Tenancy By Entirety: Defined And Explained
Lauren Nowacki5-minute read
October 19, 2021
When people join together in marriage, they also join together in life – often combining finances, raising a family together and jointly owning property. One way to share ownership of a home is through a structure called tenancy by entirety.
What Is Tenancy By Entirety?
Tenancy by entirety (TBE) is a way for married couples to hold equal interest in a property as well as survivorship rights, which keep their property out of probate. It’s not 50/50 ownership. With TBE, each spouse owns 100% of the property.
Great news! Rates are still low in 2021.
Missed your chance for historically low mortgage rates in 2020? Act now!
How Does Tenancy By Entirety Work?
With both spouses having full ownership of the property under TBE, neither one can sell their share of the property or, in some states, place a lien against the property without mutual consent. Creditors cannot go after the property if only one spouse is sued for unpaid debt.
When one spouse passes away, the surviving spouse becomes the only owner of the property. The property doesn’t need to go through probate for this to happen, it happens automatically. It bypasses any heirs of the deceased spouse and the property cannot be included in estate plans, anyway. It’s important to note, skipping probate only happens when the first spouse dies. The property will go through probate when the second spouse passes or both spouses pass at the same time.
Who Qualifies For TBE?
TBE is only available to married spouses who live in places this type of ownership is legal. At the time of this writing, TBE is recognized in 25 states and Washington D.C. These are the states (and district) that recognize:
- District of Columbia
- New Jersey
- New York
- North Carolina
- Rhode Island
Each state listed above may have its own set of stipulations for TBE. For example, some states only allow TBE for real estate or homestead property only. There are states that also recognize TBE for domestic partnerships. Keep in mind that some state legislative codes use the term “husband and wife,” which could exclude same-sex couples. It’s important for same-sex couples to work with a real estate attorney to learn more about their options.
How Can Tenancy By Entirety Be Terminated?
There are a few ways TBE can be terminated and it can only be terminated with the consent (or death) of the other.
Upon the death of one spouse, the surviving spouse will become the only owner of the property, without the property going through probate. With the spouse’s passing, the TBE is terminated automatically.
If the married couple divorces, the TBE dissolves because the condition of marriage is no longer met. The terms of divorce will determine what is done with the property.
The spouses can also terminate a TBE if both parties agree to do so. It cannot be terminated by one spouse only.
Elements Of Tenancy By Entirety Ownership
There are five requirements that are commonly required for TBE ownership.
- Unity of time: The couple must take ownership of the property at the same time.
- Unity of marriage: The couple must be legally married. In some states, they can also be domestic partners.
- Unity of title: The couple must get the title by the same deed.
- Unity of interest: The couple must have equal interest in the property.
- Unity of possession: The couple must have equal control and ownership of the property.
Low rates were a big story in 2020. It was a great year to refinance!
The Pros And Cons Of Tenancy By Entirety
With any type of ownership, TBE has its advantages and disadvantages. Here are a few to consider.
Pros Of TBE
Tenancy by entirety provides limited asset protection. Creditors cannot use the property as collateral to satisfy a debt.
It prevents one spouse from putting a lien on the home or selling their ownership to a third party. It also provides the right of survivorship between spouses. That means if one spouse passes away, the other spouse becomes the sole owner of the home. The deceased spouse’s interest is not passed on to heirs.
Cons Of TBE
Since both spouses have equal, full ownership of the home, they must mutually agree on all property decisions, which can cause issues within the relationship.
While protection from creditors is an advantage, it’s important to remember that it protects the property only if the debt or judgment to satisfy is only 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, they’re no longer protected since they are the sole owner of the property.
Another disadvantage of TBE is that it is not available in all states and in the states it’s recognized, there are still limits. Some states only recognize TBE for real estate or homestead property. Some only recognize it for married couples and, even more limited, for “husbands and wives” only.
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 is not 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 are not protected from creditors as a married couple in a TBE.
One thing the two have in common is the right of survivorship. If one owner passes away, the surviving owners remain the owners 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 tenants 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.
The Bottom Line
If you’re married or, in some states in a domestic partnership, and wish to fully own the property with your spouse or partner, having survivorship rights and protection from creditors, a TBE may be a good option for you. Just make sure your state recognizes TBE and that you understand the state’s stipulations and meet the requirements. If you have more questions or wish to learn more about your state’s specific rules, consult a real estate attorney.
See What You Qualify For
Equal Opportunity Housing: What You Need To Know
Kevin Graham - October 15, 2021
Equal opportunity housing protects buyers from discrimination in housing. Learn more about what equal opportunities mean for you and how they are enforced.
Joint Tenancy: Definition, Pros And Cons
Home Buying - 6-minute read
Rachel Burris - October 26, 2021
If you’re planning to purchase property with another person, it can be tricky to share ownership rights. One potential solution for this issue is joint tenancy.