Legal News Post # 1
Why marriage is so great in Florida-Tenancy by the Entireties:
Florida has a very old form of property ownership known as tenancy by the entireties (“TBE”). TBE is a joint tenancy that exists only between spouses. TBE only exists if the property is specifically titled to a married couple in a manner as follows: “John Doe and Jane Doe, husband and wife”.
This type of joint ownership has several interesting features:
1. Survivorship: Upon the death of one of the spouses the property goes to the surviving spouse by operation of law. This property will be excluded from probate of the estate of the first spouse to die.
2. Legal fiction: This ownership is deemed to be an ownership by the marriage itself. In other words, it creates the curious legal fiction that there is one entity (the marriage) that owns the property. Each spouse in the marriage is said to own the whole (the entirety). This strange fiction creates the basis for the next two features unique to TBEs.
3. Limited asset protection: A general judgment creditor (think credit card company) of either the husband or wife can not look to the TBE property to satisfy the debt solely owed to creditor by that spouse. Florida’s acceptance of TBE ownership, along with homestead is the reason Florida is considered one of the most debtor friendly states in the US. Note: This protection does not apply if the debt is jointly owed by the husband and wife. Also, this protection does not apply with respect to federal tax liens (pre-emption by federal law). Hint for spouses: Don’t sign husband’s or wife’s credit card application or you both become liable for debt and thus expose otherwise protected property!
4. Severance of TBE upon divorce. Logically, since the marriage “owns” the property, if the marriage no longer exists then TBE ownership can’t exist. So, upon divorce the TBE ownership severd and is converted to a tenancy in common (“TC”), in which each party gets an equal interest (50%) in the whole.
Interestingly, once the TBE is severed by divorce, if the divorced parties remarry, the TBE does not get reinstated. The parties must re-convey the property to each other as husband and wife. Admittedly this scenario does not occur too often, but not re-conveying to create the TBE could cause unitended consequences for a surviving spouse especially in 2nd or 3rd marrages with “blended” families. This is so because in 2nd marriages upon the first spouse’s death his or her TC interest (say 50%) will not go to the husband by operation of law and , assuming there is no will, Florida’s intestacy statutes could cause an interest in such property to go to the first to die spouse’s children and not 100% to the surviving spouse.
Florida Statues Sec.732.102 provides:
The intestate share of the surviving spouse is:
(3) If there are one or more surviving descendants of the decedent who are not lineal descendants of the surviving spouse, one-half of the intestate estate.
(4) If there are one or more surviving descendants of the decedent, all of whom are also descendants of the surviving spouse, and the surviving spouse has one or more descendants who are not descendants of the decedent, one-half of the intestate estate.
Finally, in any matter dealing with the ownership and rights in real property, one must always determine whether the real property is homestead. Homestead rights exist by virtue of the Florida Constitution and are quite broad and very complex. Legal scholars refer to Homestead as a “legal chameleon” because of its complexity and the maze of court rulings interpreting the application of the law to facts. I mention homestead only to point out there are other considerations and options when it comes to asset protection and that homestead can protect real property from creditors regardless of whether the property is owned as a TBE. I’ll discuss homestead in future posts.