South Carolina BAR Journal
SC Lawyer, January 2012, #5.
Is There a Better Way to Hold Title to Real Estate for Asset Protection Purposes?
South Carolina LawyerJanuary 2012Is There a Better Way to Hold Title to Real Estate for Asset Protection Purposes?By Shawn M. FlanaganOver the past decade, it has become increasingly popular for a married couple to own their home as "joint tenants with rights of survivorship and not as tenants in common" (JTWROS). Lawyers should consider discussing "tenants in common with a right of survivorship" (TICWROS) with their clients as an alternative to JTWROS. The reason for this added advice is that titling a home as TICWROS may afford the owners a level of protection from their creditors not available with JTWROS.
Titling a couple's home as TICWROS may afford the owners a level of protection from their creditors similar to that applicable to tenancy by the entirety (TBTE) in states like North Carolina and Florida. The protection, if it exists, has its origins in Smith v. Cutler, 366 S.C. 546, 623 S.E.2d 644 (2005), and Davis v. Davis, 75 S.E.2d 46, 223 S.C. 182, 75 S.E.2d 46 (1953). Although this article focuses on a married couple's residence, the asset protection afforded by TICWROS (if any) might also extend to other real estate and might apply to unmarried co-owners of property.
Assume for purposes of this article that either your husband-client or your wife-client is engaged in a business or profession which carries a high risk of being sued personally. Assume further that the high risk spouse is not comfortable titling their home solely in the name of the low risk spouse. Also, on the first to die, your clients want title to their home to pass outright to the survivor via a non-probate transfer.
It is important to understand the differences between the various ways to hold real estate.
Tenants by the entirety (TBTE)
According to Davis, tenants by the entirety was abolished in South Carolina in 1895. Presently, close to half the states and Washington, D.C. have some type of TBTE property interest. States that have it include North Carolina and Florida.
In the case of tenancy by the entirety, the property interest of a deceased owner passes automatically on death to the surviving owner. Use of tenancy by the entirety is limited to a husband and wife. Furthermore, neither spouse in a TBTE may unilaterally terminate the TBTE during his or her lifetime. An owner can sell his or her interest onlywith the consent of his or her spouse. In most states recognizing tenancy by the entirety, the creditors of one spouse cannot reach the entireties' property. This was true in South Carolina before 1895.
Tenants in common (TIC)
Only a decade ago, the very large majority of co-ownership of real estate in South Carolina was accomplished via tenancy in common. Upon the death of a TIC owner, his or her property interest is a probate asset and passes either by intestacy or in accordance with the deceased owner's Last Will and Testament. An owner of a property interest titled as TIC is permitted by law to convey his or her interest without the consent of any other owner. There can be more than two owners, and their ownership percentages do not have to be equal. The creditors of one owner can reach that owner's property interest.
Joint tenants with rights of survivorship (JTWROS)
Prior to 2000, the estate of joint tenancy with rights of survivorship (JTWROS) was rarely used in South Carolina because the applicable law was uncertain. An amendment to S.C. Code Section 62-2-804 in 1996 helped in some respects.