Marriage and Bank Accounts

Asset Protection: Protecting Bank Accounts Through Tenancy in the Entirety

September 13, 2022

Married couples need to strictly adhere to the “unities” in order to enjoy the protections afforded by Tenancy In The Entireties.

Tenancy in the what? Here in Florida, married couples can help protect their (marital) bank accounts against many creditors and judgment seekers by creating the accounts as tenants in the entireties. That means that the funds are indivisibly owned; neither spouse individually owns the property, but each spouse is “seized of the whole.”[1] This means in theory that if a judgment is obtained against one spouse, the entire account is shielded against the creditor or judgment seeker.

However, creating the account so that it truly is a tenancy in the entirety is critical, as a case I came across demonstrates:

In Smart v. City of Miami Beach, Fla., 51 F. Supp. 3d 1299 (S.D. Fla. 2014), almost a decade after getting married, the wife put her husband’s name on a bank account she owned prior to the marriage. The wife deposited her salary and other funds into the account. Later, the defendant obtained a judgment against her and attempted to garnish (i.e., seize) her assets from the bank account. The wife fought the garnishment and claimed that the account was protected as a tenancy in the entirety. In other words, that it was marital property and shielded from collection.

The federal court, applying Florida law, disagreed with her.[2] The court ruled that the bank account was not in fact a tenancy in the entirety. The court recited the rule that in Florida, in order to create a tenancy by the entireties ownership of a bank account, the following six “unities” must exist when the couple opens the account:

(1) unity of possession,

(2) unity of interest,

(3) unity of title,

(4) unity of time,

(5) survivorship, and

(6) unity of marriage.

A Florida Bar treatise spells out these unities a bit more[3]:

(1) unity of possession — the couple jointly owns and controls the account.

(2) unity of interest — the couple’s interests in the account must be identical (i.e., can’t stipulate that one party owns, say, 75% of the account, and the other owns 25%).

(3) unity of title — the interests must have originated in the same instrument.

(4) unity of time — the interests must have commenced simultaneously.

(5) survivorship — (i.e., can’t stipulate that someone other than a spouse inherits a spouse’s interest in the account upon death); and

(6) unity of marriage — the parties must be married at the time the property became titled in their joint names.

In Ms. Smart’s case, her problem was that she and her husband were not married when the account became titled in their names. The account was titled in her name before the marriage. The account was co-titled in her husband’s name afterward. Because there was no tenancy in the entireties, Ms. Smart’s contributions in the account were garnishable.

I suspect that many married couples besides Ms. Smart and her husband have joint accounts that they wrongly believe are inherently protected as a marital asset. Adding a name to an existing account after marriage is just one mistake that some married couples (like Ms. Smart) make.

Here’s another situation: Some couples might have a joint account from prior to their getting married. Maybe they lived together before marriage and commingled funds. For whatever reason they now decide to get married, don’t do anything to the bank account (other than deposit and withdraw funds), and erroneously believe that because the account is titled in their names and they’re now married, that the assets are protected.

If Ms. Smart and her husband wanted to create a tenancy in the entireties for their bank account, the better practice would have been to go to the bank together, after getting married, and create an entirely new bank account with both their names. Likewise, the couple that jointly established their account, but prior to marriage, would need to create an altogether new bank account after marriage. Again, for the requisite "unities" to exist for a tenancy in the entirety, the parties must be married at the time the property became titled in their joint names.

A couple reading this might realize, “Oh my gosh, we need to set up a new bank account!” and run off to the bank. But as will be discussed below, any such couple would be wise to make sure that at the bank they select the correct ownership option (or find another bank). There are a couple of potential pitfalls:

Pitfall 1

When setting up an account, a bank might give the couple a menu of account types to choose from: joint tenancy, tenants in the entireties, etc. If the couple has the express option of choosing a tenancy in the entireties but chooses another option, the couple may be found to have not created a tenancy in the entireties, that is, by expressly waiving that option. See In re Stephenson, 2012 WL 4896725 (Bankr. M.D. Fla. Oct. 4, 2012). In other words, if presented with the tenancy in the entireties option, the couple ought to choose that option to gain tenancy in the entireties protections.

Pitfall 2

In the Stephenson case above, the couple in question also opened an account at a second bank, which expressly stated that no tenancy in the entireties would be created. Id. Boone and Singer, authors of the aforementioned treatise, recommend that a couple in such a situation find another bank (i.e. one that will permit tenants in the entireties).

Bottom line: married couples seeking the protections afforded by tenancy in the entirety should together, at one time, in one place, create a new account after they get married. They should follow the rules of unity listed above strictly.

Finally, I want to address some misinformation I came across while researching this article.

Florida Statute §655.79 provides that when two or more persons are named on a bank account, there is a presumption that upon the death of one of the named persons, that person’s portion of the account vests in the surviving persons (unless a contract or other document expressly states otherwise).

In 2008, the Florida legislature modified the statute to include the last sentence below:

(1) Unless otherwise expressly provided in a contract, agreement, or signature card executed in connection with the opening or maintenance of an account, including a certificate of deposit, a deposit account in the names of two or more persons shall be presumed to have been intended by such persons to provide that, upon the death of any one of them, all rights, title, interest, and claim in, to, and in respect of such deposit account, less all proper setoffs and charges in favor of the institution, vest in the surviving person or persons. Any deposit or account made in the name of two persons who are husband and wife shall be considered a tenancy by the entirety unless otherwise specified in writing.

(Emphasis added.)

Three years later, an otherwise excellent 2011 Florida Bar Journal article reviewing tenancy by the entirety in Florida mentioned the change to the statute and opined: “Presumably there is no longer a requirement to establish the unities in the case of bank accounts.”[4]

I stumbled across an attorney website posting from 2011 which seemed to run with this idea and suggested that, per a “reasonable interpretation” of the statute, whether spouses were married when they opened the account no longer matters, and that a spouse can now presumably add one spouse to an account, and have the account be a tenancy by the entirety. In other words, the unities are no longer required. (As a courtesy to the law firm, I will not cite the website.) I believe this is bad information.

According to the Legislative History, the statute was amended based on a recommendation by the Florida Supreme Court in Beal Bank v. Almand and Associates, 780 So. 2d 45 (Fla. 2001).[5] In Beal Bank, a married couple had created multiple bank accounts. The overriding question was whether they had intended to create one type of account (e.g. joint tenancy with right of survivorship) or another (e.g., tenancy by the entirety). The issue was not whether unities existed when they created the accounts. For one of the accounts, the default account language specified that the account was a joint tenancy with right of survivorship. A lower court judge had (incorrectly) held that this language constituted an express disclaimer that the account was therefore not held as a tenancy by the entireties.[6] The Supreme Court disagreed and opined that the result was ambiguous, that because the couple was married, the account could also be deemed a tenancy by the entireties:

[W]e respectfully disagree that a statement that an account is held as a joint tenancy with right of survivorship constitutes an express disclaimer that it is not held as a tenancy by the entireties. As we have explained, a tenancy by the entireties is essentially a joint tenancy modified by the common-law doctrine that the husband and wife are one person.”

Id. (internal quotes removed).

In other words, under Beal Bank, if a married couple establishes an account, and the account specifies that this is a joint account with right of survivorship, then, without more, the account could also be a tenancy in the entireties, because a tenancy in the entireties is essentially a joint account with right of survivorship + marriage.

The 2008 amendment simply attempted to fix this ambiguity, and created a presumption in favor of tenancy by the entireties. But the Beal Bank court never threw away the requirement for unities. And nor does the statute. The unities were not the issue.

In other words, and as Smart v. City of Miami Beach, Fla., underscores, the unities are still required.

See also Regions Bank v. Hyman, 91 F. Supp. 3d 1234, 1250 (M.D. Fla. 2015), aff'd sub nom. Regions Bank v. G3 Tampa, LLC, 766 Fed. Appx. 772 (11th Cir. 2019) interpreting Beal Bank:

In Beal Bank, […] a creditor sought to garnish bank accounts that debtors held with their wives. The trial court dissolved the writs. The District Court of Appeal affirmed in part, reversed in part, and certified questions of great public importance. The Florida Supreme Court held that, as between the debtor and a third-party creditor (other than the financial institution into which the deposits have been made), if the signature card of the account does not expressly disclaim the tenancy by the entireties form of ownership, a presumption arises that a bank account titled in the names of both spouses is held as a tenancy by the entireties as long as the account is established by husband and wife in accordance with the unities of possession, interest, title, and time and with right of survivorship.

(Emphasis added.)

Conclusion

In sum, a married couple should not add one spouse’s name to the other spouse’s pre-existing (i.e., pre-marital) account and expect to have a tenancy by the entireties and all attendant protections. Likewise, a married couple should not expect an account they jointly owned prior to their marriage to also be protected as a tenancy by the entirety.

NOTES

[1] “When a married couple holds property as a tenancy by the entireties, each spouse is said to hold it ‘per tout,’ meaning that each spouse holds the ‘whole or the entirety, and not a share, moiety, or divisible part.’ […] Thus, property held by husband and wife as tenants by the entireties belongs to neither spouse individually, but each spouse is seized of the whole.” Beal Bank, SSB v. Almand & Associates, 780 So. 2d 45, 53 (Fla. 2001) (internal citation removed). This notion of indivisibility is founded on the common law doctrine that spouses (e.g., husband and wife) are one person. Anne Buzby-Walt, Are Florida Laws On Tenancy By The Entireties In Personalty As Clear As We Think?, FLORIDA BAR JOURNAL, Sept./Oct. 2011, at 52. https://www.floridabar.org/the-florida-bar-journal/are-florida-laws-on-tenancy-by-the-entireties-in-personalty-as-clear-as-we-think/

[2] As a complete side note, Ms. Smart had won a sexual harassment trial against the City of Miami Beach, where the jury awarded her $700,000. The honorable court subsequently ruled that the jury lacked a sufficient evidentiary basis for its decision in favor of Mrs. Smart because the harassment was not severe or pervasive, and therefore not actionable. The City then attempted to collect from Mrs. Smart its litigation costs of over $64,000. Mrs. Smart apparently negotiated with the city to pay a little over $26,000. Defendant (the city) subsequently attempted to garnish the joint bank account. In other words, Mrs. Smart was awarded $700,000, but she had to pay $26,000.

[3] The Florida Bar, 2017, Asset Protection in Florida, Chapter 2, General Exemptions From Creditors, Sam W. Boone, Jr. and Michael S. Singer, citing Beal Bank, SSB v. Almand & Associates, 780 So.2d 45, 52 (Fla. 2001), citing First National Bank of Leesburg v. Hector Supply Co., 254 So.2d 777 (Fla. 1971).

[4] Anne Buzby-Walt, Are Florida Laws On Tenancy By The Entireties In Personalty As Clear As We Think?, Florida Bar Journal, Sept./Oct. 2011, at 52. https://www.floridabar.org/the-florida-bar-journal/are-florida-laws-on-tenancy-by-the-entireties-in-personalty-as-clear-as-we-think/

[5] Florida Staff Analysis, H.B. 343, 2/18/2008.

[6] Beal Bank, 780 So. 2d at 61.

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DISCLAIMER. This article was written by Joshua Tarjan, Esq. The article is for informational purposes only and is not intended as legal advice to the reader. Reading this article creates no attorney-client relationship between the reader and the author. If the reader has a specific legal issue to address, they are urged to consult with an attorney qualified to practice law in the reader’s jurisdiction. Discussed here are general principles that may not apply to the reader. The law is full of exceptions, which may not have been discussed. The law is also subject to abruptly change. Again, the reader should not rely on any information or advice in this column.

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