Yes Yes Yes
Massachusetts Yes Yes Yes
Michigan Yes Yes No
Minnesota No
Mississippi Yes Yes Yes
Missouri Yes Yes Yes
Montana No
Nebraska No
Nevada No
New Hampshire No
New Jersey Yes Yes Yes
New Mexico No
New York Yes Yes No
North Carolina Yes Yes No
North Dakota No
Ohio No
Oklahoma Yes Yes Yes
Oregon Yes Yes No
Pennsylvania Yes Yes Yes
Rhode Island Yes Yes Yes
South Carolina No
South Dakota No
Tennessee Yes Yes Yes
Texas No
Utah No
Vermont Yes Yes Yes
Virginia Yes Yes Yes
Washington No
West Virginia No
Wisconsin No
Wyoming Yes Yes Yes

More T by E Facts

In order to form a tenancy by the entirety, a couple must acquire the property at the same time and the title to the property must be granted by the same instrument. Additionally, both partners must share the same interest in the property and must hold equal rights to possession of the property. Property held under tenancy by the entirety cannot be sold, mortgaged, or used as collateral by one spouse without the consent of the other spouse.

tenancy by the entireties essential elements

Six Essential Tenancy by the Entirety Elements

There are six essential tenancy by the entirety elements in most states. For example, under Florida law, to be able to qualify as TBE property, the subject property must have the following elements:

  1. Unity of Possession – Both spouses must have joint ownership and joint control.
  2. Unity of Interest – Each party must have an indistinguishable property interest.
  3. Unity of Title – The property interest needs to have been created in the same instrument,
  4. Unity of Time – The property interest must have taken place at the same time.
  5. Unity of Marriage – The individuals must have been married to each other when they attained the property.
  6. Survivorship – When one spouse dies, surviving spouse then owns the property.

Which States Recognize Tenancy by the Entirety

There are 26 states in the US which have tenancy by the entirety statutes on their books. The rules regarding tenancy by the entirety vary from state to state.

Tenancy by the entirety applies only to real estate in the following states:

  • Alaska
  • Indiana
  • Kentucky
  • New York
  • North Carolina
  • Rhode Island

Tenancy by the entirety for all property is recognized by these states:

  • Arkansas
  • Delaware
  • Florida
  • Hawaii
  • Maryland
  • Massachusetts
  • Mississippi
  • Missouri
  • New Jersey
  • Oklahoma
  • Pennsylvania
  • Tennessee
  • Vermont
  • Virginia
  • Wyoming

In Illinois, couples can only own their homestead as tenants by the entirety. Therefore, they are unable to buy and title investment real estate under this form of property ownership. In Michigan, any joint tenancy previously held by a husband and wife prior to marriage converts to a tenancy by the entirety upon marriage. The state of Ohio only recognizes tenancy by the entirety for deeds issued before April 4, 1985. Some states allow ownership of bank and investment accounts under tenancy by the entirety. There is no gift tax consequence for tenancy by the entirety because the unlimited marital deduction allows for tax-free transfers between spouses.

Tenancy by the Entirety Vs. Joint Tenancy

Tenancy in Common

Unlike tenancy by the entirety, tenancy in common typically does not have rights of survivorship. For example, suppose Adam and Barbara are tenants in common. Adam dies. Adam’s share does not automatically go to Barbara. Instead, Adam’s share goes to whoever Adam named in his will. Without a will, on the other hand, the courts decide who inherits his portion.

With a tenancy in common, the percentage of ownership does not have to be equal. One tenant can transfer the property to others during and after his or her lifetime. Even so, all owners have the rights of occupancy regardless of percentage of  ownership.

For instance, Adam and Barbara own a house as tenants in common. Adam owns 1/4 and Barbara owns 3/4. Both have the right to occupy the entire property. Let’s say Barbara sells her 3/4 share in the house to Charlie. Adam still retains his 1/4 ownership in the home.

Joint Tenancy

With joint tenancy, on the other hand, two or more persons own the property creating a right of survivorship. However, joint tenancy can be between or among groups of people who are not married. The joint tenants share an equal ownership in the property.  Though, property held under a joint tenancy is fair game for the creditors one of your joint tenants. Thus, a creditor of one partner can seize the assets from both parties.  So, this form of ownership is devoid of meaningful asset protection.

Same-Sex Marriage

In states where tenancy by the entirety rights apply, those rights should apply for same-sex married couples. However, the legal doctrine in many states refers to property owned by a “husband and wife” rather than “spouses” or a “married couple.” As a result, it is advisable that married same-sex couples who wish to enter into a tenancy by the entirety agreement use very specific language, repeated throughout the deed, which states their intention to hold the title as tenants by the entirety in no uncertain terms as a measure of added protection.

Tenancy by the Entirety: Asset Protection with Limits

  • Protection of Assets from Creditors

One of the main benefits of tenancy by the entirety is the theoretical ability to protect marital assets from creditors. As indicated above, property owned under tenancy by the entirety is technically owned by the married couple as a unit, rather than by the individual spouse. As a result, property owned under TBE is not typically subject to claims by creditors against either spouse as an individual. It is, however, subject to claims made against the couple jointly.

The default rule in most states where tenancy by the entirety exists is that creditors can obtain a lien against property held under TBE as the result of a judgement against one spouse but cannot foreclose upon it. Creditors with liens against TBE property are generally entitled to the following three rights.

T by E Property Rights

  1. Repayment of the debt if the property with the lien is sold. If there is a lien against the property, proceeds from the sale of that property are required by law to be paid to the creditor who holds the lien.
  2. The debtor’s right to survivorship, meaning that if the spouse who does not owe the debt dies, the creditor can take the entire property. This happens because death nullifies TBE privilege and death of the non-debtor spouse converts the property held under TBE to the sole property of the debtor spouse.
  3. Right to occupancy in lieu of the debtor. If a creditor has a lien against a property of which the debtor is a tenant by the entirety, that creditor technically has the right to occupy the property that they have the lien against. It is very rare that a creditor actually chooses to physically occupy the property that they have the lien against, however, this right entitles the creditor to more than just physical occupancy. If the property is the residence of the non-debtor spouse, the creditor is entitled to some form of payment from the non-debtor spouse in order to occupy the residence without sharing it with the creditor. If the property is not the residence of the non-debtor spouse and it generates income, the non-debtor spouse is legally obligated to share the income derived from that property with the creditor.

right to foreclose

  • Creditors Forgo Right to Foreclose

The most important right in the context of asset protection with regards to TBE property is the right that creditors do not have: the right to foreclose. The protection against seizure of assets enjoyed by tenants by the entirety applies to the collection of nearly all debts owed by an individual spouse. Exceptions include federal tax liens. Regulations vary from state to state regarding the degree of asset protection provided under tenancy by the entirety.

As stated, property held under tenancy by entirety can still be seized as the result of a federal tax lien. The U.S. Supreme court has ruled that property held under TBE is subject to a federal tax lien against one spouse. This also includes criminal fines and forfeitures resulting from federal criminal cases. As a result of this ruling, both the Internal Revenue Service and the federal government have the right to administratively seize and sell. Most commonly, they foreclose against the tenancy by the entirety property held by the spouse whom the lien was levied against.

  • Right of Survivorship

In a tenancy by the entirety, a surviving spouse will automatically own the property in its entirety upon the death of the partner. Property held under this doctrine is wholly owned by both parties. Thus, it cannot legally be included in an individual spouse’s estate plan. The result is that property held in a tenancy by the entirety does not go into probate. So, it is not subject to the claims of the decedent’s heirs or beneficiaries.

Because of the nature of tenancy by the entirety is a method of holding marital property, it is also canceled by death. Property held by a married couple as tenants by the entirety will convert to the solely owned property of the surviving spouse upon the death of the first spouse. It is important to note that once the property becomes the sole property of the surviving spouse, it is once again subject to the claims of the surviving spouse’s creditors.

In order to avoid this consequence, in some jurisdictions it is possible to allow tenancy by entirety property to be moved to a revocable trust that require both parties to revoke. Then, upon the death of the first spouse, the trust typically becomes irrevocable. These trusts, known as TBE trusts or qualified spousal trusts, are owned by the marriage, rather than the individual spouses. Therefore, the trusts maintain tenancy by entirety privileges following the death of the first spouse. It is possible to set up a TBE trust provided that the following conditions are met:

  • The couple must be married before establishing the trust.
  • The couple must remain married.
  • The trust or trusts must be revocable by the respective settlors or by both settlors acting together in the case of a joint trust.
  • Both spouses must be permissible beneficiaries of the trust or trusts while they are alive.
  • The trust instrument or deed must reference the applicable statute allowing such a trust to retain TBE privilege after death of the first spouse as it appears in the jurisdiction where the trust is issued. There are many types of deeds that vary state to state, so be sure you use the proper instrument.

The following states allow joint trusts to qualify for tenancy by the entirety privileges:

  • Delaware
  • Florida*
  • Hawaii
  • Illinois **
  • Indiana
  • Maryland
  • Missouri
  • North Carolina
  • Tennessee
  • Virginia
  • Wyoming

*Florida law practitioners debate over whether or not joint trusts qualify for TBE privileges under current statutes.

**In the state of Illinois, only the couple’s homestead can be moved into a joint trust and qualify for TBE privileges.

terminating tenancy by the entirety

Terminating Tenancy by the Entirety

In the event that a couple holding property as tenants by the entirety divorce, the tenancy by the entirety is automatically terminated. As such, the property is then held by the former spouses as tenants in common. Because tenancy by the entirety only applies to marital property, there is no way to continue to hold property under this type of agreement once a divorce has been granted.

A tenancy by the entirety can also be terminated by a mutual agreement entered into by both parties or by a joint conversion of the title into another form of property ownership.

There some additional legislative protections. You can view more information about planning on our pages that discuss homestead exemptions and IRA creditor exemptions by state.


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