By Andrew Bellm
Owning property as “tenants by the entirety” (often abbreviated as TBE) is one of the more powerful, and sometimes misunderstood, forms of co-ownership available to married couples. It is especially relevant in asset protection planning because, under the right circumstances, it can significantly limit a creditor’s ability to reach jointly owned property.
What Tenancy by the Entirety Means
Tenancy by the entirety is a form of ownership available only to married couples. Under this structure, the law treats the spouses as a single legal unit that owns the entire property rather than as two separate owners who each hold a divisible interest.
This unity of ownership creates two important consequences.
First, neither spouse can transfer, encumber, or otherwise dispose of the property without the other’s consent. Both spouses must act together.
Second, and most importantly for asset protection purposes, property held as tenants by the entirety generally cannot be seized to satisfy the individual debts of only one spouse. In Tennessee and many other states that recognize tenancy by the entirety, a creditor of one spouse typically cannot force the sale of entirety property to satisfy that spouse’s individual obligation.
Creditor Protection Benefits
The primary benefit of tenancy by the entirety is the protection it provides against the individual creditors of either spouse.
If one spouse becomes subject to a judgment, whether from business liability, a personal guaranty, or a tort claim, that creditor generally may pursue only that spouse’s separate property. Because neither spouse owns a separate, divisible interest in entirety property, creditors typically cannot reach those assets.
This creates several practical advantages:
- Individual creditor protection: A creditor of one spouse generally cannot attach, partition, or force the sale of property held as tenants by the entirety.
- Right of survivorship: Upon the death of one spouse, ownership automatically passes to the surviving spouse without the need for probate.
- Unified ownership: As long as the marriage remains intact and the property continues to be held as tenants by the entirety, individual creditors generally must wait unless the debt is owed jointly or the property’s ownership changes.
This protection is not absolute. It generally does not apply to debts owed jointly by both spouses, certain federal tax liens, or claims involving fraudulent transfers when property is placed into tenancy by the entirety after creditors’ claims have arisen.
Tennessee’s Treatment of Tenancy by the Entirety
Tennessee recognizes tenancy by the entirety for real property owned by married couples. Property held in this manner is generally protected from the separate creditors of either spouse.
The rules are more nuanced for personal property, such as bank accounts. Certain jointly titled accounts may receive similar protection, but the result depends on how the account is established and documented.
For that reason, proper titling and documentation are critical. An error in how property is deeded or titled can unintentionally eliminate the protections that tenancy by the entirety provides.
Tenancy by the Entirety Trusts in Tennessee
A more advanced planning strategy involves tenancy by the entirety trusts. These trust arrangements are designed to preserve the creditor protection associated with tenancy by the entirety while allowing assets to be managed through a joint trust.
In Tennessee, this planning technique is commonly implemented through a joint revocable trust that is carefully drafted and funded to preserve the unified ownership characteristics of tenancy by the entirety. Assets should generally be owned as tenants by the entirety before they are transferred into the trust.
When properly structured, a tenancy by the entirety trust can preserve creditor protection while also providing additional estate planning benefits, including:
- centralized asset management,
- probate avoidance,
- coordinated distribution planning upon death,
- and potential tax planning flexibility.
Important Limitations and Practical Considerations
Although tenancy by the entirety can be a valuable asset protection tool, it is not a universal solution. Several important limitations should be considered.
- It does not protect against liabilities owed jointly by both spouses.
- It may not protect against federal tax liens or certain statutory claims.
- Transfers made to create tenancy by the entirety after creditor claims arise may be challenged under fraudulent transfer laws.
- It is available only to legally married spouses.
- Upon the death of one spouse, the surviving spouse becomes the sole owner of the property, and those assets may then become subject to the surviving spouse’s individual creditors.
In the context of trusts, courts and creditors may also examine whether the trust truly preserves the unified ownership required for tenancy by the entirety treatment. Improper drafting or administration may jeopardize the intended protections.
Conclusion
Tenancy by the entirety remains one of the most effective asset protection tools available to married couples in Tennessee for protecting property from the individual creditors of either spouse. When properly structured, it provides meaningful creditor protection while maintaining straightforward ownership.
For couples seeking additional estate planning flexibility, a properly drafted tenancy by the entirety trust may preserve many of these same protections while offering benefits such as probate avoidance and centralized asset management. Because these strategies depend heavily on proper drafting, titling, and administration, experienced legal guidance is essential to ensure the intended protections are preserved.