This is the third in the series discussing the intersection of estate planning and asset protection. This discussion features tenancy by entirety which is a form of tenancy only allowed for married couples and, where available, registered domestic partners The deed must either include the words "Harry and Wilma, tenants by entirety" or "Harry and Wilma, husband and wife". For registered domestic partners, it would be "Sally and Sara, registered domestic partners as tenanats by entirety." (No court has inerpreted the Oregon Family Fairness Act with regard to this issue yet).
If the ownership is characterized as tenancy by entirety, Oregon case law provides that the debts of one spouse cannot attach to the property unless both husband and wife (or domestic partners) are liable for the debt.
For example: Wilma's creditor obtains a judgment lien against Wilma's interest in the home she shares with Harry as tenants by entirety. In this case, the creditor cannot force the sale of the home because Harry has an one-half undivided interest in the entire home and he is not a party to the judgment. The creditor must wait to see which of Wilma or Harry dies first. If Harry is the first to die, the creditor can force the sale. If Wilma is the first to die, her creditor is out of luck.
In the event Harry and Wilma divorce, their tanancy by entirety is automatically converted to a one-half interest as tenants in common. The creditors of either Harry or Wilma can attach the property and force a sale of the one-half interest.
