Tenants By Entireties Exemption May Depend Upon Where Asset Located: The Case Of Unissued Corporate Stock
This post is about tenants by entireties accounts. Assume two married people living in Florida have a joint financial account. Whether the account is presumed to be an entireties accounts depends upon where the account is maintained. Accounts opened and maintained in Florida are presumed to held by the entireties. Accounts opened and maintained in other states which states to not recognize entireties ownership are not entireties accounts notwithstanding the fact that the account owners live in Florida- Florida residents cannot export entireties protection to accounts set up in other states unless the other state recognizes entireties ownership.
That’s the general rule. One of my clients had retired from IBM. He had invested over the years in a non-tax qualified stock purchase plan where the company would contribute some money to the purchase of IBM stock. He owned approximately $250,000 of IBM. The stock was titled jointly with his wife. We discussed whether the stock was owned as tenants by the entireties. The stock was not held in a brokerage account. The IBM shares have never been issued to the client. The client described his ownership as an accounting entry on IBM books; they owe him the stock.
Because this stock is not held in a financial account I could not tell the client with certainty what state’s entireties laws would apply to ownership and creditor protection. Perhaps the stock is located at the IBM physical corporate offices. Yet IB M has offices in several different states so that it would be difficult the find the stock in the company’s maze of offices. These clients stated that they had the right to request delivery of their IBM stock in physical certificates to their current residence in Florida.
In my opinion, this client does not own "stock" until the stock is issued. What this client owns is a debt receivable from IBM because IBM is obligated to issue the client stock upon request. I think a judgment creditor could garnish IBM and direct IBM to issue stock certificates to the creditor.
I suggested to the client that they ask IBM to deliver physical possession of stock certificates representing their accumulated stock account. Then, the clients should open a joint brokerage account in Florida and deposit their joint certificates in their joint account. The physical location of the stock would be clear, and the stock should be protected as a tenants by entireties asset. There no longer would be an account at IBM subject to garnishment.
