Tenancy by Entirety (also called Tenancy by the Entirety) is a form of joint property ownership that’s only recognized in a handful of states.
Tenancy by Entirety (TBE) is one of three common methods of holding title to jointly owned real property. The others are Joint Tenancy and Tenants in Common. However, Tenancy by the Entirety (T by the E) is reserved for married couples and is only recognized in 25 states and the District of Columbia.
Each form of joint property ownership results in different consequences or stipulations for property owners, especially when one owner dies. Let’s take a look at the special considerations that come with holding title to real estate as a Tenancy by Entirety, as well as which states allow this form of property ownership.
What is a Tenancy By Entirety – and How Does it Differ From Other Joint Property Ownership Arrangements?
Tenancy by the Entirety is strictly for married couples – in the states that recognize T by the E, it does not apply to close familial relationships or business partnerships. However, some states do recognize domestic partners and same-sex marriages for TBE, although couples in these types of relationships should engage an attorney who specializes in real property law to ensure this option is available to them.
Two special considerations for TBE involve the transfer of ownership rights upon death of a spouse, and equal ownership.
- Equal Interests. In a Tenancy By Entirety, both parties have 100-percent equal interests in the property. That means neither party can sell their interests or transfer ownership rights to another person without first getting permission from the other party.
- Right of Survivorship. In a TBE, there’s automatic right of survivorship, which means that if a spouse dies the ownership interests of the deceased are automatically transferred to the surviving spouse.
Those two considerations are important because they ensure a direct and legally unchallengeable method to ensure the surviving spouse gets sole custody of the home when one spouse dies, as well as the inability of one spouse to force a sale of the house if the marriage dissolves.
Although a Joint Tenancy also includes right of survivorship, co-owners are free to divest or transfer their shares of the property whenever they wish. In a Tenancy in Common, co-owners can bequeath their ownership interests to an heir of their choosing. Both of these forms of joint property ownership could lead to undesirable ownership arrangements for a surviving spouse or following the dissolution of a marriage.
Another important consideration for TBE is how it offers protection from creditors. Regardless of one party's debt situation, creditors cannot come after the home and force its sale to satisfy a spouse's unpaid debts. However, the situation may be different if the married couple shares responsibility for the unpaid debt and is sued jointly. In this case, creditors may be able to place a lien on the property. The same can be true if a spouse passes and the remaining spouse – now the sole owner – is responsible for the unpaid debt.
What are the Requirements for a Tenancy By The Entirety?
There are five “unity” conditions that must be met to form a TBE in the states that recognize this type of joint property ownership:
- Unity of time. Each spouse has to take ownership of the home at the same time.
- Unity of title. Spouses must acquire their interests in the home under the same title.
- Unity of interest. Equal interests must be acquired concurrently.
- Unity of possession. Spouses must have equal control and possession of the home.
- Unity of marriage. Co-owners must be married.
Which States Recognize Tenancy By Entirety?
Tenancy by Entirety is recognized in 25 U.S. states:
- New Jersey
- New York
- North Carolina
- Rhode Island
Tenancy By Entirety is also recognized in Washington, D.C.
In a Tenancy by the Entirety, each spouse owns the home equally, regardless of how much money one half has invested in the asset. The arrangement is unique in that each spouse holds 100 percent ownership rights – it’s not a 50-50 split.
A TBE can be terminated by death or divorce. In the former, the spouse enjoys automatic right of survivorship and becomes the sole owner of the home. In the latter, the TBE is dissolved because certain unity requirements no longer apply. A TBE also can be terminated if both spouses are in agreement to dissolve the arrangement.
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.