Tenancy By Entirety: Defined And Explained

When people join 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.

Let’s look at what tenancy by entirety means, as well as the pros and cons of buying a house this way.

Tenancy by entirety (TBE) is a type of ownership that allows 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, both spouses own 100% of the property.

With both spouses having full ownership of the property under TBE, neither can sell their share of the property or, in some states, place a lien against the property without mutual consent. Creditors can’t 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, as it happens automatically. It bypasses any heirs of the deceased spouse, and the property can’t be included in estate plans.

It’s important to note that skipping probate only happens when the first spouse dies. The property will go through probate when the second spouse passes away or both spouses pass at the same time.

Elements Of Tenancy By Entirety Ownership

Five requirements are commonly mandatory for TBE ownership:

1. Unity of time: The couple must take ownership of the property at the same time.
2. Unity of marriage: The couple must be legally married. In some states, they can also be domestic partners.
3. Unity of title: The couple must get the title by the same deed.
4. Unity of interest: The couple must have equal interest in the property.
5. Unity of possession: The couple must have equal control and ownership of the property.

As with any type of ownership, buying a house with TBE has its advantages and disadvantages. Here are a few to consider.

Pros Of TBE

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

Limited Asset Protection

Tenancy by entirety provides limited asset protection. Creditors can’t use the property as collateral to satisfy a debt. This applies even in the event that one of the spouses dies – under this type of ownership, the property will remain protected from claims against the deceased spouse’s estate.

Protects Each Spouse’s Ownership

TBE also 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

While TBE offers several benefits, there are also some potential drawbacks.

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 protects 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, they’re no longer protected since they’re the sole owner of the property.

There Are Limitations

Another disadvantage of TBE is that it’s not available in all states – and in the states it’s recognized, some limits exist. For example, some states only recognize TBE for real estate or homestead property. Some states only recognize it for married couples or – even more limited – for “husbands and wives.” It’s important for same-sex couples to work with a real estate attorney to learn more about how they can adjust the language of their contract to include both partners.

TBE is only available to married spouses who live in places where 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 it:

• 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

TBE can be terminated in a few ways, and it can only be terminated with the consent (or death) of the other spouse.

• Death: 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.
• Divorce: If the married couple divorces, the TBE dissolves because the condition of marriage is no longer met. The terms of divorce will determine what’s done with the property.
• Mutual agreement: The spouses can terminate a TBE if both agree to do so. It can’t be terminated by one spouse only.

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.

To further your understanding of TBE, let’s take a look at the answers to some frequently asked questions.

Who owns a property held as tenancy by entirety?

Under tenancy by entirety, both spouses own the property 100%. TBE also gives both spouses survivorship rights.

What’s the difference between joint tenancy and tenancy by entirety?

While tenancy by entirety gives both spouses 100% ownership of the property, joint tenancy provides each party 50% ownership interest. Additionally, joint tenancy doesn’t provide protection against creditors.

What happens to tenancy by entirety when a couple gets divorced?

Tenancy by entirety no longer applies when a couple divorces because this type of ownership is only available to married couples and domestic partnerships in some states. The terms of the divorce will impact what happens with the house. In instances where the individuals are keeping the house, they will become tenants in common.

If you’re married or – in some states – in a domestic partnership and wish to fully own the property with your spouse or partner while maintaining survivorship rights and protection from creditors, tenancy by entirety may be a good type of ownership 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 rules, consult a real estate attorney.

Looking to get started on your home buying journey? Start your mortgage application online today with Rocket Mortgage^®.