What is Tenancy by the Entirety?

Definition:

Tenancy by the entirety (TBE) is a form of property ownership, available only to married couples, in which both spouses have equal and complete ownership of a property.

🤔 Understanding tenancy by the entirety

Tenancy by the entirety (TBE) is a legal arrangement in which both spouses in a married couple have equal and complete ownership of a property. More precisely, each spouse has the same ownership rights and an undivided interest in the property. Consequently, neither spouse can make decisions about selling or transferring the property without the other’s approval. When one spouse dies, the other automatically gets full ownership of the property, avoiding probate (a court process that validates wills). Since both parties equally own the property, debts that are held by only one of them can’t affect the property — i.e., they can’t lose their house because one spouse defaulted on a secured loan. Tenancy by the entirety is similar to joint tenancy. However, unlike joint tenancy, tenancy by the entirety is only available to married couples, either with marriage certificates or by common law — the laws vary by state.

Example

Imagine a married couple, Hollis and Reilly, who buy a house together. They both want to ensure that they have equal rights to the property, so they enter a tenancy by the entirety. In this arrangement, the law views Hollis and Reilly as a unified legal entity. Because of this, neither of them can transfer the property to anyone else without the other’s consent. Similarly, their individual debts don’t reflect upon their joint property. When one of them passes away, the other will get full ownership of the property. If they get divorced, the tenancy by the entirety automatically terminates and becomes a tenancy in common or joint tenancy depending on the state.

Takeaway

A tenancy by the entirety is kind of like splitting a TV with a roommate...

If you split it evenly, both of you have equal ownership over the TV and can watch it whenever either of you wants (although if you’re watching at the same time, there may be some disagreements about what to watch). If one of the roommates dies, the other one gets the TV. But assuming both stay healthy, neither one can sell their viewing rights (or the TV) without the other’s consent. Similarly, in a tenancy by the entirety, each spouse has an equal and complete interest in the joint property, neither can sell it on their own, and if one dies, the other gets it.

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What is tenancy by the entirety?

Tenancy by the entirety (TBE) is a type of legal arrangement that’s exclusively available to married couples, both by common law and with a marriage certificate (different states may have different interpretations of this).

Essentially, in a tenancy by the entirety, each spouse gets full ownership rights to a piece of property (typically real property). They each get a complete (entire) and undivided interest in the property.

This arrangement provides certain benefits, such as the right of survivorship, which means that if one spouse passes away, the other will receive full ownership of the property. By granting this right, it prevents the property in question from going to probate (an often lengthy legal process for distributing inheritances). Tenancy by the entirety also provides each spouse protection from the other’s debt obligations. Because the property is owned by the collective unit (the couple), no individual spouse can use the house as collateral for one of their individual loans, without the other’s consent.

Hypothetically, that means that if one spouse puts up the house as collateral for a loan (assuming the lender didn’t do their due diligence) and doesn’t tell the other spouse, if they default on the loan, the house can’t be taken. (However, if there’s enough evidence that a tenancy by entirety was established specifically to defraud creditors, this may be overturned by a judge.)

Although beneficial in some cases, the protections provided by a tenancy by the entirety can reduce the autonomy of each individual owner. Neither spouse can give away the property in a will (to anyone other than the surviving spouse), and they can’t just sell the property whenever they want.

There needs to be an agreement between both spouses to transfer the property to any party. This also applies to their individual interests in the property (which is the entirety of the property).

Previously, tenants by the entirety arrangements sometimes only applied to husbands and wives, but the Supreme Court ruling legalizing same sex marriage nationwide has changed the legal landscape — currently, there is some uncertainty as to how some state laws regarding tenancy by the entirety apply. (Same sex couples would be well-advised to consult with a local attorney for questions regarding property purchases or estate planning.).

To establish a tenancy by the entirety, several criteria, referred to as the “unities,” need to be met. The number of unities required for a joint tenancy can vary by state. Most of the time, they are referred to as the Four Unities (but some jurisdictions may require additional unities). The Four Unities are:

  1. The unity of possession, which states that both parties have equal ownership of the property
  2. The unity of interest, which states that the property in question is the same
  3. The unity of title, which states that the origin of the title must be the same (i.e., buying from the same seller)
  4. The unity of time, which states that the agreement was entered into at the same time

Tenancy by the entirety is very similar to joint tenancy, with the main difference being that joint tenancies are available to any two people regardless of marital status, and tenancy by the entirety is only available to married couples. Tenancy by the entirety is also not available in all states.

What is the main purpose of tenancy by entirety?

A tenancy by the entirety’s main purpose is to establish equal ownership rights and to prevent real estate or other property from going into probate after one of the owners’ deaths, aka the right of survivorship.

While it does offer protection from certain debt obligations, a judge can effectively “undo” a tenancy by the entirety if they deem the agreement was established to evade debts. Because of this, the protection may not be sufficient to rely on, but it does offer some degree of defense.

What is the difference between joint tenants and tenants by the entirety?

Joint tenants and tenants by the entirety are very similar. For the most part, they can be viewed as the same thing, except tenants by the entirety must be a married couple.

If a married couple in a tenancy by the entirety arrangement gets divorced, they’ll usually automatically become either joint tenants or tenants in common.

Furthermore, while a joint tenant can sell or transfer their interest (share) in a property without consent from the other tenant, a tenant by the entirety cannot.

Keep in mind selling an interest in the property is not the same as selling the entirety of the property itself — Neither joint tenants nor tenants by the entirety can sell off a whole house, for example, without the other’s permission.

What is the difference between tenants in common and tenants by the entirety?

In a tenants in common arrangement, both tenants do not necessarily have an equal share of the property. For example, one tenant could have a 60% share, and another could have a 40% share.

Each tenant can transfer or sell their own shares without the other tenant’s consent. Tenants in common arrangements typically do not have the right of survivorship.

Tenants by the entirety arrangements, on the other hand, always give each tenant an equal interest in the property. Plus, individual tenants cannot sell or transfer their interest without the other tenant’s consent.

Which states recognize tenancy by the entirety?

Currently, 25 states and the District of Columbia recognize tenancy by the entirety. These states include:

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

Not all of these states recognize tenancy by the entirety in precisely the same way. Some states, such as Alaska and New York, only apply tenancy by the entirety to real estate, for example.

In Michigan, any joint tenancy between a husband and a wife is automatically a tenancy by the entirety. Ohio, on the other hand, only recognizes tenancy by the entirety if the arrangement was initiated before April 4, 1985.

Because of the variations in laws, it’s always important to check your own state’s laws when entering a tenancy by the entirety.

Does tenancy by the entirety avoid probate?

Tenancy by the entirety avoids probate as long as one tenant in the agreement survives the other. When this happens, the property is immediately transferred to the surviving tenant, who then takes full ownership of it.

If both tenants pass away at the same time, the property will usually enter probate. Similarly, if one tenant dies, and then the other tenant dies later on, the property can still enter probate at that time.

What happens to tenants by the entirety after divorce?

In most cases, a divorce terminates a tenancy by the entirety arrangement. Marriage is a prerequisite to tenancy by the entirety, so when a marriage no longer exists, neither does the arrangement.

Generally, a tenancy by the entirety automatically converts into a joint tenancy or tenancy in common once the divorce is finalized.

What happens to tenants by the entirety after death?

When a tenant by the entirety dies, the surviving tenant immediately takes full ownership of the property. This is the right of survivorship. It prevents the property in question from going into probate.

However, in the case that both tenants die at the same time, the property usually will go to probate instead. There, the court will decide how to pass the property to the owners’ inheritors.

Similarly, if one tenant dies, and then the other dies sometime later, the property usually will go into probate since there is no remaining survivor to pass the property to (assuming they didn’t remarry and enter another tenancy by the entirety).

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Updated September 30, 2020

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