Michigan Bankruptcy Blog
Two years have passed since the United States Supreme Court passed down a 5-4 decision in Obergefell v. Hodges which held that same-sex couples have a fundamental right to marry under both the Due Process and Equal Protection Clauses of the Fourteenth Amendment.
The decision has far ranging implications across many areas of common and statutory law. One of the most significant areas that Obergefell impacts, is real property law. The obligations, rights, and protections afforded to people who own property jointly are often dependent on their marital status. One of the questions raised by the decision is whether same-sex couples in Michigan can own real property as tenants by the entirety and as a result whether same-sex couples are afforded the creditor protections that come with owning real property as tenants by the entirety.
The answer to this question is: Almost certainly, but the Michigan legislature needs to make some statutory updates to remove all doubt (or Michigan appellate courts need to provide some clarity by way of case opinions).
Legislative Changes Underway Following Obergefell
Since Obergefell determined that same-sex couples have a fundamental right to marry under both the Due Process and Equal Protection Clauses of the Fourteenth Amendment, the decision conflicts with a number of Michigan statutes that grant rights to those who are "married" (defined as between a man and a woman), and invalidates Michigan Constitution, Article I, which defined marriage as "the union of one man and one woman…"
The Michigan legislature is currently undergoing a process of reviewing and recommending needed reforms to constitutional and statutory provisions that were affected by the Obergefell decision.
The Michigan Law Review Commission (the "Commission") is an advisory body to the Michigan legislature which has the duty to "[e]xamine the common-law and statutes of this state and current judicial decisions for the purpose of discovering defects and anachronisms in the law and recommending needed reforms."
In reviewing the Obergefell decision’s impact, the Commission used seven keywords to identify affected constitutional and statutory provisions, including "husband(s)", "wife", "wives", "father", "mother", "marriage", and "married." These keywords identified 131 affected statutory provisions. 11 of those statutes dealing directly with tax and property implications of property owned by spouses as tenants by the entirety.
A tenancy by the entirety refers to a form of concurrent ownership enjoyed, historically, by a husband and wife. In Michigan, a tenancy by the entirety is presumptively created when husband and wife take title to real property as co-owners and a conveyance to a husband and wife creates a tenancy by the entirety unless it explicitly indicates the intention of the married couple to create some other form of tenancy.
Tenancy by the entirety grants rights of survivorship to a surviving spouse. It also provides increased protection from creditors. While common creditors of the married couple are entitled to levy upon property held by that couple as tenants by the entirety, the property is not ordinarily liable for individual debts of either spouse.
Each of the 11 statutes identified by the Commission that relate to tenants by the entirety include gender specific language such as "husband", "wife", and "husband and wife," and the Commission has determined that each needs to be changed to encompass same-sex married couples/individuals in light of the Obergefell decision.
The Commission’s general recommendation concerning these eleven statutes dealing with tenancy by the entirety was to change the "husband", "wife", and "husband and wife" gender-specific language of each statute to "spouse" or "spouses" in order to encompass same-sex married individuals/couples.
Implications of it all
While the language of each of these creditor protection statutes is currently gender-specific, the statutes as they are currently written would almost certainly not withstand a challenge under the holding in Obergefell. But until the changes have been made there is some ambiguity - albeit slight - surrounding the issue of how same-sex couples should proceed when it comes to real property transactions.
Generally speaking, it’s advisable for same-sex married couples who desire a tenancy by the entirety to use specific and somewhat repetitive language in the deed that leaves no doubt as to their intention to take title as tenants by the entirety.
No matter how specific the language, it does not guarantee a tenancy by the entirety because existing law refers to property owned by "husband and wife" rather than "a married couple" or "spouses". However, in light of the Obergefell decision, and the Commission’s proposed changes to the tenancy by the entirety related constitutional and statutory provisions, it’s hard to imagine that any court would find otherwise.
