Tenancy by the entirety

What Is Tenancy by the Entirety?

Tenancy by the entirety is a form of concurrent property ownership specifically designed for married couples, treating them as a single legal entity for the purpose of holding title to real estate. This unique arrangement falls under the broader category of real estate law and property ownership, providing distinct property rights and protections. Under a tenancy by the entirety, each spouse possesses an equal, undivided interest in the entire property, rather than holding separate shares. A key feature of tenancy by the entirety is the "right of survivorship," meaning that upon the death of one spouse, full ownership of the property automatically transfers to the surviving spouse without the need for probate. This structure also offers a degree of asset protection against the individual debts of a single spouse.

History and Origin

The concept of tenancy by the entirety has deep historical roots, originating in the English common law system as a form of concurrent ownership. It developed under the doctrine of "coverture," which legally viewed a husband and wife as a single legal person. This "oneness" of the marital unit was central to how property was held by spouses. As early as the thirteenth century, this legal construct was documented, with Blackstone's commentaries providing a foundational description.¹⁵,¹⁴

Initially, this structure often granted the husband significant control over the property. However, with the advent of Married Women's Property Acts in the United States during the 19th century, the legal landscape evolved to grant wives equal ownership rights, reversing the common law dominance of husbands.¹³ Despite these changes, the core principle of treating the married couple as an indivisible unit for property ownership in tenancy by the entirety has largely persisted in states that recognize it.¹²

Key Takeaways

• Tenancy by the entirety is an exclusive form of property ownership for married couples.
• It grants each spouse an undivided interest in the entire property, not separate shares.
• A crucial feature is the right of survivorship, which bypasses the probate process upon the death of one spouse.
• The property is generally protected from the individual creditors of only one spouse.
• This form of ownership is not recognized in all U.S. states and is often limited to real estate.

Interpreting Tenancy by the Entirety

Interpreting tenancy by the entirety involves understanding its implications for legal title and financial obligations. Because spouses are considered a single legal entity for the property, neither spouse can unilaterally sell, mortgage, or transfer their interest in the property without the consent of the other. This unified control provides strong protection against individual financial distress affecting the shared asset. For example, if one spouse incurs significant individual debt, that spouse's personal creditors generally cannot place a lien or force the sale of the property held in tenancy by the entirety. This characteristic makes it a powerful tool in estate planning and asset protection for married couples.

Hypothetical Example

Consider John and Mary, a married couple who purchase a house together. Instead of holding the property as tenants in common or joint tenancy, they decide to take title as tenants by the entirety. This means they both own 100% of the property, not 50% each.

Several years later, John faces a personal lawsuit unrelated to Mary or their shared property, resulting in a large judgment against him. Because the house is held in tenancy by the entirety, the judgment creditor cannot place a lien on the home or force its sale to satisfy John's individual debt. The property is shielded from this claim as long as Mary is alive and the couple remains married. If John were to pass away, Mary would automatically become the sole owner of the house, free from the judgment against John, due to the right of survivorship.

Practical Applications

Tenancy by the entirety is commonly used in several practical scenarios, primarily benefiting married couples in their wealth management and estate planning strategies. Its most notable application is in protecting a primary residence from the individual debts of one spouse. For instance, if one spouse faces a personal lawsuit or business failure, the family home held as tenancy by the entirety may be insulated from those individual creditor claims.¹¹

However, it is important to note that this protection does not extend to joint debts where both spouses are liable. For example, a federal tax lien against one spouse's interest in property held by the entirety can attach to that interest, as ruled by the U.S. Supreme Court, potentially allowing the IRS to collect.¹⁰,⁹ Despite this, states like Maryland specifically recognize and protect this form of ownership for married persons, often presuming it unless otherwise stated in the deed.⁸,⁷ This framework can significantly streamline the transfer of property upon death, bypassing the often lengthy and costly probate process, which is a major advantage for beneficiaries.

Limitations and Criticisms

Despite its advantages, tenancy by the entirety has several limitations and criticisms. A primary limitation is its availability; it is not recognized in all U.S. states, and some states that do recognize it may limit its application strictly to real property or homesteads.⁶, This geographic and asset-type restriction can limit its utility for couples with property across different states or those seeking protection for other forms of assets.

Furthermore, the protection against individual creditors is not absolute. If a couple incurs a joint liability, the property held in tenancy by the entirety is generally subject to claims from those joint creditors.⁵ The Internal Revenue Service (IRS) can also attach a federal tax lien to a spouse's interest in such property, even if only one spouse is liable for the tax.⁴,³

Another significant drawback arises from its termination. Tenancy by the entirety automatically dissolves upon divorce, converting the ownership, typically, into a tenancy in common. This conversion eliminates the right of survivorship and the protections against individual creditors, potentially exposing the property to future claims against either former spouse.² This means that while it provides significant security during the marriage, its protective benefits cease precisely when a couple's financial situation might become most vulnerable due to marital dissolution.¹

Tenancy by the Entirety vs. Joint Tenancy

Tenancy by the entirety and joint tenancy are both forms of concurrent property ownership that include the right of survivorship, meaning that upon the death of one owner, their interest automatically passes to the surviving owner(s). However, a critical distinction lies in who can hold these titles and the level of protection offered.

The primary confusion between the two often stems from their shared right of survivorship. However, the requirement of marriage and the inability of one spouse to unilaterally affect the property in a tenancy by the entirety provide a much stronger form of protection from creditors for the marital asset compared to joint tenancy.

FAQs

What happens to a property held in tenancy by the entirety if the couple divorces?

Upon divorce, a tenancy by the entirety is automatically severed and typically converts into a tenancy in common. This means the right of survivorship is extinguished, and each former spouse then owns a distinct, transferable share of the property.

Can a single spouse sell their share of a property held in tenancy by the entirety?

No, neither spouse can unilaterally sell, transfer, or mortgage their interest in property held as tenancy by the entirety. Both spouses must agree and act together to convey the property. This is a core aspect of this type of ownership.

Does tenancy by the entirety protect property from all creditors?

Tenancy by the entirety generally protects property from the individual debts of only one spouse. However, it does not protect the property from debts for which both spouses are jointly liable, nor from certain federal tax liens against one spouse, as determined by the U.S. Supreme Court.

Is tenancy by the entirety available in all states?

No, tenancy by the entirety is not recognized in all U.S. states. Approximately half of U.S. states and the District of Columbia permit this form of property ownership, and some may restrict its use to real estate only.

How does tenancy by the entirety affect estate planning?

Tenancy by the entirety simplifies estate planning for the specific property because the right of survivorship ensures the property automatically passes to the surviving spouse upon the death of the other, bypassing the probate process. This can save time and legal fees.