In the event that one spouse is facing a possible lawsuit, a means of protecting that person’s assets from the reach of creditors is to transfer the assets in the name of the debtor and the debtor’s spouse as tenants by the entireties, assuming that the spouse is not also subject to the same lawsuit.
By transferring the debtor’s assets into both the debtor’s name and the spouse’s name as tenants by the entireties, the assets are protected from the debtor’s creditors (except in fraudulent transfers) because the debtor’s spouse now has ownership of the assets along with the debtor. Creditors of the debtor who are not also creditors of the spouse, cannot take assets belonging to the debtor’s spouse. The benefit to this asset protection strategy, is that the debtor still retains some control over the asset, but the asset is protected from creditors’ reach.
One should keep in mind that by transferring the debtor’s asset from the debtor to the spouse alone and not in both names as tenants by the entireties, will subject the assets to the reach of the spouse’s creditors as well as subject to reach by the spouse in the event of divorce. Therefore, transferring the assets belonging to the debtor to both the debtor and spouse as tenants by the entireties is an effective method for protecting a debtor’s assets from creditors. Contact one of our attorneys today for more information.