September 2010Volume 98Number 9Page 446

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Tenancy by the entirety gets a boost

Spouses no longer must choose between the protection against creditors provided by tenancy by the entirety and the estate-planning advantages of a revocable inter vivos trust.

Effective January 1, 2011, House Bill 5282 is now PA 96-1145. The new law, says Lisle lawyer Neil Golter-mann of Momkus McCluskey LLC, who assisted in drafting the legislation, means married couples will no longer have to forego the protections of holding property as tenants by the entirety to set up and fund inter vivos trusts recommended for their estate plans.

The new language

The act adds the following language to section 1c of the Joint Tenancy Act (765 ILCS 1005/1c):

Where the homestead is held in the name or names of a trustee or trustees of a revocable inter vivos trust or of revocable inter vivos trusts made by the settlors of such trust or trusts who are husband and wife, and the husband and wife are the primary beneficiaries of one or both of the trusts so created, and the deed or deeds conveying title to the homestead to the trustee or trustees of the trust or trusts specifically state that the interests of the husband and wife to the homestead property are to be held as tenants by the entirety, the estate created shall be deemed to be a tenancy by the entirety.

The new law also amends section 12-112 of the Code of Civil Procedure (735 ILCS 5/12-112). As amended, the second sentence of that section now reads as follows:

Any real property, or any beneficial interest in a land trust, or any interest in real property held in a revocable inter vivos trust or revocable inter vivos trusts created for estate planning purposes, held in tenancy by the entirety shall not be liable to be sold upon judgment entered on or after October 1, 1990 against only one of the tenants, except if the property was transferred into tenancy by the entirety with the sole intent to avoid the payment of debts existing at the time of the transfer beyond the transferor's ability to pay those debts as they become due.

"An arrow in the quiver for married couples"

Joint tenancy and tenancy by the entirety differ in fundamental respects, Goltermann notes. Any one joint tenant may encumber or transfer the property without the consent of the others. Likewise, a creditor of one joint tenant may obtain a judgment against and levy on the property. Joint tenants need not be married or otherwise related, and any sort of property, real or personal, may be held in joint tenancy.

Only married couples may hold property as tenants by the entirety in Illinois, and they may use that form of ownership only for homestead property. Tenants by the entirety may not dispose of their respective shares of their property without the consent of both. Creditors of only one spouse may obtain judgments, but they generally may not foreclose upon property that the debtor spouse holds in tenancy by the entirety.

Before the enactment of the statutory change, Goltermann says, spouses whose estate plan recommendations included the common vehicle of revocable inter vivos trusts would have to choose between their estate planner's advice and the protections against creditors that tenancy by the entirety confers. Now, married couples may take advantage of both vehicles if their circumstances warrant. "The new law is another arrow in the quiver for married couples who are doing their estate plans."

Some lawyers expressed trepidation on learning of the new law. Wrote one, "It seems to me that the nature of trust beneficiary interests and the right of survivorship attendant to tenancy by the entirety are not compatible."

Noting that Illinois law has permitted land trusts to hold property in tenancy by entirety for many years, Goltermann discounts such concerns. "If the statute says that a husband and wife can have tenancy by the entirety protection through a land trust where they don't own legal title but only a beneficial interest, the same thing can happen through an inter vivos trust." Goltermann is currently seeking input from other practitioners on appropriate wording for transfer deeds.

Practitioners can find out more about the new law from Richard F. Bales of Chicago Title Insurance at ISBA's Real Estate Update on October 15 in Bloomington. View the program and register online by visiting

Helen W. Gunnarsson is an attorney and writer in Highland Park. She can be reached at <>.

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