In these trying economic times, customers from all income backgrounds are interested in learning more about legal structures that might safeguard their properties. The variety of financial institution lawsuits, foreclosures, and insolvencies are tremendously increasing. Clients are interested in the liability of themselves, their partners, and their future heirs. Those who have collected significant wealth throughout the years are seeking to ensure that the maximum amount is maintained for future generations. Others are merely attempting to hold on to whatever they still have.

This concern talks about the securities offered to an other half and other half by owning residential or commercial property as occupants by the entirety. We hope that this background information will be helpful to you.

Tenancy by the whole is a type of joint ownership for residential or commercial property that is held by a partner and spouse. Tenancy by the totality stems from the theory that a couple represent an indivisible unit. Each spouse owns an undivided interest in the residential or commercial property. At the death of either partner, the residential or commercial property passes to the making it through spouse.

Do all states allow married couples to hold residential or commercial property as tenants by the totality?

No. Laws regarding residential or commercial property rights vary by state. Some states do not deal with married joint owners differently than unmarried joint owners. The applicable law is where the residential or commercial property lies.

Michigan and Florida both allow for ownership as renters by the entirety.

What occurs to the occupancy by the whole residential or commercial property on the death of the first partner to die?

The residential or commercial property passes to the enduring partner by law with no further action. A create in a will (or bequest in a trust) is inefficient to move the residential or commercial property.

Is all residential or commercial property held collectively by partner and partner always occupancy by the totality residential or commercial property in states that permit such ownership?

No. A couple can likewise own joint residential or commercial property as (1) tenants in common, or (2) joint renters with rights of survivorship.

Tenants in typical each own half (or some other portion) of the residential or commercial property, but the co-tenants have equal right to have the entire residential or commercial property. Co-tenants might unilaterally partition the residential or commercial property, sell the residential or commercial property, or mortgage the residential or commercial property. Co-tenants likewise transfer the residential or commercial property at their death to whoever they designate in a will or trust, or by intestacy law.

Joint renters with rights of survivorship own a concentrated interest in the entire residential or commercial property, and the residential or commercial property goes by law to the enduring co-tenant at the death of the first co-tenant. Co-tenants with rights of survivorship can unilaterally seek to partition the residential or commercial property, offer the residential or commercial property, or mortgage the residential or commercial property.

How would we know whether our joint residential or commercial property is held as renters by the totality?

Michigan and Florida law presume that property held jointly by a hubby and partner is held as occupants by the totality. A deed or other certificate of title should show another kind of ownership (i.e., state "as occupants in typical") in order to overcome this presumption.

The law is less clear on whether the anticipation uses to personal residential or commercial property. In any occasion, it is sensible to expressly specify on a deed, certificate of title, or other legal document that the couple plans to hold the residential or commercial property (real or individual) as occupants by the totality. You need to consider having an attorney evaluation all files evidencing joint ownership of residential or commercial property to figure out if it is held as occupants by the whole.

Can non-married individuals own residential or commercial property as occupants by the totality (i.e., two bros, a mom and child, two unrelated individuals)?

No. This kind of ownership is scheduled for married individuals in Michigan and Florida. Non-married persons can hold residential or commercial property jointly as either renters in common or as joint tenants with rights of survivorship.

Do lenders of the first partner to die have any rights to residential or commercial property held as tenants by the entirety?

No. Tenancy by the whole residential or commercial property is not included in the probate process. Creditors of the very first partner to die have no rights to the residential or commercial property and need not be notified when the residential or commercial property passes to the surviving spouse.

Will financial institutions of the surviving spouse be able to attach a lien on the residential or commercial property after the death of the first spouse?

Yes. After the death of the first spouse, complete ownership of tenancy by the whole residential or commercial property transfers to the enduring partner. Accordingly, financial institutions of the making it through spouse can connect a lien on the residential or commercial property.

Is it possible for a making it through spouse with financial institution concerns to decline to accept full ownership of the residential or commercial property however still live on the residential or commercial property?

Yes. The surviving spouse may disclaim the survivorship interest in occupancy by the totality residential or commercial property within nine months of the death of the very first spouse. A correctly prepared estate strategy might prevent a lien on the residential or commercial property if the debtor-spouse survives by expecting using a qualified disclaimer to money a credit shelter or qualified terminable interest residential or commercial property trust. Courts have dealt with the right to reside in the residential or commercial property as earnings interest.

However, a few states hold that such use of a disclaimer makes up a fraudulent transfer. For example, Florida restricts disclaimers when the disclaimant is insolvent at the time that the disclaimer ends up being irrevocable.

Does a financial institution of one spouse have rights against occupancy by the totality residential or commercial property?

It depends upon the laws of the state.

In the majority of states that allow occupancy by the whole residential or commercial property, including both Michigan and Florida, a couple must act together to transfer, partition, encumber, etc any residential or commercial property held as tenants by the entirety. A lender of one spouse does not have an attachable interest in the occupancy by the totality residential or commercial property.

Conversely, in the minority of states, either partner might act alone to affect the tenancy by the whole residential or commercial property (mortgage, partition, sell, and so on). Tenancy by the totality is treated the like the other types of joint ownership, and a creditor of one spouse might attach to the degree of the debtor-spouse's interest in the residential or commercial property. This would permit a financial institution to force a sale or partition of the residential or commercial property.

Exist unique financial institutions that could still have an attachable interest in occupancy by the entirety residential or commercial property, even in states where the spouses must act together?

Yes. The U.S. Supreme Court has actually decided that residential or commercial property held as occupants by the totality is constantly subject to a federal tax lien versus one spouse, regardless of the hidden state law. The guideline has been extended to criminal fines and forfeitures from federal criminal cases. This rule allows the Internal Revenue Service or the federal government to either: (1) administratively seize and offer the taxpayer's interest in tenancy by totality residential or commercial property, or (2) foreclose the federal tax lien versus the occupancy by entirety residential or commercial property. Because of the problem of selling the taxpayer's interest, the most likely treatment is foreclosure.

Following a hearing on a foreclosure petition, a court may purchase the sale of the whole residential or commercial property and distribute the earnings equitably between the non-debtor-spouse and the debtor-spouse (which then consists of payment to the Irs). Some courts value the couple's respective interests according to appropriate life spans; others presume each partner's interest is 50%.

In Michigan and Florida, can a couple freely transfer occupancy by the whole residential or commercial property if one partner has creditor issues?

Yes, generally. In states where the couple must act together, they might convey tenancy by the entirety residential or commercial property to among them alone or to a third party (such as their kids or to a trust), complimentary from the debtor-spouse's creditors. Because the lenders do not have an attachable interest in the residential or commercial property, this transfer is ruled out to be made with the intent to defraud a creditor.

However, if there is a risk that the debtor-spouse might undergo bankruptcy proceedings within two years of the transfer, then the transfer might be prevented by the bankruptcy trustee. This might result in major financial consequences because the residential or commercial property will no longer be considered to be held as occupants by the entirety.

In Michigan and Florida, is occupancy by the totality residential or commercial property subject to bankruptcy of one or both of the spouses?

Generally, no. In states where the partners need to act together, occupancy by the whole residential or commercial property is usually exempted from the personal bankruptcy proceedings if only one partner is the debtor of a creditor. This is true even if both spouses concurrently declare insolvency.

However, if there are joint financial institutions of both partners, collectively held residential or commercial property may be liquidated to pay joint debt.

In Michigan and Florida, when is occupancy by the entirety residential or commercial property not excused from insolvency procedures?

When the spouses transfer residential or commercial property into tenancy by the whole status within two years before the debtor-spouse files for bankruptcy (or is pushed into uncontrolled personal bankruptcy by a creditor), the residential or commercial property could be returned to the bankruptcy estate as a deceitful conveyance. If returned, the residential or commercial property will not be considered held as tenants by the whole and for that reason will not be exempt from the insolvency procedures.

Also, a partner and wife must be mindful in transferring residential or commercial property out of its occupancy by the entirety status if there is any opportunity that either partner could be based on insolvency proceedings.

Does occupancy by the entirety residential or commercial property afford protection versus financial institutions if the other half and spouse have joint debts?

No. For instance, if a couple both personally guarantee a loan, or are both mortgagees on a piece of genuine residential or commercial property, those joint lenders can connect an interest in tenancy by the whole residential or commercial property in any state. Tenancy by the totality residential or commercial property is also not exempt from insolvency to the extent of any joint debts of the partners, even if just one spouse goes through the personal bankruptcy case.

A joint debt would allow the creditor to force a partition or sale of the residential or commercial property and recuperate the proceeds to the degree of the joint debt.

Can individual residential or commercial property be held as tenants by the totality?

State courts vary on whether occupancy by totality law applies to individual residential or commercial property as well as genuine residential or commercial property.

Michigan law allows for tenancy by the whole ownership of genuine residential or commercial property, along with proceeds from genuine residential or commercial property (e.g., rents, sale proceeds). Michigan restricts ownership of individual residential or commercial property as tenancy by the entirety to just identified types, particularly: bonds, certificates of stock, mortgages, promissory notes, debentures, or other evidences of insolvency provided that the ownership includes the wording "as occupancy by the entireties." Non-binding case law has actually indicated that this might be encompassed consist of brokerage accounts. Although specific concrete individual residential or commercial property can not be held as tenancy by the entireties, holding those assets in an LLC which is titled as occupancy by the wholes might offer protection. See concern 17.

Florida law on tenancy by the whole uses to all kinds of both real and personal residential or commercial property. Florida courts have enabled savings account to held as renters by the entirety and receive full lender security, even if one partner may unilaterally draw from the joint account where the account contract grants each partner authorization to act for the other.

Can we hold membership interests in a Michigan or Florida limited liability business as renters by the totality?

Yes. Michigan specifically permits subscription interests in limited liability business to be held as renters by the entirety to the same level as real residential or commercial property. This provision pays for asset security for LLC subscription interests held as renters by the totality. Thus, it appears feasible for an LLC to hold personal residential or commercial property, including checking account, and secure those assets with occupancy by the wholes ownership of the LLC.

Florida statutes supply that an interest in an LLC is individual residential or commercial property and typically enables all real and personal residential or commercial property to be held as occupancy by the totality.

Question:

So should a husband and spouse transfer all residential or commercial property allowable to ownership as occupants by the whole?

Answer:

No, it depends upon the truths and circumstances of each client. A lawyer should review your estate plan and numerous properties and liabilities to identify what kind of ownership is best for you.

For instance, if one spouse currently has substantial lenders, transferring residential or commercial property into a tenancy by the entirety for the purpose of preventing lenders could be considered a deceptive conveyance.

Also, it may be better to hold particular assets in the name of only one spouse to limit joint liability. For instance, it may be better to hold a car driven by the couple's kid in just one spouse's name (and even the child as soon as she or he turns 18) in case of an accident that results in death or major disfigurement.