Joint vs. Separate Ownership of Physician Assets


 Dr. David Marcinko MBA CMP®

J. Christopher Miller; JD


Do you remember when Andy DuFresne confronts the chief guard of his prison in The Shawshank Redemption and tells him to divert an inherited sum of money into his wife’s name? Even sixty-five years after the 1949 setting of that conversation, a common means of protecting assets from the reach of creditors is to transfer property into a spouse’s name. Assuming that the spouse is not also at substantial risk of being the target of lawsuits because of the spouse’s profession or lifestyle, it is an effective means of accomplishing that goal. Creditors with valid judgments against an individual may only attach and seize those assets owned by that individual.  Anything worth doing is worth doing right, however, and there are several pointers to structuring asset ownership in a way that maximizes its protective value.


A small number of states, such as Hawaii, Pennsylvania, and Florida, have statutes that automatically protect property jointly owned by spouses from creditors of either spouse, but often not from creditors of both spouses together. Property that benefits from this characterization is held in as a “tenancy by the entirety,” and prevents only one spouse from transferring away property that the married couple obtained together.  Again, variation in state law determines just how beneficial the formation of a “tenancy by the entirety” can be from an asset protection standpoint.  This protection comes from a public interest in the preservation of marital assets, such that one spouse’s indiscretion may not harm the position of the other spouse. 

The most significant limits to the advantage provided by the tenancies of the entirety are first, that the creditors with claims against both spouses may seize such jointly held property, and second, that upon the first death between the spouses, the property flows directly to the surviving spouse alone, who then no longer has the benefit of the creditor protection.  Moreover, in April of 2002, the U.S. Supreme Court sharply curtailed the benefit provided by tenancies by the entirety by ruling that it does not shield an asset from the federal authorities, even if the tax liability was incurred only by one spouse.[1]

Some states in the South and West are community property states, which is similar to, but not the same as, tenancy by the entirety.  Under the community property theory, all property acquired by either spouse during the residency in that state (or in some states, prior to or during the residency), will be considered jointly owned property even if titled to an individual spouse. Merely by moving to one of these community property states, a person can automatically shift assets, thus reducing the quantity of assets subject to the creditors of the wealthier spouse.


Community property and land owned as tenants-by-the-entirety is different from a third type of ownership called Joint Tenancy with Rights of Survivorship, sometimes abbreviated as “JTWROS”.  Joint tenancy with rights of survivorship may ease some burdens associated with probating a decedent’s estate, but this form of ownership is not ideal when viewed through the asset protection prism.

An alternative is to hold assets in the name of one spouse or the other, or as “tenants-in-common.”  Tenancy-in-common is best described as a situation in which each spouse owns a one-half undivided share in the property, but does not have the automatic right to full ownership at the death of the other spouse. 

Three advantages flow from this form of ownership:

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  • Neither spouse owns the property exclusively.

A creditor seizing the interest of one spouse would not have a valuable asset because it could not evict the remaining spouse, so creditors will attack these assets only as a last resort to satisfy their claims. However, a lien recorded against either fractional interest would have to be satisfied upon its sale, so that the net proceeds would be reduced by the amount of the lien.  For this reason, tenancy-in-common is only a temporary means of protecting an asset from an adverse judgment, and not quite the same as fully separate ownership.  This flaw is one reason why many estate planners recommend the funding of property into the name of a spouse or family member less vulnerable to adverse judgments.

  • If either spouse were to die, only half of the property would be subject to estate tax.

Ownership of property as tenants-in-common helps in the estate planning arena by facilitating the process of equalizing the assets held by each spouse. Changes made during 2010 and 2013 to the estate tax laws have pushed the federal estate tax exemption above $5 million, so fewer individuals (less than ½ of 1% of the general public by some estimates) will realize an actual tax savings from such planning. Even more appealing is that surviving spouses can now claim the unused exemption left behind by a deceased spouse. Estate tax concerns are now playing a much smaller role in recommending how spouses own their property.

  • A dying spouse has the ability to control how his or her interest is distributed.

In many simple Wills, all property of a spouse is given by bequest to the surviving spouse.  Such a bequest could include partial ownership interests in real estate.  If the surviving spouse is concerned about asset protection, this additional property would not be beneficial because it would easily be sacrificed to the survivor’s creditors.  One way of avoiding this result is to build an estate plan in which each spouse bequests the partial interest owned by that spouse to a trust.  At the first death between two spouses, the trust will hold the partial ownership interest for the benefit of the surviving spouse.  The trust holding the partial residence interest preserves the deterrent faced by creditors of the surviving spouse because seizure of the surviving spouse’s interest would not terminate the spouse’s right to use the land provided for in the trust.

A different set of rules applies to property held jointly by medical professionals who are not married to each other. If property is owned jointly among siblings or business associates instead of a business entity, the owners should make sure that the deed names them as tenants-in-common.  Otherwise, each successive death among the owners will shift the ownership to the survivors, and leave the family of the deceased owner with no lasting value from the owner’s investment into the property and its improvements.


Assets should be held in a way that protects them from creditors for the long term. The form of asset holdings should thus be a significant part of the discussions held with professional advisors, so that the protection lasts beyond your death or that of your spouse. Structure the protected assets so that they do not flow back to you if your spouse should pass away.  In this manner, integrated asset protection, estate planning, and financial planning unite to protect the family’s interests by extending the benefits of creditor protection for the long term.

ASSESSMENT: Your comments are appreciated.


[1] See United States v. Craft, 535 U.S. 274 (Apr. 17, 2002).

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