Protect Your Home From Creditors

Illinois Law permits a unique means of holding title to a married couple's residential property. When legal title to a residence is held as "Tenants by the Entirety", the residence cannot be attached by creditors, making this an attractive "asset protection device" for business owners.

The TENANCY BY THE ENTIRETY was created by the Illinois Legislature in 1994 as an additional means for married persons to hold legal title to their residence in Illinois. The Tenancy by the Entirety is similar to a joint tenancy except that it can only be between married persons and only can be used on the parties' marital residence.

The primary advantage to holding title as tenants by the entirety is that the property cannot be attached by creditors unless the judgment is entered against both spouses. This has a great significance to business owners who run the risk of having a judgment entered against them and run the risk of having their homes sold to satisfy the demands of judgment creditors.

With property held in joint tenancy, the interest of one joint tenant is subject to attachment and sale to collect on a judgment against that one joint tenant. A spouse's interest in a residence can be attached and sold to satisfy a judgment, which could leave the other spouse living in a house that is partially owned by a stranger. However, when title to the homestead is held as Tenants by the Entirety, the whole property is protected from judgments entered against either spouse as long as the property is not sold or both spouses are living. The entire homestead property held as a tenancy by the entirety is immune from execution, levy and sale in satisfaction of a judgment against either spouse with no upper value limit. This severely affects collection efforts.

In its present legal form:

  • the estate of tenancy by the entirety is available only to husband and wife who hold title to their residence jointly;

  • only property maintained or intended for maintenance as a homestead by both husband and wife together during their marriage may be held as tenants by the entirety;

  • the estate may be created by devise, conveyance, assignment or other transfer, but specific language must be used to effectively create a tenancy by the entirety;

  • the residence held as tenants by the entirety is not limited to real property, and also includes interests in a land trust or a cooperative apartment;

  • if properly established, a Tenancy by the Entirety will prevent the IRS from attaching one spouse's interest in real estate where the debt is owed by only one spouse.

Simply stated, a Tenancy by the Entirety does not allow a creditor, even the IRS, to attach an interest in real estate to collect on a debt that is owed by only one spouse. This law also affects creditors and landlords who believe that they have a means of collecting a debt against an individual.

We have been strongly urging our business clients to seriously consider transferring the title to their residences to a tenancy by the entirety to protect their homes from attachment by creditors. The firm of Bellas & Wachowski can help you transfer title to your home to take advantage of this law in a cost-effective manner. Contact George Bellas for more information relating to asset protection for the small business owner and other estate planning issues unique to the small business owner.