Wednesday, December 05, 2007

Tenants by the Entirety protection

An interesting case was recently reported that can serve as a reminder of the importance of using the Tenants by the Entirety (765 ILCS 1005/1c) as a method of ownership. The case is Maher v. Harris Trust and Savings Bank, No. 06-3656 out of the 7th Circuit. As you'll recall, parties must be married and use the property as their primary residence in order for Tenants by the Entireties to be appropriate.

Part of the case simply serves to exemplify the advantage of Tenancy by the Entireties...Husband had a judgment entered against him alone and then the judgment debtor attempted to collect against the marital residence and failed. That's the protection, a judgment against only one of the two spouses cannot be collected against the property owned as Tenants by the Entirety.

The other more unique aspect of this case was that the property owned by the spouses wasn't "typical" fee simple ownership in real estate but rather shares of stock in a co-op building. The judgment creditor argued that the stock was personal property and subject to turnover. The appellate court said that property maintained as a homestead may be held as Tenancy by the Entireties whether real or personal property.

Use Tenancy by the Entireties whenever possible. It has all the benefits of joint tenancy, plus the extra creditor protection. Review the deed carefully at closing. What I see a lot of is sort of the "form" deed given at closing provides for joint tenancy and if you're not reviewing everything thoroughly that's what you'll get. And in the case above what you would have gotten was a family out of their home.


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