What does “tenants by entirety” mean?
Tenants by entirety (TBE) is a type of legal ownership reserved for married couples, or, in some areas, domestic partners. Though usually applied to real estate, the tenancy by entirety form of ownership might sometimes be applied to other assets including bank accounts, investments, or non-real estate property.
In a tenancy by entirety situation, both spouses own the deeded property in its entirety (thus the name). That means if Roberto and Maria Gonzalez hold a TBE property, Roberto owns 100% of the property and Maria owns 100% of the property. At the same time, neither Roberto nor Maria are the sole owner of the property, which becomes important in a creditor situation. Most often, a TBE ownership means that Roberto cannot sell, mortgage, or otherwise reduce the property without Maria’s participation, and vice versa. For the purposes of a TBE agreement, Roberto and Maria are seen as a single, separate entity rather than two individual entities.
Tenancy by entirety must include certain conditions, also known as “unities.”
- Unity of possession: Both parties have joint ownership and control
- Unity of interest: Both parties have equal interest in the property
- Unity of title: Both parties claim ownership on the same legal document
- Unity of time: Both parties must take ownership at the same time
- Unity of marriage: Both parties are married to each other
- Unity (or right) of survivorship: In the event of one party’s death, the other party becomes sole owner of the property
Tenants by entirety vs. tenants in common
Another form of ownership called “tenants in common” functions similarly to tenants by entirety. Tenants in common is another way for multiple people to own the same piece of property. With tenants in common ownership, all parties have equal access and use of the property as well.
However, under tenants in common, the parties do not have to be married and the ownership does not have to be equal. One party could own 30% of the property while the other party owns 70%. Each party has control over their portion of the property individually, and could thereby sell their share without the other party’s consent.
In the case of divorce, a tenants in entirety ownership dissolves into a tenants in common type of ownership. Since this arrangement isn’t exactly ideal for both parties, divorce litigation usually helps determine compensation and reassignment of the property.
Tenants by entirety vs. joint tenants
“Joint tenants” is another type of multiple party ownership in which the owners do not have to be married. The functionality of tenants by entirety and joint tenants is quite similar, especially if the joint tenancy agreement includes a right of survivorship.
For example, couples in a committed relationship who are not legally married might buy property as joint tenants with (or without) rights of survivorship. They would enjoy many of the same rights of ownership as those under tenants by entirety, with one notable exception: joint tenants are able to transfer or sell their interest in the property to another party.
Legal protections provided by tenants by entirety
A tenants by entirety distinction provides a certain amount of legal asset protection to the owners of the property, which can be beneficial to married individuals.
As mentioned, survivorship rights protect the surviving spouse in the event of one spouse’s death. The property automatically transfers completely to the survivor without the need for probate or legal action, even if a will names other heirs to the property. If both spouses die at the same time, lawyers will determine property heirs based on the couple’s will(s) or judiciary laws.
Another important protection regards debts incurred by one party. Under tenants by entirety, property cannot be seized based on only one debtor spouse. To use the above example, if Maria incurred a debt individually, her creditors could not use the tenants by entirety property to reclaim the debt because Roberto is still a 100% owner and that would diminish his interest without cause. With the exception of federal tax liens, only debts in both owners’ names can affect their TBE property.
However, the individual debt protection of TBE ownership has limitations. If a creditor suspects that a debtor spouse assigned TBE ownership to a certain property as a way of knowingly defrauding the debt, they may fight against the TBE classification in court. Depending upon timing and legal precedence, a judge may overturn the tenancy by entirety.
States that recognize tenants by entirety
Not all states operate according to TBE, and those that do may have differing definitions or executions. For example, some wording specifies “husband” and “wife” rather than “spouse”, which could create different circumstances for same-sex married couples. State laws are subject to change, so it’s best to consult a local lawyer for the most updated TBE laws in your area.
That said, at time of writing, the following states recognize tenancy by entirety
for all types of property: Alaska, Arkansas, Delaware, Florida, Hawaii, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, Wyoming, and also the District of Columbia.
States that recognize tenancy by entirety exclusively for real estate property include Indiana, Kentucky, Michigan, New York, North Carolina, and Oregon. Illinois recognizes TBE for homestead real estate but not for investment property.
Ohio abolished tenancy by entirety on April 4, 1985, but will still recognize deeds with the TBE designation that were created prior to that date.
Advantages and disadvantages of tenants by entirety
Tenants by entirety ownership can be beneficial for some married couples, while others may find this type of ownership restricting.
Advantages to tenants by entirety:
- Equal use of the property
- Equal, complete ownership of the property
- Property protection from individual’s debt
- Automatic right of survivorship
Disadvantages to tenants by entirety:
- Only available to married couples
- Does not allow for other heirs in the event of one spouse’s death
- Cannot be included in an individual estate plan
- Loans and liens against the property require dual consent
Overall, tenancy by entirety, a type of property ownership exclusively for married couples, is one way to exercise joint ownership and tenancy over a property if recognized legally in your particular state. Consulting with legal counsel and an experienced real estate agent could help you determine if tenancy by entirety is best for your property ownership situation.
A home inspection is an examination of a home—from the foundation to the roof and many things in between—that is meant to be objective.
Interest rates determine how much it costs to borrow money, like when buying a house, or how much return you’ll receive on an investment.
An appraiser is a trained, licensed professional tasked with evaluating a property to estimate its current fair value in the marketplace.