In these trying economic times, clients from all income backgrounds have an interest in finding out about legal structures that may safeguard their properties. The number of financial institution claims, foreclosures, and bankruptcies are greatly increasing. Clients are worried with the liability of themselves, their spouses, and their future heirs. Those who have actually collected substantial wealth over the years are seeking to make sure that the optimum amount is preserved for future generations. Others are merely attempting to hold on to everything they still have.

This issue discusses the securities available to a partner and better half by owning residential or commercial property as tenants by the whole. We hope that this background details will be helpful to you.

Tenancy by the totality is a kind of joint ownership for residential or commercial property that is held by a couple. Tenancy by the totality originates from the theory that an other half and better half represent an indivisible system. Each spouse owns an undistracted interest in the residential or commercial property. At the death of either spouse, the residential or commercial property passes to the enduring partner.

Do all states permit couples to hold residential or commercial property as occupants by the entirety?

No. Laws relating to residential or commercial property rights differ by state. Some states do not deal with married joint owners in a different way than single joint owners. The suitable law is where the residential or commercial property is situated.

Michigan and Florida both permit ownership as occupants by the totality.

What happens to the tenancy by the entirety residential or commercial property on the death of the first partner to die?

The residential or commercial property passes to the enduring spouse by law with no additional action. A design in a will (or bequest in a trust) is ineffective to transfer the residential or commercial property.

Is all residential or commercial property held jointly by couple constantly occupancy by the entirety residential or commercial property in states that allow such ownership?

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

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

Joint occupants with rights of survivorship own an undivided interest in the entire residential or commercial property, and the residential or commercial property goes by law to the making it through co-tenant at the death of the first co-tenant. Co-tenants with rights of survivorship can unilaterally look for to partition the residential or commercial property, sell the residential or commercial property, or mortgage the residential or commercial property.

How would we understand 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 couple is held as renters by the entirety. A deed or other certificate of title need to show another type of ownership (i.e., state "as tenants in common") in order to conquer this anticipation.

The law is less clear on whether the presumption uses to personal residential or commercial property. In any occasion, it is prudent to expressly specify on a deed, certificate of title, or other legal file that the couple means to hold the residential or commercial property (real or personal) as renters by the whole. You ought to consider having a lawyer evaluation all documents evidencing joint ownership of residential or commercial property to identify if it is held as tenants by the whole.

Can non-married persons own residential or commercial property as occupants by the entirety (i.e., 2 brothers, a mom and daughter, two unassociated individuals)?

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

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

No. Tenancy by the totality residential or commercial property is not included in the probate process. Creditors of the very first partner to pass away have no rights to the residential or commercial property and need not be notified when the residential or commercial property passes to the making it through spouse.

Will creditors of the enduring spouse be able to connect a lien on the residential or commercial property after the death of the very first partner?

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

Is it possible for a surviving partner with lender concerns to contradict full ownership of the residential or commercial property but still live on the residential or commercial property?

Yes. The enduring partner may disclaim the survivorship interest in tenancy by the entirety residential or commercial property within 9 months of the death of the first partner. A correctly drafted estate strategy might prevent a lien on the residential or commercial property if the debtor-spouse endures by preparing for using a certified disclaimer to money a credit shelter or qualified terminable interest residential or commercial property trust. Courts have dealt with the right to live in the residential or commercial property as income interest.

However, a few states hold that such use of a disclaimer makes up a deceitful transfer. For example, Florida restricts disclaimers when the disclaimant is insolvent at the time that the disclaimer becomes irreversible.

Does a creditor of one spouse have rights versus occupancy by the entirety residential or commercial property?

It depends upon the laws of the state.

In the majority of states that permit tenancy by the entirety residential or commercial property, including both Michigan and Florida, a husband and wife should act together to move, partition, encumber, etc any residential or commercial property held as occupants by the entirety. A financial institution of one partner does not have an attachable interest in the tenancy by the entirety residential or commercial property.

Conversely, in the minority of states, either spouse may act alone to affect the tenancy by the totality residential or commercial property (mortgage, partition, sell, etc). Tenancy by the entirety is dealt with the very same as the other kinds of joint ownership, and a lender of one spouse might attach to the extent of the debtor-spouse's interest in the residential or commercial property. This would enable a creditor to require 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 totality 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 entirety is constantly subject to a federal tax lien versus one partner, regardless of the underlying state law. The rule has been reached criminal fines and forfeits from federal criminal cases. This rule allows the Internal Revenue Service or the federal government to either: (1) administratively take and sell the taxpayer's interest in occupancy by totality residential or commercial property, or (2) foreclose the federal tax lien versus the tenancy by whole residential or commercial property. Because of the difficulty of offering the taxpayer's interest, the most likely treatment is foreclosure.

Following a hearing on a foreclosure petition, a court might purchase the sale of the whole residential or commercial property and distribute the profits equitably in between the non-debtor-spouse and the debtor-spouse (which then consists of payment to the Internal Revenue Service). Some courts value the partner and spouse's particular interests according to appropriate life spans