What is tenancy by the entirety?

If you want to co-own a home with your spouse as one legal unit and help your family avoid probate when one of you dies, tenancy by the entirety may be worth a look. This title option, available in select states, gives each spouse 100% ownership of the same property with a built-in right of survivorship and some protection from individual creditors. Here’s how it works, where it’s allowed, and when it could be the right fit for you.

How does tenancy by the entirety work?

Tenancy by the entirety is a type of joint ownership that allows married couples to hold equal ownership interest in a property as well as survivorship rights, which keeps the property out of probate. But it's not 50/50 ownership: You own 100% of the property, and your spouse owns 100% of the property.

That means neither of you can sell your share of the property or (in some states) place a lien against the property without mutual consent. Creditors also can’t go after your property if only one spouse is sued for unpaid debt.

Let’s say one spouse dies. If so, the surviving spouse automatically becomes the sole owner of the property. The property doesn’t need to go through probate for this to happen; it bypasses the deceased spouse's heirs, and it can't be included in estate plans.

But be aware that skipping probate only applies if the first spouse dies. The property will have to go through probate when the second spouse dies, or if both spouses die at the same time.

Tenancy by the entirety example

Colin McCarthy, an associate broker at McCarthy Real Estate in Southold, New York, relates a hypothetical example of how tenancy by the entirety works.

“Let’s say a married couple, Jon and Jane, purchase a house in New York and take title together at closing," he says. "If they own it as tenants by the entirety, and Jon later passes away, the title will not be split up or tied up in probate between them on that first death. It will pass automatically to Jane, the surviving spouse.”

Another case in point involves litigation.

“Imagine that Marcus and Diana purchase a home in Virginia as tenants by the entirety. But later, Marcus is sued by one of his business creditors and loses the lawsuit. Because the home is owned by tenants by the entirety – both Marcus and Diana – the creditor cannot force the sale of their property to satisfy Marcus’ individual debt,” says Ryan Fitzgerald, a REALTOR® in Raleigh, North Carolina. “If Marcus dies, Diana will automatically be the only owner of their real estate, without having to go through the probate process.”

What are the requirements for tenancy by the entirety?

For tenancy by the entirety to be a valid form of ownership, five requirements must be met. You and your spouse must:

1. Take ownership of the property at the same time.For instance, you and your spouse must acquire your home simultaneously at the closing rather than one spouse purchasing the house before marriage and adding the other later.
2. Be legally married (or, in some states, be domestic partners). If you and your partner buy a home while you are engaged, the deed will not automatically qualify for this protection until you are legally married and re-title the property.
3. Get the title by the same deed. Both you and your spouse must be named as grantees on a single, identical legal document that transfers the property into your names.
4. Have equal interest in the property. Neither you nor your spouse can claim a 50% stake in the home. The law treats you as owning an undivided 100% interest in the property as a single unit.
5. Have equal control and ownership of the property. Your spouse cannot unilaterally choose to take out a second mortgage or sell a portion of your home’s backyard without your formal written consent.

Note that tenancy by the entirety rules can vary from state to state. For example, Florida adds “survivorship” as a sixth element, and some states recognize common-law marriage, community property laws, or domestic partnerships.

“There are such significant variations among states that it’s always best to verify your specific rights with a local real estate lawyer,” suggests Fitzgerald.

Which states allow tenancy by the entirety?

Tenancy by the entirety is not available in all states. You and your partner must be married and live in a state where this type of ownership is legal, which currently numbers 25 states and the District of Columbia.

• Alaska
• Arkansas
• Delaware
• District of Columbia
• Florida
• Hawaii
• Illinois
• Indiana
• Kentucky
• Maryland
• Massachusetts
• Michigan
• Mississippi
• Missouri
• New Jersey
• New York
• North Carolina
• North Dakota
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• Tennessee
• Vermont
• Virginia
• Wyoming

Keep in mind that roughly half of these states, including Indiana, Michigan, and New York, limit tenancy by the entirety strictly to real property, such as land and homes, rather than personal property, such as bank accounts or vehicles.

Additionally, certain states, including Illinois, impose specific conditions that limit this protection exclusively to a married couple’s primary residence rather than investment or vacation properties.

Lastly, while Ohio no longer allows new agreements of this type, it honors those established before 1985.

Carefully check your state’s laws, and consult with a real estate attorney when in doubt.

How can you end tenancy by the entirety?

Tenancy by the entirety can be terminated in a few ways, but this can only be done with the consent (or death) of the other spouse.

• Death: Upon the death of one spouse, the surviving spouse becomes the sole owner of the property, without the property going through probate. Upon the spouse's passing, the tenancy by entirety terminates automatically.
• Divorce: If the married couple divorces, the tenancy by entirety dissolves because the condition of marriage is no longer met. The terms of divorce will determine what’s done with the property, including its sale.
• Mutual agreement: The spouses can terminate a tenancy by the entirety if both agree. It can't be terminated by one spouse only.
• Joint conveyance: This occurs when you and your spouse sign a new deed that transfers your property to a different form of ownership, such as a living trust or to a third party.

Terminating tenancy by the entirety ownership usually requires recording a new deed or legal decree with your county recorder's office to reflect the property title change. Although the termination itself doesn’t end or cancel an existing mortgage, it could trigger a “due-on-sale” or alienation clause by the lender if ownership is transferred to a third party, or it may require a complete refinance to remove one spouse’s name and financial liability after a divorce.

“This is not a form of ownership that one spouse can casually undo on their own. Once a marriage ends, the title structure usually changes as well,” says McCarthy.

Pros and cons of tenancy by the entirety

As with any type of ownership, buying a house with tenancy by the entirety has its advantages and disadvantages.

Pros

Married couples who are buying a house might choose tenancy by entirety thanks to the several advantages it provides, including:

• Limited asset protection. Creditors can’t use the property as collateral to satisfy a debt. This applies even if one of the spouses dies. Under this type of ownership, the property will remain protected from claims against the deceased spouse’s estate.
• Protection for each spouse's ownership. Tenancy by the entirety also prevents one spouse from placing a lien on the home or from selling their ownership interest to a third party. And it provides the right of survivorship between spouses. That means if one spouse dies, the other spouse becomes the sole owner of the home. The deceased spouse’s interest is not passed on to heirs.
• Unified control of the property. Tenancy by the entirety ensures that both you and your spouse have an equal say in all major decisions. Neither spouse can unilaterally mortgage, sell, or lease the property without the other’s written consent.
• Estate planning simplicity. This ownership, by including an automatic right of survivorship, permits the property to transfer immediately to the surviving spouse without worrying about probate and its associated delays and costs.

Cons

While tenancy by the entirety offers several benefits, there are some potential drawbacks, such as:

• Potential to cause tension. Since both spouses have equal, full ownership of the home, they must agree on all property decisions, which can cause issues within the relationship.
• No protection against joint debt. While protection from creditors is an advantage, it’s important to remember that it safeguards the property only if the debt or judgment to satisfy is from one spouse. If the married couple shares the debt, the protection no longer applies. And if one spouse dies and the surviving spouse has debt or judgments to satisfy, the surviving spouse is no longer protected, since they're the sole owner of the property.
• There are limitations. It's not available in all states, and in those where it's recognized, some limits apply. For example, some states only recognize tenancy by the entirety for real estate or homestead property. Some states only recognize it for married couples.
• Cancellation in the event of a divorce. Once your marriage is legally dissolved, tenancy by the entirety is automatically terminated. Usually, it converts into a tenancy in common, eliminating the right of survivorship and the asset protection that previously shielded your property from individual creditors.

How does TBE compare to other types of ownership?

Tenancy by entirety is typically compared to two similar types of ownership: joint tenancy and tenants in common. Here’s how they differ.

Tenancy by entirety vs. joint tenancy

The marriage requirement is the primary distinction between TBE and joint tenancy. The people holding TBE must be married or, in some states, in a domestic partnership. Those holding a joint tenancy can be two or more people, related or not. In a TBE, both people have equal, 100% interest in the property. In a joint tenancy, all parties have an equal interest in the property, but it isn’t 100%. If two people share the joint tenancy, they both have 50% interest in the property.

With TBE, the couple is seen as one entity. In joint tenancy, joint tenants are considered separate legal entities. As separate entities, those in a joint tenancy aren’t protected from creditors as a married couple in a TBE.

One element the two have in common is the right of survivorship. If one owner passes away, the surviving owner remains the owner of the property and the property doesn’t go through probate.

Tenancy by entirety vs. tenants in common

One of the biggest differences between TBE and tenancy in common is that the latter doesn’t come with survivorship rights. If one owner passes away, their share of ownership is passed on to their heirs, not the other owners.

In the event of a divorce, a TBE agreement typically converts to a tenants in common agreement with the terms of the divorce dictating what happens to the property.

How does it compare to other ownership types?

You can explore other ownership types after reviewing the pros and cons and checking your state’s laws. Two alternative types are joint tenancy and tenancy in common.

Tenancy by entirety vs. joint tenancy

The marriage requirement is the primary distinction between tenancy by the entirety and joint tenancy. The people holding tenancy by the entirety must be married or, in some states, in a domestic partnership. Those holding a joint tenancy can be two or more people, related or not.

Also, in a tenancy by the entirety, both parties have equal 100% interests in the property. In a joint tenancy, all parties have an equal interest in the property, but it isn't 100%. If two people share a joint tenancy, each has a 50% interest in the property.

Under tenancy by the entirety, the couple is treated as a single entity. In joint tenancy, joint tenants are considered separate legal entities. As separate entities, those in a joint tenancy aren’t protected from creditors as a married couple in a tenancy by the entirety would be.

One element the two share is the right of survivorship. If one owner dies, the surviving owner remains the owner of the property, and the property doesn't go through probate.

Unmarried partners, business associates, and siblings often prefer joint tenancy because it offers survivorship rights without requiring marriage. Additionally, it offers greater flexibility, enabling you to sell or transfer your particular interest in the property more easily than tenancy by the entirety does, due to its strict unified-entity rules.

Tenancy by entirety vs. tenancy in common

One of the biggest differences between tenancy by the entirety and tenancy in common is that the latter doesn’t come with survivorship rights. If one owner dies, their share of ownership passes to their heirs, not to the other owners.

In the event of a divorce, a tenancy by the entirety agreement typically converts to a tenancy in common agreement, with the terms of the divorce dictating what happens to the property.

Those who desire to bequeath their particular share of a property to heirs other than a co-owner may prefer tenancy in common because it doesn’t include an automatic right of survivorship. It's also preferable for partners or investors who want to own unequal shares of a property, as it offers greater financial flexibility.

FAQ

To further your understanding of tenancy by the entirety, let's look at answers to some frequently asked questions.

How does tenancy by the entirety affect taxes?

For most married couples, this type of ownership is treated like other forms of co-ownership for tax purposes. It typically does not trigger a gift tax due to the unlimited marital deduction for spouses. Married couples filing jointly can access the primary home capital-gains tax exclusion of up to $500,000. For estate tax purposes, the impact of tenancy by the entirety can vary greatly depending on the respective facts and circumstances of each couple and applicable federal and state laws. It's recommended to consult a tax attorney or CPA for expert advice on this topic.

What is the main purpose of tenancy by the entirety?

The primary purpose of tenancy by the entirety is to allow married spouses to hold title together in a way that preserves survivorship and reinforces the idea of married ownership as a single legal unit. It protects the surviving spouse and keeps the title simpler upon the death of the other spouse. Tenancy by the entirety also prevents creditors from attaching an interest in a home owned as a tenancy by the entirety.

What are the responsibilities of tenants by the entirety?

Both spouses share equal responsibility for all aspects of the property, including mortgage payments, property taxes, homeowners insurance, and maintenance. Neither spouse can take action alone on major decisions, such as selling or mortgaging the property – they must agree.

What happens to tenancy by the entirety if a spouse becomes incapacitated?

Ownership does not automatically dissolve if one spouse becomes incapacitated, but the inability of both parties to participate in decision-making can effectively “lock” the property. Because this title requires mutual consent, a valid power of attorney, guardianship, or other legal authority is necessary to proceed with a sale, refinance, or transfer. Without such a designation, a court-supervised process may be required to authorize any actions, potentially leading to significant delays and legal costs during a sensitive time.

The bottom line: Tenancy by the entirety may be the right option for you

If you’re married or – in some states – in a domestic partnership and yearn to fully own the property you share with your spouse or partner, while also maintaining survivorship rights and protection from creditors, tenancy by entirety can be a good type of ownership for you. Just make sure your state recognizes tenancy by the entirety, understand your state’s rules and requirements, and weigh the pros and cons of this arrangement carefully. When in doubt, consult a real estate or tax attorney for details.

Looking to get started on your homebuying journey? Start your mortgage application online today with Rocket Mortgage.