You can hold title to property in several ways, depending on your goals and personal circumstances. A tenancy by the entirety (TBE) is one option that's available to married couples in some states.
It's only available to spouses and, in some jurisdictions, to domestic partners. The deed will "fail"—it can't be upheld by law—if you try to enter into such an ownership arrangement with someone to whom you're not married, or if your state doesn't recognize this provision for registered domestic partnerships and you want to hold title to property in this way with your partner.
Many states still use the terms "husband" and "wife," rather than "spouses," in their legislative codes. Same-sex spouses should consult with a legal professional to find out if their state is one of them and to add additional language to their deeds to clarify that they intend to hold the property as tenants by the entirety.
Tenancy by the entirety isn't usually 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 states that allow it.
Common Elements of TBE Ownership
Five rules govern TBE ownership. These conditions are known as "unities" and they must exist for a TBE deed to be valid:
- Unity of possession: Spouses have joint ownership and control of the premises.
- Unity of interest: Neither spouse's interest in the property is superior to that of the other.
- Unity of title: Both spouses receive title to the property via the same deed.
- Unity of time: Ownership of the property must be taken by both spouses simultaneously.
- Unity of marriage: In most states, spouses must be married at the time they acquire the property. Some states recognize domestic partnerships for this purpose. The property might automatically convert to a TBE in some states if unmarried partners acquire it then subsequently marry.
Tenants by the Entirety: Who Owns What?
Each spouse individually owns the entire property, and they have joint control over it as tenants 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% ownership interest in the real estate if they bought the 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 or other collateral lien against it without Sue's cooperation and consent.
TBEs and Creditors
Tom's or Sue's creditors typically can't reach the asset, at least not for debts that are 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 isn't a contractual party to the debt.
Of course, the property is fair game for debts that Sue and Tom might have taken out jointly, and federal tax liens are also an exception to the rule.
Creditors can take the matter up with a court if they have reason to believe that the TBE was formed in an attempt to defraud them and save the property from one spouse's debts. It's possible in this case that TBE provisions could be overturned by a judge.
Tenants by the Entirety Have Rights of Survivorship
The surviving spouse immediately becomes the sole owner of the property when the other spouse dies. TBE ownership is said to carry "rights of survivorship."
The property passes outside probate to the surviving spouse rather than to the deceased spouse's heirs or under the terms of the decedent's estate plan. In fact, a spouse can't legally include TBE property in an estate plan because of this survivorship provision.
The property escapes probate only when the first spouse dies. Surviving spouses would have to resort to another estate-planning method to avoid probate of the property upon their own deaths.
The property would also be subject to probate if both spouses die simultaneously in a common event.
TBEs vs. Joint Tenants With Rights of Survivorship
The marriage requirement is the distinct difference between a TBE and a joint tenancy with rights of survivorship. Most of the other provisions are the same.
There's just that one additional requirement for a tenancy by the entirety—that the co-owners must be legally married to each other at the time they take title, and they must remain married to each other throughout the period of ownership.
A TBE situation also offers additional protection that joint tenants with rights of survivorship don't share. Neither spouse is permitted to transfer interest in the asset to a third party.
Tenants by the Entirety vs. Tenants in Common
A TBE arrangement converts automatically and by operation of law to a tenancy in common in the event that spouses divorce.
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.
Tenancy in common is a popular and less restrictive type of ownership. Tenants in common can hold ownership interests in different percentages. They're not necessarily "equal" co-owners, and they don't have to be married or even be related to each other.
Joe might own 60% while Sally owns 40%. But Joe and Sally each retain the right to use and enjoy the entire premises despite these ownership percentages.
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% ownership interest to Tom and Bill, Sally would find herself in a tenant in common arrangement with Tom and Bill even if this isn't to her liking.
What States Observe This Form of Tenancy?
Half of all states—25 plus the District of Columbia—recognize tenancies by the entirety as of 2019, but with varying rules depending on the type of property in question.
Illinois, Indiana, Kentucky, Michigan, New York, North Carolina, and Oregon reserve this type of ownership for real estate only.
The states that recognize tenancies by the entirety for all types of property are Alaska, Arkansas, Delaware, Florida, Hawaii, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming.
Ohio only recognizes this type of ownership for deeds created prior to April 4, 1985. Property purchased since that date cannot be owned this way.
The District of Columbia also observes tenancies by the entirety for all property.
Couples can only hold their homesteads as tenants by the entirety in Illinois. They can't buy and title investment real estate in this way.
Any joint tenancy entered into by a husband and wife in Michigan automatically becomes a TBE by virtue of their marriage, and if they owned the property as joint tenants before marriage, ownership automatically converts to TBE when they do marry.
A tenancy by the entirety can be terminated at any time by mutual consent of the spouses.
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.