Missouri Court of Appeals upholds bankruptcy protection provided by Tenancy of the Entireties

          Recently, Kansas City Divorce Attorney Mark Wortman posted a concise summary of a recent opinion by the Missouri Court of Appeals regarding the creditor and bankruptcy protections provided by joint ownership in the form of Tenancy by the Entireties.  In light of the current economic turmoil, this post seems extremely timely, and I have decided to provide my own summary below.

          In Missouri (but not in Kansas), married couples may hold property in special form of joint ownership called Tenancy by the Entireties. Instead of the spouses being recognized as joint tenants each holding a 50% interest in the property, Tenancy by the Entireties treats each spouse as owning an undivided 100% interest in the property. In other words, the spouses are treated as one. Under Missouri law, there is a rebuttable presumption that property jointly owned by spouses is held as a tenancy by the entirety. A party may rebut this presumption by showing that the weight of the evidence leaves no doubt that the property was not held as a tenancy by the entirety. Additionally, spouses may severe a tenancy by the entirety by consent, agreement, or acquiescence.

          As Mr. Wortman stated creditors of only one spouse, may not seek satisfaction of their debts against tenancy by the entirety property. Similarly, “tenancy by the entirety property is . . . exempt in bankruptcy provided that only one spouse is filing.” This exemption does not apply when both spouses file for bankruptcy.

          In The Capital Bank v. Barnes, the Southern District of the Missouri Court of Appeals addressed the issue of whether evidence that the day to day operations of a business were managed by only one spouse and evidence that the spouse referred to himself as the sole owner could rebut the presumption of tenancy by the entireties. Specifically, the Missouri Court of Appeals addressed whether this evidence could show acquiescence to severe the tenancy by the entireties. The Missouri Court of Appeals held that it could not. In the case, an Arkansas court entered a judgment in favor of The Capital Bank and against Mr. Barnes. The Capital Bank registered the judgment in Missouri and sought to satisfy the judgment by seizing assets jointly owned by Mr. Barnes and his wife, a restaurant.  The Missouri Court of Appeals held that even though there was evidence that Mrs. Barnes worked full-time at a local bank and evidence that Mr. Barnes managed the day to day operations of the restaurant and was listed as the sole owner with the Missouri Division of Liquor Control, the presumption of tenancy by the entireties was not rebutted. The Missouri Court of Appeals noted that there was also evidence that the property was still owned as tenancy by the entireties: the money earned from the business was deposited in a joint account held by Mr. and Mrs. Barnes as tenancy by the entireties, Mr. Barnes consulted with Mrs. Barnes on “major decisions” affecting the restaurant, and the real estate on which the restaurant was located was held by Mr. and Mrs. Barnes as tenancy by the entireties.

          After this case, it appears that Missouri courts will require substantial evidence before finding that marital property is not held as tenancy by the entirety property. In fact, it appears that one party’s actions or assertions (e.g., registering as the sole owner with the Missouri Division of Liquor Control) is not enough to rebut the presumption of tenancy by the entireties.

– ksmolawyer

Related posts:

1. Tenancy by the entireties and Missouri bankruptcy exemptions.
2. Court has broad discretion to divide property in a divorce.
3. Alimony payments terminate upon recipient’s remarriage unless expressly agreed otherwise.
4. Bankruptcy Court holds that debtor cannot protect out-of-state assets with the filing state’s exemptions
5. Personal injury settlements payable jointly to a husband and wife may NOT be marital property in a Missouri divorce