Category: Asset Protection
Tags: Spouse, Tenancy, Creditors, Real Property


New Creditor Protections for NC Properties

Posted on: January 9th, 2015
Effective January 1, 2015, property owned by married couples in North Carolina will enjoy creditor protections afforded to tenancy by the entireties property even if the property is transferred to one or more trusts. Under North Carolina law, real property held by a husband and wife as a tenancy by the entireties is protected from the creditors of each individual spouse, who cannot force a sale of the property to pay a debt. A tenancy by the entireties is created by a deed of real property to a husband and wife; this form of ownership generally has been considered to be terminated when the tenancy by the entireties property is transferred to one or more revocable living trusts owned by the husband and/or wife. Thus, though transfer to one or more revocable living trusts might allow the spouses to retain control over the property, since the trust is considered the owner of the property, the protections afforded to tenancy by the entireties property no longer apply.

However, North Carolina law now allows property transferred to a joint revocable or irrevocable trust or to each spouse’s individual revocable or irrevocable trusts to retain tenancy by the entireties creditor protections. Under the new statute, former tenancy by the entireties property transferred to one or more trusts established by either or both spouses retains immunity from the claims of the spouses’ separate creditors as long as:
 
  1. The couple remains married
  2. The property continues to be held in trust
  3. The spouses remain the beneficial owners of the property.
 
This change became effective January 1, 2015 for real property transferred to trust on or after that date.
 
Since the statute explicitly references “husband and wife,” it is not entirely clear whether same-sex couples who are legally married will be afforded the protections under the statute. However, given the recent trend in North Carolina case law regarding recognition of same-sex marriage, it seems likely that the statute will be interpreted to apply to same-sex couples as well.
Share |

Comments (0)



Post a comment
Name *
Email (will not be published)
Comment
Please enter this security code *