Property Titles: Tenants by the Entirety

A Way of Holding Title to Property in 26 States

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You can hold title to property in several different ways depending on your goals and personal circumstances. A tenancy by the entirety is one option available to spouses in some states.

It's only available to spouses and, in some jurisdictions, to same-sex partners. If you try to enter into such an ownership arrangement with someone to whom you're not married, the deed will "fail"—it can't be upheld by law.

Tenancy by the entirety isn't typically the default form of ownership when a married couple holds an asset, unless the property is real estate. This type of ownership can also be used for bank and investment accounts in the states that allow it.

Tenants by the Entirety: Who Owns What? 

Each spouse individually owns the entire property as a tenant by the entirety. Husband and wife are treated as a single legal entity. Tom and Sue Smith, a married couple, would each have a 100 percent ownership interest in the real estate if they bought property together and held title together as tenants by the entirety. 

This form of ownership prevents Tom from selling the property or, in many states, from placing a mortgage against it or using it as collateral without Sue's cooperation and consent. 

Tom's or Sue's creditors can't reach the asset, at least not for debts in just one of their names. If Tom is sued for a $50,000 unpaid debt that he contracted for in his sole name, that creditor cannot force the sale of the property or place a lien against it because it's also owned by Sue, and Sue is not a contractual party to the debt.

Of course, the property is fair game for debts that Sue and Tom might have taken out jointly. 

Tenants by the Entirety Have Rights of Survivorship 

Under tenancy by the entirety ownership, the surviving spouse immediately becomes the sole owner of the property when the other dies; that is, this form of ownership carries rights of survivorship. The property passes outside probate to the surviving spouse instead of to the deceased spouse's heirs-at-law or under the terms of an estate plan. In fact, a spouse can't legally include the property in an estate plan.

Tenants by the Entirety vs. Joint Tenants With Rights of Survivorship 

The marriage requirement is the distinct difference between a tenancy by the entirety and a joint tenancy with rights of survivorship. Most of the other provisions are the same. There's just one additional requirement for a tenancy by the entirety—that the co-owners be legally married to each other at the time they take title and that they remain married to each other throughout the period of ownership. 

A tenants-by-the-entirety situation also offers additional protection that joint tenants with rights of survivorship don't share. Neither spouse is permitted individually to transfer interest in the asset to a third party. 

Tenants by the Entirety vs. Tenants in Common

So what happens in the event of divorce? The tenancy by the entirety arrangement converts automatically and by operation of law to a tenancy in common. This is a popular and less restrictive type of ownership.

Tenants in common can hold ownership interests in different percentages. They are not necessarily "equal" co-owners, and they don't have to be married or even related to each other. Joe might own 60 percent while Sally owns 40 percent. But despite these ownership percentages, both Joe and Sally retain the right to use and enjoy the entire premises.

This type of ownership carries no rights of survivorship. Either tenant is free to dispose of or transfer his share of the property to a third party without the consent of his co-owner. If Joe sold his 60 percent ownership interest to Tom and Bill, Sally would find herself in a tenant in common arrangement with Tom and Bill even if this is not to her liking.

As a practical matter, real property would be a marital asset subject to division in family court when spouses divorce. This usually results in the property being sold or transferred into the sole ownership of one spouse or the other as part of the divorce proceedings.

What States Observe This Form of Tenancy? 

As of December 31, 2017, about half of all states—26 to be exact—recognized tenancies by the entirety, but with varying rules depending on the type of property in question. 

Alaska, Indiana, Kentucky, New York, North Carolina, Oregon, and Rhode Island reserve this type of ownership for real estate only. 

As of December 2017, the states that recognize tenancies by the entirety for all types of property are Arkansas, Delaware, Florida, Hawaii, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Tennessee, Vermont, Virginia, and Wyoming. The District of Columbia also observes tenancies by the entirety for all property.

At the other end of the spectrum, couples can only hold their homesteads as tenants by the entirety in Illinois. They can't buy and title investment real estate this way. 

In Michigan, any joint tenancy entered into by a husband and wife automatically becomes a tenancy by the entirety by virtue of their marriage.

Ohio only recognizes this type of ownership for deeds created prior to April 4, 1985. Currently purchased property cannot be owned this way. 

NOTE: State laws can change frequently. Please consult with an attorney for the most up-to-date advice if you're considering holding title to property this way. The information contained in this article is not legal advice and it is not a substitute for legal advice.