Tenancy by the Entirety (TBE): The “Free” Asset Protection Shield for Married Couples
Tenancy by the Entirety (TBE): The “Free” Asset Protection Shield for Married Couples
๐ WHO THIS IS FOR
- Target Profile: Married couples living in TBE states (e.g., FL, PA, VA, MI) with joint assets.
- Primary Objective: Creditor Protection (Protecting the innocent spouse’s share from the other spouse’s debts).
- Not Suitable For: Single individuals, domestic partners (in most states), or couples residing in Community Property states like California or Texas (where TBE generally doesn’t exist).
EXECUTIVE SUMMARY
- The Default: Most couples title their home as “Joint Tenants with Rights of Survivorship” (JTWROS). If the husband gets sued, the creditor can often seize his 50% share and force a sale of the house.
- The Shield: Tenancy by the Entirety (TBE) is a special form of ownership available only to married couples. Under TBE law, the property is not owned 50/50; it is owned 100% by the “Marital Unit.”
- The Power: Because the husband doesn’t own a divisible share, his personal creditor cannot seize the house. The creditor cannot break the “Marital Unit.” The house remains safe as long as the marriage (and the non-debtor spouse) survives.
- Authority Baseline: This protection is derived from English Common Law and is codified in about 25 states. It is the strongest “Zero-Cost” asset protection tool available.
Before you pay a lawyer $10,000 for a trust, check your deed. Simply changing the title of your home from “Joint Tenants” to “Tenants by the Entirety” can instantly bulletproof millions of dollars in equity. It costs about $50 (recording fee) to execute. According to Team BMT Analysis, failing to use TBE in a qualifying state is negligent asset management. Source: American Bar Association / Asset Protection Society
Scenario: Husband (Surgeon) is sued for malpractice. Judgment: $2M. Wife (Teacher) is innocent. They own a $2M home.
- Case A (Joint Tenancy – JTWROS):
Creditor seizes Husband’s 50% interest ($1M).
Creditor forces a “Partition Sale” of the home to get paid.
Result: Family loses the home. Wife gets half the cash, but the home is gone. - Case B (Tenancy by the Entirety – TBE):
Creditor tries to seize Husband’s interest.
Law says: “Husband owns 0%. Wife owns 0%. The Marriage owns 100%.”
Since the creditor didn’t sue the Marriage (just the Husband), they cannot touch the asset.
Result: Family keeps the home. Creditor gets $0.
BMT Verdict: TBE is the “poor man’s asset protection trust.” It works effectively against individual debts (credit cards, torts committed by one spouse). However, it offers ZERO protection against joint debts (joint mortgage, joint taxes) or if both spouses are sued together. It protects the innocent spouse, not the guilty couple.
State Availability (Select List)
| State | TBE for Real Estate? | TBE for Bank/Brokerage Accounts? |
|---|---|---|
| Florida (FL) | 1 (Yes) | 1 (Yes) |
| Pennsylvania (PA) | 1 (Yes) | 1 (Yes) |
| Virginia (VA) | 1 (Yes) | 1 (Yes) |
| New York (NY) | 1 (Yes) | 0 (No) |
| California (CA) | 0 (No) | 0 (No) |
*Chart Note: Geography dictates strategy. In Florida, you can title your brokerage account as TBE, making your stock portfolio judgment-proof against one spouse. In New York, only real estate qualifies. In California (Community Property), TBE does not exist at all.
Supreme Court Ruling: In United States v. Craft (2002), the Supreme Court ruled that the IRS (Federal Tax Lien) can pierce TBE protection to seize one spouse’s interest for unpaid federal taxes. TBE protects against private creditors (lawsuits), but it does NOT protect against the IRS. The IRS supercedes state property law.
โ BOUNDARY CLAUSE: This Structure Breaks Down If:
- Divorce: If you divorce, TBE automatically converts to “Tenancy in Common” (50/50). The creditor strikes immediately upon the divorce decree.
- Death of Innocent Spouse: If the non-debtor spouse dies first, the debtor spouse inherits 100%. The asset is no longer TBE; it is solely owned. The creditor seizes it immediately. (Solution: Buy life insurance on the innocent spouse).
Execution Protocol
Pull your property deed. Does it say “Husband and Wife” or “Tenants by the Entirety”? In some states (like FL), “Husband and Wife” implies TBE. In others, you must be explicit. When in doubt, re-record the deed with the specific language “as Tenants by the Entirety.”
If you live in a “Full TBE” state (FL, PA, etc.), ask your brokerage (Fidelity/Schwab) to title your joint account as TBE. Many clerks don’t know this option exists. Insist on it. If they don’t offer it, switch brokers.
Never sign joint guarantees if you don’t have to. If the husband takes a business loan, the wife should not co-sign. Keeping one spouse “clean” is the key to maintaining the TBE firewall.
TBE is a privilege of marriage. It is one of the few financial benefits where the law explicitly favors the family unit over the rights of creditors. Use it.
WEALTH STRATEGY DIRECTIVE
- Do This: If moving to a new state (e.g., relocating to Florida), immediately retitle all assets to TBE. Florida offers arguably the strongest TBE protection in the nation.
- Avoid This: Using TBE in a state that doesn’t recognize it. The court will treat it as Joint Tenancy (Weak), and you will have zero protection. Know your local statutes.
Frequently Asked Questions
Does it avoid probate?
Yes. Like Joint Tenancy, TBE includes “Right of Survivorship.” When one spouse dies, the asset passes automatically to the survivor without probate. It serves dual purposes: Asset Protection + Estate Planning.
Can I do this with an LLC?
Yes. In some states, you can own an LLC membership interest as TBE. This adds a second layer of protection (Charging Order + TBE). If a creditor attacks the LLC, they hit two walls.
What if we both get sued?
If you are both liable (e.g., you both signed a loan, or a guest slipped on your icy driveway), TBE offers no protection. It only protects against debts owed by one spouse.