Article Discusses Tenants By Entireties in a Joint Living Trust

Florida property owned by a husband and wife with rights of survivorship is presumed to be “tenants by entireties” property which is protected from the creditors of either spouse, but not protected from joint creditors. If a husband and wife contribute money to a revocable living trust, does the change of ownership terminate the entireties protection?

Many years ago I reported in a blog post a court decision in the Passalino v. Protective Group Services case which held that money deposited jointly in an attorney’s trust account did not terminate entireties ownership. The court decision implied that assets in the spouse’s living trust preserved entireties protection.

In a subsequent post, (May, 2013) I discussed a Florida Bar Journal includes in article by R. Craig Harrison discussing whether a revocable living trust may hold tenants by entireties assets which are exempt from individual spouse’s creditors. The article concludes that a living trust may include protected entireties property. The article’s conclusion applies to joint living trust. If spouses create separate living trust where only the trustmaker spouse may amend or revoke their own trust then there is no entireties ownership. The article does not specifically address separate living trust where the spouses serve as joint trustees of each other’s trust and the trust document requires joint consent to revoke or amend the provisions of either trust.

Since the publication of the Florida Bar Journal article some courts have considered whether particular living trust agreements preserved entireties ownerships of trust assets and the protection of trust asset from judgment creditors. One bankruptcy court considered the exemption of a bank account owned jointly by a husband’s living trust and his wife’s separate living trusts. The court decided that because trusts are not married individuals the trustees could not own a bank account by the entireties.

Subsequently,  (September 2020) a bankruptcy court considered a joint living trust where the husband and wife served jointly as trustee. The opinion (2020 WL 5833180) discussed in detail the legal issues pertaining to tenants by entireties protection within a revocable living trust. The court stated that then the debtors conveyed entireties asset to themselves as trustees they transferred equitable title to the trust which is not a party to a marriage. Also, after the entireties asset was transferred to the joint trust their contingent trust beneficiaries, their children, shared part of the equitable title as future beneficiaries. The court said that an asset may not be owned by the entireties if any person (in this case, the children) other than the married couple shares any part of equitable ownership.

People can preserve asset protection through the estate planning process by including an “entireties savings clause” in their joint living trust. The trust agreement should state the trustmakers intent to maintain entireties ownership as joint trustees. The trust also should preserve full equitable title in the trustees while they are both married and alive. There are other trust provisions that can preserve entireties protection notwithstanding anything else to the contrary in the trust document.

Most standard living trust forms do not consider tenants by entireties protection. Make sure the attorney drafting your joint living trust knows your intent to preserve asset protection and is familiar with the legal issues associated with entireties property transferred to a joint living trust.