Title Matters: How Property Ownership Can Be Asset Protection

By Associate Attorney Danielle Nodar

​If you live in North Carolina and are married, one of the benefits available to you is a type of property ownership known as Tenancy by the Entirety (TBE). TBE is a type of real estate ownership where the marital unit, not the individual spouses, own the property. This means that one party to the marriage cannot sell or borrow against the property without the consent of the other party.

The main benefit of TBE ownership is asset protection, as the creditors of one spouse cannot attach a lien or judgment against the TBE property. For example, if a spouse has a $10,000 judgment against him or her, the creditor will be unable to attach a judgment lien against the TBE property. This is a great way for protecting real estate from a creditor, particularly if one spouse is involved in a business or occupation where there may be a higher risk of being sued. The only exception is that federal tax liens against one spouse will attach to that spouse’s interest in the TBE property.

TBE ownership can also be an important estate planning tool as it includes survivorship rights. If one spouse passes away, the title of the TBE property automatically passes to the surviving spouse without going through probate.  Also, as ownership of the property is automatic for the surviving spouse, one spouse cannot convey TBE property in their individual will or trust to a non-spouse.

It is important to remember that a couple must be married at the time they acquire the real estate to get TBE protection.  For example, if a couple owns a house together before marriage and then gets married, the property will not automatically become TBE property. As strange as this sounds, to gain the benefits of TBE ownership, the couple would need to sign a new deed transferring the property from themselves individually to themselves as a now-married couple.

As TBE provides that the marital unit owns the property, it can be terminated under certain circumstances that impact the marriage, such as divorce or death of a spouse. If a divorced spouse or the surviving spouse has a judgment against them, it will then attach to their interest in the property.

If you have any questions about how TBE can be used in estate planning or asset protection, please call Jesson & Rains!