Tennessee Court Holds that Asset Purchased with Entireties Funds Belongs to Surviving Spouse

Probate administration typically includes categorizing assets and property for distribution. Such decisions may lead to disputes among the beneficiaries, as in In re Estate of Fletcher (Tenn. Ct. App. May 23, 2016), appeal granted (Sept. 23, 2016). The Court of Appeals of Tennessee, in that case, decided an issue that arose during probate proceedings regarding the ownership of a certificate of deposit titled in the decedent’s name. The case raised an interesting question concerning property classification and the manner in which a tenancy by the entirety in bank funds can be terminated.

In Fletcher, the decedent and his wife had refinanced the mortgage on their home before his death. With the proceeds from the refinancing, the spouses opened a joint checking account with rights of survivorship at a bank. The decedent withdrew the money to fund a certificate of deposit that was solely in his name. When the decedent passed, his wife filed a petition to probate his will. Under the decedent’s last will and testament, the wife was to receive all of his tangible personal property. The remainder of the estate was to be divided equally among his four adult children from a previous marriage. The children contended that the CD was an estate asset because it was entitled solely in the decedent’s name, while the wife argued that since the funds used to purchase the CD were derived from a joint marital account, they should pass to her outside probate.

A tenancy by the entirety is a form of property ownership unique to married persons. Under this form of ownership, each party owns the whole, and on the death of one of the parties, the survivor takes no new title or estate because the survivor is in possession of the whole from its inception. In Tennessee, a tenancy by the entirety can be created in a deposit in a bank. Under the current laws, states are split on whether a withdrawal by one spouse divests the ownership of the other spouse, or whether the ownership is preserved.

The appeals court in Fletcher examined the history of the law in Tennessee and the rationale of each rule in other states. The appeals court ultimately concluded that money withdrawn from an entireties bank account remains impressed with the entireties provision. The court explained that in a tenancy by the entirety, each party owns the whole and that ownership interest should not suddenly cease because one spouse has withdrawn funds from a bank account. Nor should account agreements that allow the funds to be withdrawn with the signature of only one spouse be construed as evidence of consent that either spouse may terminate the entireties ownership through a unilateral withdrawal. Accordingly, the court held that the funds in the CD constituted entireties property and belonged to the wife.

Seeking advice from a qualified lawyer regarding a probate or estate issue can help you determine your legal options. The Nashville attorneys at MHPS assist clients with estate planning services and probate administration, as well as family law and personal injury cases. To discuss your legal matter with an experienced member of our team, schedule an appointment by phone at (615) 800-7096 or via our online contact form.

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