Michigan law recognizes that a husband and wife may own real estate as tenants by the entireties. This allows the property to pass automatically to the surviving spouse upon the death of the other. In addition, creditors cannot reach the property to satisfy the debts of only one spouse. Recently, two cases have eroded the scope of the entireties tenancy.

In Tkachik v Mandeville, issued by the Michigan Supreme Court on July 27, 2010, the husband had abandoned his wife during the last 18 months of her life when she was battling breast cancer. Upon her death, her will disowned him from all of her assets. However, they owned several pieces of real estate by the entireties, which automatically passed to the husband on her death. In a 4-3 opinion, the Michigan Supreme Court held that, notwithstanding the fact that the real estate was held by the entireties and had already passed to the husband, he was liable to his wife's estate for his share of the insurance, tax and mortgage payments that she had made on the properties prior to her death. The dissent indicated that prior law did not allow for contribution for expenses of entireties property between spouses, and that the bad facts of this case should not be used to justify this extension. This is the first case under which a surviving spouse is liable for a portion of expenditures made by the deceased spouse on entireties property prior to death.

In United States v Barr, issued by the 6^th Circuit Court of Appeals on August 4, 2010, the United States had placed a tax lien arising from the husband's unpaid tax liability on property held by him and his wife by the entireties (in 2002, the U.S. Supreme Court had ruled that unlike other creditors, a federal tax lien could attach to the interest of only one spouse in an entireties estate). The United States then moved to foreclose its tax lien. The wife argued that that the United State could not force a sale of entireties property when only one spouse was liable on the debt, and that if the property was sold, she should receive more than ½ of the proceeds, because she was more likely to outlive her husband. The District Court ordered a sale and equal distribution, and on appeal, the 6^th Circuit, held (in a 2-1 vote) that the District Court ruling was appropriate. Because Michigan law provided that in the event of a sale of entireties property, or in the event of a divorce, the proceeds are split equally between the spouses, such is the correct ruling in the event of a tax foreclosure sale. The dissent pointed out that the foreclosure sale, being involuntary, should not be treated the same as a voluntary sale. It is unclear whether this case requires all future tax foreclosure cases to be resolved in the same way, or whether it is limited to the specific facts of this case (there was evidence in the cases that the wife had participated in the conveyance of some real estate out of the husband's name and into her name alone before the tax lien had been filed).

Holding property as tenants by the entireties is a longstanding method that Michigan residents use for estate purposes and to defeat the claims of creditors. These recent cases show that such is not a complete answer to either situation. The Hubbard Law Firm can offer solutions to these and other real estate issues.