Tip of the Day for 12/4/2012: “More on the ‘super’ exemption

Tip of the Day for 12/4/2012: “More on the ‘super’ exemption

Tip of the Day for December 4, 2012: “More on the Super Exemption”

The “Tip of the Day” on December 2, 2012 was on the topic of what I call the “super” exemption: the exemption for real estate owned by a husband and wife as tenants by the entireties. I mentioned that a tenancy by the entireties is created when a husband and wife take title to property together by a deed which states that the grantees (the people receiving title to the property) are “husband and wife”. Here’s a little twist which could cause a problem if you aren’t aware of it. If the couple acquires a property together before they are married, the property is not owned as tenants by the entireties. That is fairly obvious because one of the requirements of creating a tenancy by the entireties is that the grantees must be married. In Indiana that means you must be legally married with a marriage license. We do not have common law marriage in Indiana. So, you may have lived together as a couple. You may even consider yourselves husband and wife and the community might assume you are married. But, you have to have that marriage license to be legally married and you have to be legally married to take title as tenants by the entireties and get the advantage of the super exemption. Now, here’s the tricky part. What if the couple acquires the property before getting married but later marries. They are now legally husband and wife; they own the property together; it is in both names. One might assume that they now own the property as tenants by the entireties. If one assumed so, one would be wrong. The property does not automatically become a tenancy by the entireties when the parties marry if they already owned the property at the time of the marriage. So, the tip of the day is: Don’t rely on the super exemption for tenancy by the entireties property if you were not married when you took title. It’s a rare situation, but becoming more common as couples live together and even buy homes together before they are married. It can be fixed. You need to make a new deed and record it after the marriage to place the property into a tenancy by the entireties and protect it from the individual creditors of the spouses.

If you have questions about bankruptcy and your exemptions, call me at (812) 727-0597 or email my office

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Justin A. Steele

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