In Illinois, a married couple can hold title to their primary residence as “tenants by the entirety.” Tenancy by the entirety is similar to joint tenancy because at the death of a spouse, the property automatically passes to the surviving spouse. However, tenancy by the entirety is distinguished from joint tenancy because (1) tenancy by the entirety can only be used for the principal residence of a married couple, (2) the property cannot be conveyed or encumbered by one spouse without the written consent of the other, and (3) the property cannot be subject to a sale to satisfy a judgment against only one spouse (the exception to this rule would be the forced sale to satisfy a tax obligation).
The primary advantage to tenancy by the entirety is that it will protect a couple’s primary residence from judgments against just one of them, including judgments arising from a spouse’s professional practice, such as law or medicine, or his or her business. Of course, if both spouses undertake a liability, such as a mortgage loan, the tenancy by the entirety will not protect the residence. Upon sale of the property held by tenancy by the entirety, the proceeds do not enjoy any special protection and can be reached by creditors.
Tenancy by the entirety is established by the Illinois Joint Tenancy Act, which was recently amended to allow for tenancy by the entirety between revocable living trusts created by a husband and wife. The property will need to be held in the names of the trustees of the living trusts, and the husband and wife are required to be the primary beneficiaries of those trusts. Before this recent amendment, couples had to choose between the protections offered by ownership as tenants by the entirety and funding their living trusts as part of their estate plans.
In order for a tenancy by the entirety to be effective, whether the property is held by the individuals or their trusts, specific language must be included in the deed that the property is to be held by tenancy by the entirety. A tenancy by the entirety will not be valid if the transfer was made with the sole intent of avoiding liabilities that existed at the time of the transfer.
The recently enacted Illinois Religious Freedom Protection and Civil Union Act permits tenancy by the entirety between parties to a civil union, as well. Again, the property must be the primary residence of the couple, the deed must include specific tenancy by the entirety language, and the property cannot be encumbered or conveyed without the written consent of both parties. As with a divorce of a married couple, upon the dissolution of a civil union, a tenancy by the entirety will become a tenancy in common, which does not have the protection of the tenancy by the entirety and which does not pass the property automatically to the survivor at the death of one party.
To take advantage of the protections afforded by tenancy by the entirety, a couple should consult an attorney.
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