Written By: Brandy Miller | November 20, 2015 | No Comments

By: Larry W. Miller, Jr., Esquire

One form of ownership that I wish everyone was taught in high school is a tenancy by the entireties. No matter if someone ever hires a lawyer during their lifetime, knowledge of tenancy by the entireties can help you tremendously during your lifetime. This article will explain what a tenancy by the entireties is, and more importantly will teach you how to utilize one during your lifetime.

Let’s start with a workable definition. Simply put, it’s how married people can own things when they own them together. For example, if Bob and Steve, two unmarried friends, own a piece of real estate (land) and they both have their names on the deed, this is called owning something as tenants in common. Assuming there is not some agreement where one of them owns more of the land than the other, the law states that Bob owns half of the property and Steve owns half of the property. Simple enough. However, now let’s assume Steve gets into a major automobile accident that was totally his fault and eventually is found liable for the damages resulting from that accident. Let’s also assume the damage judgment is a sizable judgment that Steve does not have the resources to pay. When the opposing attorney does an asset search on Steve, he or she will find the piece of land Steve co-owns with Bob. The Judgment holders may file a Court action requiring that piece of real estate to be sold in order to help pay Steve’s judgment amount. If that would occur, the Court would require that half of the proceeds be given to Bob to compensate him for his ownership share in the land, and the other half of the proceeds would go to Steve’s judgment creditors to help pay off the judgment.

The idea here is that the law sees the forced sale of the real estate owned by Bob and Steve to be fair and equitable under the law. Before the sale of the real estate, Bob owned fifty (50%) percent of the asset. After the sale, Bob still owns fifty (50%) percent of the asset, as he now has cash which is equal to the value in the asset he had before the sale. Steve, on the other hand, loses his share of the real estate, but that is appropriate in order to attempt to compensate the victims from the car accident.

Now, let’s consider the scenario where two married individuals own the same piece of land. Let’s assume that Betty and Joe, who are married, purchase a piece of real estate, and place the deed into both of their names. This is called owning something in a tenancy by the entireties. In this scenario, the law states that Betty, as the wife, owns one hundred (100%) percent of the real estate, while Joe, as the husband, also owns one hundred (100%) percent of the property. The difference in being married and owning the property is that the law assumes each person owns all of the property together, whereas in the first scenario the law assumes that each person owns half of the ownership interest in the land. The key distinction between the tenancy by the entireties and the tenants in common is when Joe finds himself in the same car accident Steve was in our previous example. Once the judgment holders obtain the judgment and come looking for assets to pay off the judgment, they will find the real estate owned by both Betty and Joe. The problem now, however, is that Joe’s creditors will not be able sell the real estate co-owned with Betty in order to help satisfy the judgment. This is because there is no part of the real estate the judgment holders can sell and keep that would not harm Joe’s co-owner, Betty. If half of the proceeds are given to Joe’s creditors, Betty is harmed because she owned one hundred (100%) percent of the property before the sale but would only own fifty (50%) percent of the property after such sale had occurred. The law will not support an innocent spouse losing her assets to pay for her spouse’s debts.

So what’s the lesson to be learned here? If you are married, you need to put assets you want to keep protected in both of the spouse’s names, while keeping assets that could potentially create liability in only one of the spouse’s names. You want to assure that any liability is in only one of the spouse’s names. If a liability creating asset is held in both of the spouses’ names, the asset held in a tenancy by the entireties could potentially not be protected. If both of the spouses are named in any lawsuit and found liable, then the assets kept together in a tenancy by the entireties will not be protected, because there is no innocent spouse. A Court would have no problem having the entire asset sold because both spouses owe the Plaintiff on the same debt.

A common example of this is the automobiles that a married couple own. Any automobile should be named only in the name of the person who will drive it the most. If a car is titled in both spouses names, it potentially could open the door to suing both spouses in a lawsuit where only one of the spouses was driving. This could put the assets that are owned in a tenancy by the entireties at risk. If one spouse has a business, the business and all of its assets should be kept in only one of the spouses’ names so that if the owners of the business get sued, the lawsuit would not have the potential of putting the assets held in a tenancy by the entireties at risk. Common assets held in tenancy by the entireties are bank accounts and a personal residence. Assets commonly held in only one name are typically cars, businesses, and rental real estate.

If one has questions regarding how ownership of assets can reduce exposure to putting valued assets at risk, one should consult with a family law attorney to determine the best method of owning an asset.

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