Tenancy by the entirety is the strongest creditor shield the common law offers a married couple’s home. Available only to spouses, it treats the couple as a single “marital unity” that owns the whole, carries a right of survivorship, and forbids either spouse from alienating or encumbering the property without the other’s consent. For decades that structure kept the IRS out entirely when only one spouse owed: a creditor of one spouse simply could not reach entireties property. Then came United States v. Craft. This post walks the full post-Craft analysis — what changed, what the IRS can and cannot do, how the interest is valued, and where the real defenses still are.
Craft — the lien attaches
In United States v. Craft, 535 U.S. 274 (2002), the Supreme Court held that the § 6321 lien attaches to a liable spouse’s interest in entireties property, notwithstanding state law that immunizes such property from one spouse’s creditors. The reasoning matters: state law defines the bundle of rights a taxpayer holds — use, income, the right to exclude, survivorship, the right to consent to a sale — but federal law decides those rights are “property” reachable by the lien, and the Supremacy Clause overrides the state-law shield. Craft arose in Michigan, but its rule is national: it applies in Florida and Massachusetts just as it does everywhere, regardless of how strong the state’s entireties protection is against private creditors.
What the IRS can do — administrative versus judicial
Attachment is not the same as collection, and here the IRS’s reach is genuinely constrained. As the IRS itself set out in Notice 2003-60 after Craft, the two routes diverge sharply. Administratively, the Service can seize and sell only the taxpayer’s interest in entireties property — not the whole — and selling an undivided fractional entireties interest is so impractical that the route is rarely useful. Judicially, in a § 7403 foreclosure action, a district court has discretion to order the sale of the entire property, even over a non-liable spouse’s protected interest, under United States v. Rodgers. If the court orders that sale, the non-liable spouse must be compensated for their interest from the proceeds. So the non-liable spouse is not wiped out — and does not take 100% either; the proceeds are split.
The “no market” paradox
The intuitive defense is that an entireties interest has no separable value — you cannot sell one spouse’s interest apart from the other, so there is nothing to sell. As a matter of state property law, that is true. But under Rodgers it cuts the other way. One of the factors governing a forced sale is whether a market exists for the partial interest, and the Third Circuit, addressing entireties property directly in United States v. Cardaci, 837 F.3d 379 (3d Cir. 2017), held that because there is no real market for one spouse’s interest in an entireties home, that factor weighs in favor of selling the whole property. The unmarketability of the fractional interest is the reason § 7403 reaches the entire home, not a barrier to it. Florida law confirms the downstream point: in Grossfeld, 389 So. 3d 728 (Fla. 3d DCA 2024), a foreclosure sale severed the entireties unities, and the surplus proceeds — no longer entireties property — left 50% available to one spouse’s individual creditor.
Valuation — where the fight actually is
If the lien attaches and the whole can be sold, the decisive question becomes how much of the proceeds the government takes — that is, how the taxpayer’s interest is valued. The courts have split. Four circuits (the Second, Fifth, Ninth, and Tenth) value each spouse’s interest actuarially, accounting for life expectancy and the survivorship contingency; two (the Third and Sixth) use a flat 50/50 split; and the IRS favors 50/50. The difference is not academic. Where the liable spouse is the older one, an actuarial valuation can shrink the government’s recoverable share dramatically — sometimes to the point where a sale is not worth pursuing. Neither the Eleventh Circuit (Florida) nor the First (Massachusetts) has squarely resolved the question, which leaves room to argue for the actuarial approach where it helps.
The court’s discretion to refuse a sale
Even where the lien attaches and the whole property could be sold, § 7403 does not compel a sale in every case. Rodgers left district courts limited equitable discretion to decline a forced sale, and Cardaci put real content into it: because any survivorship valuation rests on actuarial averages, a forced sale will undercompensate a non-liable spouse who lives longer than expected, and that risk — together with the reality that money is not always an adequate substitute for a home — weighs against ordering the sale. Courts have used that discretion to refuse forced sales of entireties property or to craft alternatives, such as ordering the liable spouse to pay rent for the use of the non-liable spouse’s interest. The discretion is fact-driven and not unlimited — and it can break the other way, as in United States v. Byers (8th Cir. 2025), where a non-liable spouse’s homestead interest was held not to be the kind of vested property right that Rodgers requires compensating — but it is a genuine defense.
Survivorship — the cleanest defense, and its double edge
The most decisive contingency is mortality. Per Notice 2003-60, if the liable spouse’s interest is extinguished by operation of law at death, there is no longer an interest for the lien to attach to, and the surviving non-liable spouse takes the property unencumbered. That is the cleanest defense there is — but it is a double edge. If instead the non-liable spouse dies first, the property ceases to be held by the entirety, the liable spouse takes the entire fee, and the lien attaches to the whole property. And the defense only materializes if the IRS has not already foreclosed while both spouses were living. Severance by divorce or conveyance, meanwhile, drops the lien onto a one-half interest.
| Event | Effect on the lien and the property |
|---|---|
| Lien arises while the property is held by the entirety | Attaches to the liable spouse’s interest (Craft) |
| The liable spouse dies first | Interest extinguished; the survivor takes the home free of the lien |
| The non-liable spouse dies first | Liable spouse takes the fee; the lien attaches to the entire property |
| Divorce or conveyance (entirety severed) | The lien encumbers a one-half interest |
| § 7403 judicial sale | Whole property sold; non-liable spouse compensated for their share |
The pre-Craft reliance policy
One narrow point for older holdings: as a matter of administrative policy, the IRS will, in certain circumstances, decline to apply Craft to interests created before the decision, where third parties reasonably relied on the prior understanding that state law shielded entireties property. It is a limited carve-out, but worth checking for property and liabilities that predate 2002.
The practical takeaway
Craft ended the blanket shield, and a client should never be told the IRS simply cannot reach entireties property. But the honest assessment is not grim either: the lien attaches, yet the government’s interest is hard to value and frequently small, a court may refuse to force a sale on the equities, and the liable spouse’s death extinguishes the lien as to the home. Tenancy by the entirety remains a serious obstacle to collection — the defense simply runs through valuation, equitable discretion, and survivorship rather than through immunity. For co-owned marital property held in any other form, see the companion post.