The Journal of The DuPage County Bar Association

Back Issues > Vol. 18 (2005-06)

Northern’s Exposure
Illinois Tenancy by the Entirety in Bank Accounts
By Jonathan T. Linnemeyer

In Illinois, only the interest of property classified as homestead property1 may be held by tenants by the entirety (TBE).2 Other jurisdictions recognize ownership of personal property such as bank accounts by TBE.3 For bank accounts, this form of ownership prevents creditors of only one spouse from claiming a right to the funds in the account.4 Illinois is among a minority of states that do not allow personal property to be held by TBE.5

Deposits in an account afforded the protections of a TBE are protected from judgments against only one spouse,6 the bankruptcy of a single spouse7 and most other debts and liabilities that only name a single spouse. However, a tax lien against a single spouse may still be executed upon TBE property.8 Although a TBE account could not be opened under the laws of the state of Illinois, there is no law that prevents an Illinois married couple from depositing funds in an account as TBE in a state that recognizes TBE accounts. This article will attempt to answer the question of whether an Illinois couple who deposits funds into an account as TBE in a state that recognizes TBE bank accounts would enjoy the same safeguards afforded property owned by TBE.

I. History

Prior to enactment of the Married Women’s Act of 1861, estates by the entireties9 were recognized in the state of Illinois.10 After the passage of the Married Women’s Act of 1861, the Illinois Supreme Court reasoned in Cooper v. Cooper11 that the premise of unity of husband and wife, which the theory of estates by the entireties was predicated upon, no longer existed because the Married Women’s Act afforded Women the same rights as their husbands to dispose of the estates without consent of the other.12 After the Illinois Supreme Court decision in Cooper, Illinois courts no longer recognized estates by the entireties.13 However, all states did not follow the jurisprudence of the Illinois Supreme Court and instead continued to recognize ownership by TBE even after the passage of the Married Women’s Act. These states subscribed to the theories that either the unity of husband and wife was not severed by the Married Women’s Act, that the Married Women’s Act only applied to property owned solely by women or that ownership by TBE stood to benefit rather than burden women.14 In 1990, Illinois again began recognizing ownership by TBE.15 The Illinois legislature adopted statutes which allow married couples to hold homestead property as TBE and exempted that property from the debts of a single spouse.16 Fortunately for Illinois creditors, the Illinois legislature has declined to extend ownership by TBE beyond homestead property.17

II. Rules

For the purposes of this article, the most significant consequence of the Illinois TBE Statutes is their failure to mention personal property as property which may be owned by TBE.18 At least 16 states and the District of Columbia have laws which give their residents the power to open bank accounts as TBE.19 In Missouri, "[a]ny deposit made in the name of two persons or the survivor thereof who are husband and wife shall be considered a tenancy by the entirety unless otherwise specified."20 Thereby, a presumption is created that money deposited in a joint account by a married couple is held by TBE. To overcome the presumption that an account is held by TBE, "[e]vidence … must be so strong, clear, positive, unequivocal and definite as to leave no doubt in the trial judge’s mind."21 Undoubtedly, it is the intention of Illinois’ neighbor to the west to shield the assets of married individuals from the creditors of their spouses.

III. Analysis – Different Approaches

The question of whether Illinois recognizes the protections afforded a bank account opened by Illinois residents in a state that recognizes bank accounts owned by TBE has not been addressed in an Illinois Court. Several principles of law and decisions from other jurisdictions offer guidance as to how an Illinois court may decide if presented with this issue.

The bankruptcy of Ronald Lurie is the source of separate disputes in Wyoming and Montana22 over the seizure of personal property claimed to be owned by Ronald Lurie and his wife Nancy as TBE. The Supreme Court of Wyoming and the Supreme Court of Montana apply different approaches to resolve the issue of what law should be applied to personal property owned by TBE which has been moved to a different jurisdiction. The Wyoming case, Lurie v. Blackwell, arose when Nancy Lurie challenged the seizure of a sculpture purchased by the Luries as TBE under the laws of the state of Missouri.23 After purchasing the sculpture, the Luries moved to Montana, and sent the sculpture to Wyoming to be sold.24 Montana does not recognize the ownership of personal property by TBE, but Wyoming does.25 The bankruptcy trustee in Lurie argued that the sculpture should be subject to seizure because the Lurie’s current domicile, Montana, does not recognize ownership of personal property by TBE.26 The Wyoming Supreme Court took an approach consistent with section 244 of the Second Restatement of the Conflict of Laws27 to settle on the proper law for determining the ownership interest in the sculpture.28 Applying § 244(2), the Court determined that Missouri law should be applied because the chattel was located in Missouri at the time of its conveyance to the Luries.29 Consequently, the sculpture was found to be held by the Luries as TBE, and therefore was not subject to execution in Ronald’s Bankruptcy.30 It is settled in at least one other jurisdiction that personal property obtained by couples as TBE will continue to retain the safeguards afforded TBE property even when the couple moves to a jurisdiction that does not recognize ownership by TBE.31

The Montana Supreme Court was also faced with the question of whether the Lurie’s personal property was subject to seizure in Ronald Lurie’s Bankruptcy.32 Specifically, the Montana Supreme Court had to determine whether personal property held by the Luries as TBE in Missouri was still held by the Luries as TBE after their move to Montana.33 The court, citing section 70-1-109 of the Montana code,34 reasoned that the law governing personal property is decided by the situs35 of the property and the domicile of the owner.36 Since the property was located in Montana, the court followed Montana law and refused to recognize ownership of the personal property by the Luries as TBE.37

The two cases illustrate different approaches that may be taken to determine the law to apply when the owners of TBE property are domiciled in a state that does not recognize ownership by TBE. The cases demonstrate that some states, such as Wyoming, apply the law of the state where the property was obtained by the owner in question,38 while other states, such as Montana, apply the law of the situs of the property and the domicile of the owner.39

The United States Court of Appeals in the Third Circuit has rendered a decision based on facts similar to the question this article attempts to answer. In High v. Balun,40 Alvin and Pauline Miller purchased a Certificate of Deposit (CD) from a New Jersey bank with funds owned jointly as TBE.41 The Millers were residents of Pennsylvania at the time they purchased the CD.42 Pennsylvania acknowledges ownership of Personal Property by TBE, but New Jersey does not.43 After the CD was purchased, a judgment was rendered against Alvin Miller. The judgment was registered in New Jersey and the CD was attached.44 The Millers protested the satisfaction of the judgment with funds from the CD, claiming that the CD was owned by them as TBE and therefore was not subject to the debts of a single spouse.45 In the lower courts, an issue arose over what conflict of law test should be used to determine whether the law of Pennsylvania or the law of New Jersey should apply.46 However, the Court of Appeals sidestepped the issue of whether to apply the law of Pennsylvania or New Jersey by deferring to a clause on the CD subjecting the instrument to the New Jersey Multiple Party Deposit Account Act. This clause effectively resolved the issue of what law should apply by settling the Miller’s rights in regards to themselves and third-parties.47

Even though the court in High v. Balun did not answer the question of whether the Pennsylvania TBE would be recognized in New Jersey, the decision clearly articulates the conflict that exists and offers guidance in regards to resolving the conflict. New Jersey relies on principles articulated in the Second Restatement of the Conflict of Laws when answering conflict of law questions.48 The Magistrate Judge first applied section 188 of the Restatement, to resolve the conflict. 49 Section 188 deals with conflicts of law that arise over contracts.50 Section 188 states that in the absence of a choice of law provision, the law of the jurisdiction with the most significant relationship to the transaction should be applied.51 Applying this standard, the Magistrate Judge determined that the law of Pennsylvania should be applied.52 After the case was remanded back to the Magistrate to conduct a hearing, the Magistrate issued a second opinion. In the second opinion, the Magistrate applied Section 258 of the Restatement53 and found that New Jersey law should apply.54 Section 258 deals with conflicts of law that arise over the interest of movable marital property.55 Section 258 advocates applying the law of the jurisdiction with the most significant relationship to the spouses and the property, placing the greatest weight on the domicile of the spouses when the property was acquired.56 Although the appellate court did not decide which approach is correct, both approaches offer guidance when determining how Illinois might decide this issue.

Another section of the Restatement that may offer guidance is Section 259.57 Section 259 deals with "[r]emoval of movables of spouses to another state".58 According to the Second Restatement of the Conflict of Laws § 259, the interests of a third-party creditor in marital personal property are determined using the law of the state where the personal property was located when the interest is claimed to have been acquired.59 This restatement section is in harmony with the approach taken by the Wyoming Supreme Court in Lurie v. Blackwell.60

In Florida, a statute governs what law is applied to bank deposits.61 [T]he disposition of a joint bank account "is governed by the law of the situs of the account regardless of the domicile of any party to the account."62 Arkansas also follows this view.63 However, Arkansas recognizes that when marital property is involved, the law of the domicile of the married couple may also be applied.64 The view that a bank account is governed by the law of the situs of the account is followed by the court in In re Gillette,65 a bankruptcy case decided in a Florida bankruptcy court. In Gillette, Cher Gillette filed for bankruptcy and sought to have Florida law applied to a money market account she owned jointly with her husband, thereby exempting it from the bankruptcy estate because it was owned jointly by them as TBE.66 The account was opened by the Gillettes in a Wisconsin banking institution while the Gillettes were residents of Florida.67 Florida recognizes bank accounts held by TBE, but Wisconsin does not.68 The court decided that the law of Wisconsin should be applied to the account because the account was located in Wisconsin.69 The court applied the choice of law rules from the state of Florida, stating that the law of the situs of the account should be applied, because the bankruptcy was filed in Florida and Florida was the domicile of Cher Gillette.70 Bankruptcy courts are split in regards to whether to apply state or federal choice of law rules.71 The application of federal choice of law rules may result in a different outcome. The Gillette decision offers hope that Illinois residents could open an account in Florida as TBE, and enjoy the safeguards afforded such an account. However, depending where the action is filed, different choice of law provisions may be followed and a different result could be obtained.

For the purposes of taxation, both the State of Illinois and the Federal Government acknowledge that the situs of intangible property is the domicile of the owner.72 This designation includes bank accounts. However, there is no Illinois authority suggesting that this concept extends beyond determining the taxing jurisdiction of personal property.73

IV. Illinois

"Illinois courts rely on the principles enunciated in the Restatement (Second) of Conflict of Laws (Restatement) in resolving conflict-of-law questions."74 The Restatement groups intangible property into two categories.75 The first category consists of intangible personal property which is "embodied in a document, such as a promissory note or a bill of exchange."76 In general, this property is "governed by the same law as the document itself."77 The other category consists of things such as "simple contracts, debts and tort claims, lack[ing] physical substance and hav[ing] no location in space. The Restatement says a state has jurisdiction to apply its local law to affect interests in such a thing if it has a sufficient relationship to the thing to make application of its law reasonable."78 A bank account falls into the second category because it is not embodied in a document, and is instead property lacking physical substance.79 Although some accounts are embodied in deposit agreements, a deposit agreement is not binding upon individuals or entities not party to the agreement. It is a bank account’s inherent lack of physical substance that creates difficulty in determining the law to which an account should be subject.

Unfortunately, what constitutes a "Sufficient Relation" has not been determined in Illinois and is not defined in the Restatement. Logically, a "Sufficient Relation" should be an easier standard to overcome than the "Most Significant Relationship" Test articulated in section 188 of the Restatement. In a dispute over the choice of law there could only be a single jurisdiction with the "Most Significant

Relationship" to certain property, but there could conceivably be multiple jurisdictions with a "Sufficient Relation".

V. Conclusion

The intangible nature of bank accounts and bank deposits complicates the determination of what law should be applied to the property. This article has articulated several different approaches to resolve this issue of whether an Illinois couple opening a bank account as TBE would enjoy the safeguards afforded TBE property.

The different approaches taken by Wyoming and Montana in Lurie v. Sheriff of Gallatin County and Lurie v. Blackwell are indicative of the controversy that exists over whether the situs of property, or the jurisdiction with the most significant relationship to property should determine what law should be applied.80 Nevertheless, these decisions offer little guidance into resolving the question presented in this article because they deal with tangible property and therefore suggest applying factors that depend on where a piece of property is physically located. Similarly, section 259 of the Restatement is equally inapplicable because it deals with movable property and not intangible property.

The approaches taken by the magistrate judge in High v. Balun are illustrative of the application of the Restatement sections pertaining to the choice of law for contracts or property. 81 Section 188, pertaining to contracts, suggests applying the most significant relationship test, while Section 258, pertaining to property, places the greatest weight on the location of the spouses when the property is acquired.82 Unfortunately, the jurisprudence of the magistrate judge should not be followed. Section 258 applies to movable personal property, not intangible personal property. Section 188 applies to contracts, but creditors as third parties, are not subject to an agreement between a depositor and his/her financial institution.

The analysis that offers the best framework for answering the question presented in this article is that of the bankruptcy court in In re Gillette.83 In Gillette, the court followed the Florida choice of law statute, which directed it apply to the law of the jurisdiction of the situs of the bank account.84 Unfortunately, every jurisdiction does not follow the logic in the Florida choice of law statute.85 Other jurisdictions may follow a standard that places more emphasis on the domicile of the owner or the place with the most significant relationship to the account. Illinois has not yet ruled on whether it will acknowledge the Florida choice of law statute, or follow another standard.

For the aforementioned reasons, the best way to ensure that the safeguards afforded TBE property will be extended to a bank account owned by TBE is to open the account in a jurisdiction with a favorable choice of law statute such as Florida, and keep significant contacts with the jurisdiction in which the account is opened.

1 Homestead property is property in possession and physically occupied by the individual claiming the property as homestead property

2 765 Ill. Comp. Stat. 1005/1c (2005) (Property can only be held in a Tenancy by the Entirety by husband and wife. The instrument that conveys the property to the husband and wife as Tenants by the Entirety must specifically state this intent in the instrument. A 2002 Amendment to the statute removed the requirement that the conveying instrument specifically states that the devisees or grantees be identified as husband and wife and that the instrument includes the language, "not as joint tenants or tenants in common but as…" P.A. 92-136, § 5).

3 See, e.g., Mo. Rev. Stat. § 362.470 (2005) (Missouri statute that creates the presumption that property deposited into a joint bank account by a husband and wife is held by the husband and wife as tenants by the entirety).

4 W.W. Allen, Annotation, Estates by the Entirety in Personal Property, 64 A.L.R.2d 8 (1959).

5 Id.

6 Illinois statute 735 Ill. Comp. Stat. 5/12-112 defines the protections afforded real property held by Illinois residents as TBE.

7 11 U.S.C. § 522 (b)(2)(B) (2004) (For the property to be exempt in bankruptcy, the debtor must take a state’s exemption that allows the property to be owned by TBE and the husband and wife cannot have jointly filed for bankruptcy).

8 U.S. v. Craft, 535 U.S. 274, 284-85 (2002).

9 Estates by the Entireties included both personal property and real property.

10 Douds v. Fresen, 64 N.E.2d 729, 730 (Ill. 1946).

11 Cooper v. Cooper, 76 Ill. 57, 63-64 (1875).

12 Id.

[T]his was all based on the theory that the husband and wife were, by the law, considered but one person, and could not have separate and conflicting property rights. But our statutes have so far changed the common law that they are not one person, so far as the acquisition and enjoyment of property is concerned.

Id. at 64.

13 Insurance Co. of N.A. v. Hofing, 29 Ill.App. 180, 182 (Ill. App. Ct. 3d. Dist. 1888) (citing Cooper).

14 E.H. Schopflocher, Annotation, Married Women’s Act as Abolishing Estates by Entireties, 141 A.L.R. 179 (2004) (Citing: Diver v. Diver, 56 Pa. 106 (1867); Robinson v. Eagle, 29 Ark. 202 (1874); Baker v. Stewart 19 P. 104 (Kan. 1888); Accord).

15 765 Ill. Comp. Stat. 1005/1c (2005); 735 Ill. Comp. Stat. 5/12-112 (2005); 750 Ill. Comp. Stat. 65/22 (2005).

16 Id.

17 Id.

18 Id.

19 Arkansas: Ark. Code Ann. § 23-32-207(3) (2005) (Accounts and Certificates of Deposit); Ark. Code Ann. §23-37-502 (2005) (Savings Accounts); Delaware: See e.g., Carlisle v. Parker, 188 A. 67 (Del 1936); The District of Columbia: See, e.g., Morrison v. Potter, 764 A.2d 234 (D.C. Cir. 2000); Flaherty v. Columbus, 41 App.D.C. 525 (D.C. Cir. 1914); Florida: Bailey v. Smith, 103 So. 833 (Fla. 1925); Hawaii: Haw. Rev. Stat. § 509-2(a) (2004); Kentucky: Saylor v. Saylor, 389 S.W.2d 904 (Ky. 1965); Maryland: Md. Code. Cts. & Jud. Proc. § 11-630(a)(1) (2005); Fairfax v. Saving Bank of Balt., 199 A. 872 (Md. 1938); Massachusetts: Childs v. Childs, 199 N.E. 383 (Mass. 1936); Michigan: Mich. Comp. Laws § 491.616 (b) (2005); Missouri: Mo. Rev. Stat. § 362.470 (2005); Oklahoma: Okla. Stat. tit. 60 § 74; Pennsylvania: In re Gallagher’s Estate, 43 A.2d 132 (Pa. 1945); Rhode Island: Bloomfield v. Brown, 25 A.2d 354 (R.I. 1942); Tennessee: See, e.g., Griffin v. Prince, 632 S.W.2d 532, 534 (Tenn. 1982); Vermont: Vt. Stat. Ann. tit. 15, § 66 (2004); Virginia: Va. Code Ann. § 55-21 (2005); Wyoming: Wyo. Stat. Ann § 340-1-140 (2005).

20 Mo. Rev. Stat. § 362.470.5 (2005).

21 Beamon v. Ross, 767 S.W.2d 580, 582 (Mo Ct. App. E.D. 1988).

22 Lurie v. Sheriff of Gallatin County, 999 P.2d 342 (Mont. 2000); Lurie v. Blackwell, 51 P.3d 846 (Wy 2002).

23 Lurie, 51 P.3d at 847.

24 Id.

25 Id.

26 Id. at 850.

27 Restatement (Second) of Conflicts of Laws § 244 (1971).

28 Lurie, 51 P.3d at 848.

29 Id.

30 Id. at 851.

31 In re Koesling, 210 B.R. 487 (Bankr N.D. Fla. 1997).

32 Lurie v. Sheriff of Gallatin County, 999 P.2d 342 (Mont. 2000).

33 Id. at 345.

34 Mont. Code Ann. § 70-1-109 (2003) ("If there is no law to the contrary in the place where personal property is situated, it is deemed to follow the person of its owner and is governed by the law of his domicile.").

35 Situs is latin for laid up, stored, positioned, situated or centered.

36 Sheriff of Gallatin, 999 P.2d at 345 (The court left open the question of what law would be applied to property located in a jurisdiction different from that of its owner, where the jurisdiction where the property is located has laws that are ‘contrary’ to the laws where the owner is domiciled).

37 Id.

38 Lurie, 51 P.3d at 849 (Court rejected the view that the situs of property should determine the law applied to the property by stating "it would seem that the validity and effect of the reservation of title in the contract of sale of personal property should be determined by the lex loci contractus, rather than the lex situs.").

39 Sheriff of Gallatin, 999 P.2d at 345

40 High v. Balun, 943 F.2d 323 (3d Cir. 1991).

41 Id. at 324.

42 Id.

43 Id. at 325.

44 Id. at 324.

45 Id.

46 High, 943 F.2d at 325-25.

47 Id. at 326.

48 Id. at 324.

49 Restatement (Second) of Conflicts of Laws § 188 (1971) (The opinion actually states that the magistrate applied section "118, the provision governing contracts," but section 118 does not deal with contracts. This is likely an error and the decision should say the Magistrate applied section 188. Section 188 deals with the law governing contracts in the absence of a choice of law by the parties).

50 Id.

51 Id. To determine the jurisdiction with the most significant relationship, the following factors are taken into consideration:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative importance with respect to the particular issue.


52 High, 943 F.2d at 324.

53 Restatement (Second) of Conflicts of Laws § 258 (1971).

54 High, 943 F.2d at 324.

55 Restatement (Second) of Conflicts of Laws § 258 (1971).

56 Id.

57 Restatement (Second) of Conflicts of Laws § 259 (1971).

58 Id.

59 Id.

A marital property interest in a chattel, or right embodied in a document, which has been acquired by either or both of the spouses, is not affected by the mere removal of the chattel or document to a second state, whether or not this removal is accompanied by a change of domicile to the other state on the part of one or both of the spouses. The interest, however, may be affected by dealings with the chattel or document in the second state.


60 Lurie, 51 P.3d at 850.

61 Fla. Stat. ch 655.55 (2005).

62 Florio v. Florio, 833 N.E.2d 587, 590 (Mass. 2005).

The law of this state, excluding its law regarding comity and conflict of laws, governs all aspects, including without limitation the validity and effect, of any deposit account in a branch or office in this state of a deposit or lending institution, including a deposit account otherwise covered by s. 671.105(1), regardless of the citizenship, residence, location, or domicile of any other party to the contract or agreement governing such deposit account, and regardless of any provision of any law of the jurisdiction of the residence, location, or domicile of such other party, whether or not such deposit account bears any other relation to this state, except that this section does not apply to any such deposit account

Fla. Stat. ch 655.55 (2005).

63 White v. Toney, 823 S.W.2d 921, 924 (Ark Ct. App. 1992).

64 Id. at 924.

65 In re Gillette, 248 B.R. 845 (Bankr. M.D. Fla. 1999).  

66 Id. at 847.

67 Id.

68 See supra note 19.

69 Gillette, 248 B.R. at 848.

70 Id.

71 Robert B. Chapman, Bankruptcy, 53 Mercer L. Rev. 1199, 1307 n.811 (2002).

72 Little Audrey’s Transp. Co. v. Beverly Bank, 236 F.Supp. 352, 353 (S.D. Ill. 1964); People v. McGraw Elec. Co. 30 N.E.2d 903, 905 (Ill. 1940).

73 McGraw, 30 N.E.2d at 905 (Decision explains that jurisdictions acknowledge intangible personal property as having a situs for the purposes of determining the jurisdiction of taxation).

74 Lake County Trust Co. v. Two Bar B, Inc., 606 N.E.2d 258, 262 (Ill. App. 1 Dist. 1992).

75 Restatement (Second) of Conflicts of Laws § 9 cmt. f (1971).

76 Id.

77 Id.

78 Id.

79 Id.

80 See supra notes 22-38.

81 See supra notes 40-52.

82 Id.

83 See supra notes 65-70.

84 Id.

85 Fla. Stat. ch 655.55 (2005).

Jonathan T. Linnemeyer is a third-year law student at Northern Illinois University and Lead Articles Editor of the Northern Illinois Law Review. Bachelor’s degree in Finance from the University of Illinois Urbana-Champaign.

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