A core element of Maryland asset protection planning for married couples is holding the property as tenants by the entirety. A judgment against either the husband or the wife does not attach to the judgment debtor’s interest in entirety property. Hertz v. Mills, 166 Md. 492 (1934). A principal aspect of tenants by the entirety property is that both spouses hold the entirety and therefore neither the husband nor the wife can dispose of any part of the property without the assent of the other. Watterson v. Edgerly, 4 Md.App. 230 (1978) (The judgment debtor husband can transfer his interest in entirety property to his wife because the creditor has no attachable interest in the property).
Maryland permits tenants by the entirety for both real property holdings and for the holding of personal property such as LLC interests or brokerage accounts.
Although the Maryland cases speak of this protection aspect as an absolute characteristic of the tenancy, the U.S. Supreme Court recognized an exception. In U.S. v. Craft, 535 U.S. 274 (2002), Justice Sandra Day O’Connor held that a tax lien against one spouse would attach to that spouse’s interest in tenants by the entirety property. Although the Craft case establishes the right of foreclosure of the government’s tax liens in tenants by the entirety property when it obtains a judgment against one spouse, actual sales of tenants by the entirety residences in tax cases have been rare. [Read more…]