Married couples in Maryland often assume that once their home is titled as tenants by the entirety, it’s untouchable by a creditor chasing just one spouse. That belief is correct in most cases — but there’s one major exception that catches even careful homeowners off guard: the IRS.
A Quick Refresher on Tenancy by the Entirety
Tenancy by the entirety is a form of property ownership available only to married couples in Maryland. Instead of each spouse owning a separate share, the couple owns the property as a single legal unit, with each spouse holding an undivided interest in the whole. This structure creates two key protections: a right of survivorship when one spouse dies, and a shield against creditors who are owed money by only one spouse, not both.
For decades, Maryland families have relied on this protection to keep the family home safe if one spouse runs into business debt, a lawsuit judgment, or other individual liability.
The Exception Almost No One Expects: Federal Tax Liens
In 2002, the U.S. Supreme Court took up a case that reshaped how entirety property is treated nationwide. In United States v. Craft, 535 U.S. 274 (2002), a husband owed unpaid federal income taxes. His wife argued that because the couple’s home was held as tenants by the entirety under Michigan law (a doctrine functionally similar to Maryland’s), the IRS had no attachable interest in the property to secure the debt of one spouse alone.
The Supreme Court disagreed. It held that a spouse’s interest in entirety property — even though it cannot be sold or divided under state law — still counts as “property” or “rights to property” under federal tax lien statutes. That meant the IRS could attach a lien to the debtor spouse’s interest in the home, even though state law would have blocked an ordinary private creditor from doing the same thing.
The practical effect for Maryland couples is significant: state-law entirety protection does not extend to federal tax debt. A creditor collecting a private judgment, a credit card debt, or most business liabilities generally cannot reach entirety property tied to only one spouse — but the IRS can, and often does, in cases of unpaid federal tax liability.
Why This Matters More Than Most Couples Realize
This distinction becomes especially important for:
- Self-employed spouses or small business owners, where personal tax liability can accumulate quickly if quarterly estimated taxes are missed.
- Couples filing separately, since a tax debt attributed to one spouse individually is exactly the scenario Craft addressed.
- Estate and retirement planning, since a federal lien can complicate a refinance, sale, or inheritance long after the original tax issue arose.
Couples who assume their home is fully creditor-proof because it’s titled correctly may be surprised to learn that a federal tax problem doesn’t respect the same boundaries that protect them from private creditors.
What Maryland Couples Can Do
- Address tax issues early. Once a federal lien attaches, options narrow considerably.
- Understand what “joint” debt actually means. Entirety protection applies to separate debts of one spouse — but joint tax liabilities (for example, from a jointly filed return with a shared balance due) are treated differently from the start.
- Talk to an attorney before restructuring title. Transferring property between spouses to try to “protect” it after a tax problem has already surfaced can raise fraudulent transfer concerns, and timing matters enormously.
Where to Learn More
For a broader explanation of how tenancy by the entirety works in Maryland — including how it’s created, how it’s affected by divorce, and how it interacts with estate planning — Houlon Berman’s detailed guide on tenancy by the entirety in Maryland offers a solid foundation before you make decisions about how your property is titled.
Additional Resources
- Justia – United States v. Craft, 535 U.S. 274 (2002)
- Maryland People’s Law Library – Joint Ownership of Real Property
This article is provided for general informational purposes and does not constitute legal or tax advice. Anyone facing a federal tax lien or considering how to title marital property should consult a licensed Maryland attorney and a qualified tax professional.