One simple and highly effective tool for estate planning and asset protection that is often overlooked is the Estate by the Entireties. Indiana is one of just a few states that still recognizes the estate by the entireties. Indiana law outlines the specific instances in which this type of ownership can be utilized.
What is an estate by the entireties?
Essentially, it is real estate owned by husband and wife, as husband and wife. As long as the property is deeded correctly, an estate by the entireties applies to any written contract in which a husband and wife (1) purchase real estate, or (2) lease real estate with an option to purchase. The property is deemed to be owned by each spouse equally, as a whole. However, neither party’s interest is severable during the marriage. In other words, neither spouse can sell his or her individual interest in the property.
Why is an estate by the entireties a useful estate planning tool?
When someone dies and leaves property to another (typically the surviving spouse), in order to effectuate that transfer, normally you would have to prepare and execute a Warranty Deed (and in some counties, a Sales Disclosure Form). An estate by the entireties allows you to skip this process. When you have an estate by the entireties, upon the death of either spouse, the surviving spouse is considered to own the whole of all rights under the original contract from its inception. In other words, if one spouse dies, the surviving spouse automatically holds title to the entire property, without the need of a deed. The surviving spouse need only file an Affidavit of Survivorship, which essentially verifies that the couple owned the property as an estate by the entireties, and now one spouse is deceased.
What kind of asset protection does an estate by the entireties provide?
An estate by the entireties provides a unique form of asset protection. Essentially, a judgment against one spouse cannot cause the equity in the property to be subjected to attachment or a lien. So, for example, if the husband is prone to litigation, such as a businessman, an estate by the entireties would protect the equity in the marital property. However, if a judgment is entered against both the husband and wife together, which is very rare, the estate by the entireties protection would not apply. Keep in mind that once a couple divorces or one spouse dies, the estate by the entireties protection also disappears.
How do I know if I have an estate by the entireties or how do I get one?
The process is surprisingly very simple and can usually be done by a warranty deed. In order to ensure that you are adequately protected, you should always consult with a knowledgeable real estate attorney. The attorneys at GRIFFITH LAW GROUP routinely assist clients with creating estates by the entireties, executing warranty deeds and sales disclosure forms, as well as other asset protection and estate planning tools. Let us know if we can help!