![]() As explained by one state’s highest court:Ī review of the jurisprudence of other states shows that it is the majority view that a renunciation under the applicable state probate code is not treated as a fraudulent transfer of assets under the UFTA, and creditors of the person making a renunciation cannot claim any rights to the renounced property in the absence of an express statutory provision to the contrary. Other than for federal tax liens, a disclaimer is typically not a transfer for fraudulent conveyance purposes in most jurisdictions. If the debtor spouse survives, however, a disclaimer may be useful to avoid the lien on that spouse’s portion of the entirety property. If the debtor spouse predeceases the non-debtor spouse, no action is necessary to have the property pass to the survivor lien free if the property is held as entireties. Ī creditor problem may exist at the first spouse’s death. This provides an opportunity to preserve the asset protection qualities of entireties without unduly compromising estate planning. ![]() Under the Internal Revenue Service’s 1997 regulations, disclaimer of the “survivorship interest” in entirety property is permitted within nine months of death (not the creation of the interest). Using the flexibility afforded by the Internal Revenue Code section 2518, an estate plan can be crafted anticipating that a qualified disclaimer will be used by a surviving spouse to fund a credit shelter or qualified terminable interest property (“QTIP”) trust. From an asset protection point of view, entireties ownership is a valuable tool that ought to be preserved. This is clearly an important benefit of the entireties form of ownership. Thus, as illustrated above, as long as bankruptcy can be postponed or avoided, transferring an entireties tenancy with only a single debtor-spouse can move the property free of the debt. ![]() The Supreme Court of Hawaii found that the conveyance could not be a fraudulent one because the creditors had no attachable interest. He and his wife conveyed their entireties property to their children. Endo, a judgment was rendered against a husband for an automobile tort. This technique is not restricted to intra-spousal transfers. When, as here, a husband and wife hold title as tenants by the entireties, the judgment creditor of the husband or of the wife has no lien against the property held as entireties, and no standing to complain of a conveyance which prevents the property from falling into his grasp. The Maryland Court of Special Appeals upheld the conveyance of the real estate despite the judgment lien against the husband: The wife thereupon signed a will containing a testamentary spendthrift trust for the benefit of her husband, and died shortly thereafter. The husband transferred his interest in their entirety property to his wife for no consideration. Edgerly, for example, a husband had a judgment lien filed against him but not against his wife. Once liability against one spouse is triggered, the at-risk spouse may transfer the property to the non-debtor spouse. The planning implication is obvious: Married individuals with exposure to liability should hold as much of their property as possible by the entireties. Generally, except in Craft situations, the full bar jurisdictions permit a debtor spouse to convey the entirety property to the non-debtor spouse or for both spouses to transfer the property to third persons without running afoul of the fraudulent conveyance statute. ![]()
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