Property Owned by Married Couples Still Has Strong Protections
The tenants by the entireties (TBE) protection is one of the strongest that the law provides, and one of the clearest and easiest asset protection devices available. TBE is an exemption that protects assets that are owned jointly by a married couple from being taken by creditors. A recent case has not strengthened the protections of the TBE protections.
Creditor Tries to Collect Judgment
The case involved a debtor who owned a home with his wife. They sold the home and put the proceeds into a bank account that was titled in both of their names, although the Debtor’s name was not added to the account until three days after his wife’s.
A creditor sought to garnish the money in the account to collect on a judgment, but the debtor argued the account was protected by the TBE exemption. The debtor also argued that even if TBE did not apply, the funds were derived from the sale of the homestead, which is exempt under Florida law, as well.
Normally, to have the protections of TBE, property must be held by the husband at wife at the same time, at the same place, and generally have unity of possession and interest. Although the debtor’s wife’s name was added after the debtors on this account, the debtor cited to a law that says that when a bank account is opened by a husband and wife, it is automatically presumed to be TBE.
Thus, the debtor argued that law made it unnecessary to have the account opened at the same time, with both names on it at the same time, and the fact that he and his wife were not both on the account at the time it was opened, should not deprive them of the TBE protections.
Court Disagrees With Interpretation But Still Finds Protection
The Court disagreed, saying that the law presuming TBE protection or bank accounts still required a showing that a husband and wife obtained their interest in TBE at the exact same time. Thus, the bank account had no TBE protection, and could have been taken by creditors.
But that was not the end of the inquiry. The Court found that because the account was funded with money that was from the sale of the home, and the home was TBE property, that the funds still maintained the TBE protection. In other words, because the funds had the TBE protection before they were put into the account, they maintained that protection, even after being deposited into the bank account.
The Court noted that TBE protection cannot be destroyed by transferring the property into a bank account. Only death, divorce, or agreement between the spouses can end the TBE protections. It cannot be destroyed even when one spouse unilaterally puts TBE property in the spouse’s own name. Thus, the account here could not be garnished by the creditor.
Not all asset protection is difficult or complex, but mistakes can be costly. Contact Tampa asset, estate and probate attorney David Toback to discuss a comprehensive asset protection plan.