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January 21, 2025 Estate Planning

Mark R. Brown and Christopher Weeg Featured in Annual Estate Planning Supplement

Comiter Singer Partners Mark R. Brown and Christopher Weeg co-authored the article “Planning with Florida Tenancy by the Entireties” for the 26th Annual Estate Planning Supplement. Published in partnership with the Palm Beach Daily News by The Palm Beach County Estate Planning Council, Inc., this long-standing supplement features expert insights from council members and reaches an affluent readership.

The following article appeared in the issue released on Sunday, January 5, 2025 

Planning with Florida Tenancy by the Entireties

By Mark R. Brown and Christopher Weeg

Tenancy by the entireties (TBE) is a common way for Florida married couples to hold title to property to achieve simplified probate avoidance and asset protection. While TBE provides asset protection benefits, it is not a creditor protection panacea, and certain situations may necessitate a different ownership structure. Moreover, attaining TBE status may be more difficult than you think given the complicated requirements under Florida law. It is therefore essential that you are properly advised regarding TBE.

What are TBE and its benefits?

TBE is a special form of property ownership in Florida only available to married couples. Assets owned as TBE will automatically pass to the surviving spouse on the first spouse’s death and will therefore avoid probate at that time; in this regard, TBE is similar to joint tenancy with rights of survivorship (JTWROS) ownership. TBE differs from JTWROS, however, because (1) only debts or judgments incurred by both spouses (and certain federal claimants, like the IRS) can attach to TBE property, and (2) generally speaking, no portion of TBE property can be used to satisfy the debts or judgments of one spouse. Therefore, TBE is frequently used as a form of basic asset protection planning.

How to create TBE?

To create TBE property, a married couple must take title to the asset jointly at inception. A person cannot convert an account to TBE simply by adding the spouse’s name to the account. The best option is to close the original account and open a new account with both spouses as TBE owners. If the financial institution does not offer — or purports to not offer — titling as TBE, consider finding one that does or write “TBE” on the account opening paperwork and signature card. Finally, the titling of the asset should specifically state TBE and not JTWROS, which is particularly relevant for bank and brokerage accounts.

What are some TBE limitations?

Unfortunately, TBE has some critical limitations. All too often, married couples are jointly sued. For example, if one spouse is driving a car titled either in the other spouse’s name or in both spouse’s names, both spouses will be sued. In addition, the couple may work together in the same business, which likewise creates the opening for a joint lawsuit. Steps can be taken to reduce the risk for joint lawsuits, such as asset titling and using assets in a certain manner.

A significant vulnerability to TBE protection is that it ends upon the first spouse’s death when the property automatically passes to the surviving spouse, thereby subjecting it to the surviving spouse’s judgments and creditors. Likewise, TBE protection will end if the parties divorce.

Since assets owned as TBE pass to the surviving spouse by operation of law, they are not controlled by the deceased spouse’s estate plan. As a result, irrevocable trusts created under the deceased spouse’s estate plan may not be properly funded (absent a disclaimer) and the deceased spouse’s GST exemption may not be fully utilized.

What advanced structures enhance TBE asset protection?

A more creative structure is warranted when clients have significant asset protection concerns. For example, assets can be held in an LLC owned 95% as TBE and 5% by an irrevocable family trust or another party. A multi-member LLC offers strong asset protection because, under Florida law, a creditor of an LLC member is limited to obtaining a charging order against the member’s LLC interest, as opposed to the creditor’s forcing the liquidation of that interest. And importantly, this LLC structure mitigates the risk of the loss of TBE asset protection because on the first spouse’s death the multi-member status continues with the surviving spouse and the irrevocable trust as members.

Can TBE be owned in a joint trust?

Florida law is unsettled on whether assets held in a joint trust created by a married couple can enjoy TBE status. Some states (like Delaware) specifically authorize TBE trusts, but Florida does not. Transferring TBE property to a Florida joint trust, therefore, may result in a loss of TBE status and may not be advisable unless you specifically intend to end that status using a more advanced technique like a Florida Community Property Trust (FCPT).

TBE status is lost when assets are transferred to a FCPT. However, the benefits of a FCPT are potentially significant because it may allow a “double basis step-up” upon the first spouse’s death (as opposed to a step-up of only one-half of the property). You must evaluate the tradeoff between enhanced TBE asset protection and the double basis step-up.

Conclusion

TBE is a valuable tool in Florida, but you must carefully consider whether, and to what extent, it is appropriate given your asset protection and estate planning goals and whether a more advanced or alternative structure is warranted.