Does Tenancy by Entirety (TBE) Avoid Probate?

Posted Dec 30, 2023

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Probate is a process by which a court manages the distribution of a deceased person’s assets to beneficiaries. Many people prefer to avoid probate, as it can be a time-consuming process, causing delays in the distribution of assets. Probate is also costly and may expose private financial matters publicly. 

Leaving a will may sometimes allow the beneficiaries to avoid probate, but not always. However, the presence of a valid will should ease the process of going through probate. Still, some people want to reduce the potential for this exposure and delay.

Tenancy by the entirety offers a solution.

For married couples in some states, one way to avoid probate is to hold property as a TBE (tenancy by the entirety). When a couple holds property in a TBE, the couple is regarded as a single entity that shares an equal interest in the property. Each has a 100% ownership stake, which requires that they must agree when managing the property and one spouse cannot sell it without the other’s agreement. 

However, only half of US states allow this type of ownership, and most restrict it to married couples, although several have expanded the option to include eligibility by domestic partners. One attribute of TBE ownership that distinguishes it from the other choices like joint tenancy and community property is that with a TBE when the first spouse dies, the surviving spouse always inherits the property as sole owner. It's worth noting that when the second spouse dies, the property must proceed through probate.

What else is different about TBE?

The arrangement may protect the asset from creditors if only one partner in the TBE is obligated by the debt. Creditors of one spouse cannot pursue the property if the other spouse is not liable for the debt. With a community property holding, in contrast, a creditor of one partner can pursue the property they hold together. 

To establish a Tenancy by the entirety, couples must satisfy “five unity” conditions of ownership:

  1. Unity of time. Each spouse has to take ownership of the home at the same time. 
  2. Unity of title. Spouses must acquire their interests in the home under the same title. 
  3. Unity of interest. Equal interests must be acquired concurrently. 
  4. Unity of possession. Spouses must have equal control and possession of the home. 
  5. Unity of marriage. Co-owners must be married. 

Is there another way for a surviving spouse to avoid probate?

If a couple holds property in joint tenancy, then when one owner dies, that person's share of the assets automatically transfers to the surviving owners without going through probate. One difference between joint tenancy and tenancy by the entirety is that the structure is allowed for larger groups, rather than being restricted to married or registered couples. If a married couple is part of a joint tenancy group, the surviving spouse would only inherit their pro rata share of the property rather than the entire asset. Still, joint tenancy with the right of survivorship is a viable option for couples living in a state that does not allow TBE.

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.

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