Tenancies by the Entireties – A Strong Protection from Collections Actions
One of the most powerful exemptions to collection, and thus, a powerful exemption from creditors, is known as the tenancies by the entireties (TBE). Whether TBE is a good or bad thing probably depends on whether you are the business or person collecting, or the one being collected against. Either way, it can be helpful from a strategy and planning standpoint to understand what Florida’s TBE exemption actually does.
What are Tenancies by the Entireties?
When a married couple owns property jointly, the property is said to be held as TBE. However, there are more specific findings necessary for property to qualify as TBE. In order to get the benefits and protections of the TBE exemption, property must:
- Be owned and controlled by both the husband and the wife
- Be owned equally by both the husband and the wife; that is, both must have the same interest in the property
- The couple’s interest in the property must have arisen while the parties were married, and at the same time.
Titled and Untitled
We know that some property gets a title—say, for example, a car, a business or a bank account, where you can look and see names on bylaws, a title, a deed, or an account. But some property is not titled by or with a specific document. In the absence of a written title, generally, so long as #2 and #3 above are met, the property will be assumed to be TBE.
When it comes to collecting on a judgment, the first place many creditors will look to collect, are the debtor’s bank accounts. Florida law presumes that bank accounts are TBE, even if the account is only in the name of one spouse, so long as it was opened when the couple was married.
Of course, there can also be benefits to excluding one spouse from title to certain property. Married couples should be aware that by excluding the other spouse, they could be losing a valuable asset protection tool, and a valuable defense to a collections action.
Death is one of the few things that can undo TBE status of property. From an estate standpoint, TBE property will allow the property to go to the spouse upon the death of the other spouse, even without a will or other planning instrument.
Divorce will also strip property of its TBE status, as will taking specific steps to remove a spouse from the title of any particular property.
The benefit of TBE when it comes to avoiding collections, is that if a debt is only owed by one spouse, the creditor cannot take any property that has the TBE exemption attached to it. Again, from a planning standpoint, this can make debts taken out by one spouse “safer” than debts that are in both spouse’s names.