Tenancy By the Entirety??

January 10, 2009 by
Filed under: Deeds 

At your purchase closing, did your eyes started to glaze over when your lawyer began to describe tenancy in common, joint tenancy, and tenancy by the entirety? Did it get worse when he began to compare and contrast the three? Well, here in one easy to ignore article is as much as, if not more than, you ever wanted to know about tenancy by the entirety.

You may already know that joint tenancy and tenancy by the entirety both have a right of survivorship. That is, if one joint tenant or one tenant by the entirety dies, the surviving joint tenant or tenant by the entirety immediately and automatically owns the entire property. It is not necessary for the deceased person’s estate to be probated or for the surviving person to receive a deed to the deceased person’s share of the property. The death of one joint tenant or tenant by the entirety results in the automatic transfer of that person’s share to the survivor.

Tenancy by the entirety has two features which distinguish it from joint tenancy. First, only married couples who are living in the property as their primary residence may own property as tenants by the entirety. Second, property held in tenancy by the entirety is shielded from the creditors of one spouse. This second feature is the reason why many married purchasers will want to consider taking title to the property they are purchasing as tenants by the entirety. A creditor who has a judgment against one (but not both) of the owners of property that is held in tenancy by the entirety cannot force the sale of the property to pay the judgment. The creditor can record the judgment and have it act as a lien against the property for when the property is ultimately sold by the homeowners, but the creditor cannot force the sale of the home.

An Illinois appellate court has taken the idea of tenancy by the entirety as a shield against creditors a step farther. That court ruled in E.J. McKernan Company v. Gregory that even after a judgment had been entered against a husband, he and his wife could transfer their home (which was then held in joint tenancy) to themselves as tenants by the entirety. The creditor argued that the transfer of the property after the judgment was a fraudulent transfer (courts frown on fraudulent transfers and permit creditors to undo such transfers and sell the property). But the court held that because the Illinois legislature created tenancy by the entirety, and the only practical effect of tenancy by the entirety is to shield property from the creditors of one spouse, the transfer after the judgment was permitted (even though it was a fraudulent transfer!)

Purchasers of homes are not the only ones who may benefit from tenancy by the entirety. A married couple presently holding title in joint tenancy or in tenancy in common could achieve the same benefit by transferring their property from themselves to themselves in tenancy by the entirety. If you are interested in exploring further whether you should take title to property in tenancy by the entirety, you should consult with your lawyer and discuss fully the possible legal consequences.

Steven G. Evans
Attorney at Law
Phone: 847/705-5866
Fax: 847/705-5867


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