By: Ethan R. Okura

Back in December of 2009, my father, Sanford K. Okura, wrote an excellent article titled “Tenants by the Entirety.” It explained the pros and cons of holding property as “tenants by the entirety” as opposed to holding them in revocable trust(s). At the time, tenants by the entirety protection was only available for property owned directly by married couples or registered reciprocal beneficiaries.

The main benefit of owning property as tenants by the entirety is to protect your assets from lawsuits. Even if a creditor wins a lawsuit against one spouse or reciprocal beneficiary, the property is protected from the creditor. The creditor must have a claim and win a lawsuit against both spouses or reciprocal beneficiaries in order to take the property away from the couple or reciprocal beneficiaries.

In 2012, I wrote an article titled “Tenants by the Entirety Protection Available in Trust.” I explained how owning property in a revocable trust traditionally had other benefits that differed from the creditor protection advantages of owning property as tenants by the entirety. These advantages include avoiding probate even when the second spouse dies, avoiding conservatorship in the event of incapacity of either spouse, keeping assets in the family after both spouses pass away and minimizing estate taxes with the use of A-B revocable trusts. This often left married (or reciprocal beneficiary) estate planning clients unsure of whether to take advantage of the benefits provided by the revocable trust or stay with the safety and creditor protection of keeping their real estate in their names as tenants by the entirety. The then-relatively new law allowed married couples and reciprocal beneficiaries in Hawai‘i to put their real property in trust while retaining the creditor protection benefits of tenants by the entirety laws.

It is quite common for married clients to seek our assistance in doing estate planning with their home and other real property already owned as tenants by the entirety. However, I rarely see married couples that own personal property as tenants by the entirety. Many people are not aware that in Hawai‘i, intangible personal property, such as corporate stocks and bonds, LLC membership interests and even bank accounts can also be owned as tenants by the entirety. In some states, only real estate can be owned as tenants by the entirety. In other states, only “Homestead Property” qualifies. Some states do not have tenants by the entirety protection at all.

Married couples who own financial institution accounts jointly with rights of survivorship might be wiser to own the accounts as tenants by the entirety. Some banks do not allow holding accounts as tenants by the entirety, even though it is legal in Hawai‘i.

Hawai‘i Revised Statutes Section 509-2(a) is the actual code section that permits land or any other type of property to be held as tenants by the entirety. An interesting point about this code section is that it was actually written to abolish an inconvenient common law rule referred to as “the Straw Man.”

Under old English Common Law, the transfer of real property to joint owners required “Four Unities” in order to establish a valid joint tenancy with rights of survivorship (or the more protected status of tenants by the entirety for married couples). One of these requirements was the “Unity of Time,” meaning that the joint owners must receive their interest in the property at the same time. So, if one person already owned the property and wanted to add another person as a joint tenant, the original owner had to transfer his ownership to a “straw man” (a third party), who could then transfer it back to the original owner together with the new joint owner at the same time. This extra step would then satisfy the requirement of Unity of Time.

HRS Section 509-2(a) was written to specifically eliminate the requirement of a “straw man” by allowing the original owner to transfer the property to him or herself and the new joint owner(s) without temporarily putting it in someone else’s name first who could transfer it to them at the same time. Thankfully, legislators also specifically included “any other property” as being eligible for tenants by the entirety treatment, not just real property or one homestead property.

If you need help in determining whether your real or personal property is held as tenants by the entirety, or in setting up your estate so that your assets are protected from creditors, please see a qualified attorney for a personal assessment and recommendations specific to your situation.