In Illinois, holding title to a home in the form of tenancy by the entirety is a way for married couples to protect their homestead from creditors, and help ensure a smooth estate transition during a difficult time. But what does it mean to own real estate as tenants by the entirety? Who might this arrangement work for, what are the restrictions and limits involved, and is there anyone out there who can help you get a better understanding of this important real estate concept?

It’s Not Always So Easy to Split Down the Middle

Have you ever been eating an incredible meal – let’s say it’s Thanksgiving at your family’s house – only to have to squabble over the last piece of food? You know – brother and sister fight over the last dinner roll. Mom and son argue about who gets the last piece of pie. It happens to all of us. In these moments, many people often come up with a brilliant solution.

“Why not,” they propose, “just divide the last piece in half?”

So, with this plan in mind, you and your family take that last buttery, flaky baked good and split it in two. Now, of course, there’s bound to be another set of issues. For one thing, you probably didn’t actually manage to split the food exactly into two equal portions. So now, there’s going to be a debate about who gets the larger piece, and who gets the smaller one. And at the same time, there’s probably going to be other family members who swoop in like vultures at this point, asking for a nibble of your portion of the food – even though they weren’t involved in the first round of negotiations whatsoever.

It can be a lot to handle, divvying up the dinner table. Now, imagine that the stakes are even higher – imagine it’s your home.

Protecting Your Most Important Asset In a Difficult Time

While many of us would prefer to think of our “Forever Home” as an asset that we can fall back on comfortably, the reality is that there may come a time when complications arise. One owner of the property could pass away unexpectedly. Creditors could come knocking, demanding payment. In these moments, it helps to be prepared, and have a plan in place to safeguard your financial future, and your household’s current lifestyle.

In many ways, the manner by which you own your home can play a big role in determining what happens when these pressing issues come up. Here in Illinois, there are many different ways for partners or groups of people to take ownership over real estate. We break down a few common solutions – including joint tenancy and tenancy in common – on our blog, here.

In this post, we wanted to focus on one way of holding title to a property that can offer significant protections from creditors and help ease estate transitions – even though there are some limitations and restrictions attached. That form of holding is known as tenancy by the entirety.

What Does Tenancy By the Entirety Really Mean?

Tenancy by the entirety is a form of joint ownership for real estate, available only to married couples, and only for a homestead property owned by that couple. This might include a home, a condo, a land trust, or a share in a co-op. It’s important to remember that tenancy by the entirety must be specified when married partners assume ownership of the asset; it will not be assumed.

In short, you can think of tenancy by the entirety as a tool for married couples to help protect their primary residence, in several key ways. Most importantly, owning a home via tenancy by the entirety can help offer key protections from creditors in some circumstances, and can also help streamline the estate planning and transfer process.

Protection From Creditors

In a tenancy by the entirety arrangement, one spouse/owner cannot encumber, dispose of, partition, or transfer the property without the consent of the other. At the same time, both parties must agree if one partner wants to dispose of their half share of the ownership. Meanwhile, if only one spouse is in debt, creditors cannot generally foreclose on property held in tenancy by the entirety. To put it another way, a creditor of only one spouse cannot foreclose on this jointly owned property to collect the debt owed. However, it’s important to remember that tenancy by the entirety will not generally offer protection from creditors of joint debts.

Estate Planning and Transition

As with joint tenancy with rights of survivorship, property held by tenants by the entirety can be transferred outside of probate. When one co-owner passes, the survivor will be able to automatically take the title to the entire property, outside of the formal probate process. Meanwhile, as of 2011, it may be possible to employ tenancy by the entirety alongside other types of asset protection plans, including revocable living trusts, as this article from the Illinois State Bar Association points out.

Putting a Plan Into Action

It’s important to remember that when it comes to real estate in Illinois, the way your paperwork is set up can have long-term ramifications for your personal and financial future. Understanding the various ways you can hold title to property in Illinois, including tenancy by the entirety, is a key piece of the puzzle – but there is always more to discuss.

Curious about which form of ownership might be the right fit for your unique circumstances? Want to talk over all things Chicagoland real estate with an experienced legal pro? Don’t hesitate to continue the conversation with the Gunderson Law Firm.

Our attorneys and staff handle a wide range of real estate legal services, including:

  • residential and commercial purchase & sale agreements
  • mortgage conveyancing
  • litigation
  • estate planning & transitions
  • asset protection planning
  • title examinations & disputes
  • foreclosures

For families, investors, and developers alike, the Gunderson Law Firm possesses the expertise and insight necessary to make the most of your time and budget – all reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, title, and insurance industries. Drop us a line when you’re ready to learn more or to schedule your free initial consultation.