How Should Married People Own Property?

A few married people who are concerned about asset protection have asked whether it is better to hold property jointly as tenants by entireties or title property in the name of the one spouse least likely to be sued. Both forms of ownership are protected from creditors of the spouse most likely to become a judgment debtor. There are different consequences in the event the non-debtor spouse predeceases.

Upon the death of the non-debtor spouse the property owned tenants by entireties vest in the name of the surviving spouse where the property would be vulnerable to the surviving spouse’s individual creditors. The title conveyance is automatic and no probate is necessary. Tenants by entireties ownership is easy and inexpensive to establish without the assistance of an attorney.

If the non-debtor spouse owns property in their own name, rather than jointly with the debtor spouse, upon the death of the non-debtor spouse probate will likely be necessary. However, probate can be avoided if the non-debtor spouse leaves the property in trust for the debtor spouse and other heirs. The trust agreement could include “spendthrift provisions” which protects the property from the creditors of the surviving spouse and other heirs. Establishing such a trust requires the assistance of an estate planning attorney.

If either spouse is unlikely be sued then titling non-exempt property in their individual name is probably better asset protection provided there is also an effective estate plan. This issue illustrates how asset protection should be designed in conjunction with estate planning.

posted by Jonathan Alper, asset protection and bankruptcy attorney, Orlando, Florida