Tenancy by the Entirety: Definition & Explanation

When it comes to owning property with someone else, there are a few important considerations to keep in mind. You’ll want to ensure that your ownership interests are protected, that the property will transfer to you quickly and easily if the other party passes away and that you are safe from certain liabilities belonging to the other owner. Tenancy by the entirety (TBE) is one form of ownership that can provide all three. A TBE designation most often applies to real estate property and is only offered to married couples in specific states.

Questions about your family’s estate-planning needs? Consider speaking with a local financial advisor.

What Is Tenancy by the Entirety?

When it comes to property, tenancy in its entirety is a form of joint legal ownership between two married individuals. It is only offered in specific states but provides certain estate benefits to those who choose to hold their property in TBE.

Tenancy by the entirety is designed to not only simplify the inheritance process but also ensure shared ownership of a property while maintaining survivorship benefits. TBE offers some financial protections, as well, as safeguarding property from certain creditors and litigation.

Both owners in a tenancy by the entirety will hold an equal share of the property, regardless of where the funds to purchase that property came from. The property also cannot be sold or transferred without the consent of the other spouse. For a tenancy by the entirety to be valid, it must meet five requirements, also known as unities:

Marriage: Both owners need to be married to one another at the time the deed is issued. (Some states do allow for same-sex partnerships.)
Possession: Both spouses share joint ownership and control of the property.
Title: Both spouses are named on the property deed.
Interest: Both spouses share an equal interest in the property.
Time: Both spouses take ownership of (purchase) the property at the same time. (Some states will allow for a TBE to be issued later on if a property is jointly purchased before the marriage.)

How Tenancy by the Entirety Works

One of the most notable features of tenancy by the entirety is the right of survivorship. This means that if one spouse passes away, the surviving spouse automatically inherits full ownership of the property without the need for probate.

This seamless transfer of ownership can be a significant advantage in estate planning, as it ensures that the property remains within the family and avoids the often lengthy and costly probate process. Additionally, this form of ownership can help protect the property from claims by creditors of one spouse, as the property cannot be divided without the consent of both parties.

To establish tenancy by the entirety, certain legal requirements must be met. Primarily, the couple must be legally married at the time of acquiring the property. Furthermore, this form of ownership is not available in all states, so it’s essential to verify whether your state recognizes tenancy by the entirety.

It’s also important to note that while this arrangement offers protection against individual creditors, it does not shield the property from joint debts or obligations incurred by both spouses. Therefore, couples should consider their financial situation and potential liabilities when deciding if this ownership structure is suitable for them.

Why Tenancy by the Entirety is Beneficial

Aside from ensuring that both owners hold an equal and shared interest in a property, tenancy by the entirety offers other important benefits.

Tenancy by the entirety protects against liabilities. Debt claims against an estate can only be applied to a TBE property if the debts are also shared. Individually owned debts cannot be claimed against the property. This means that if only one spouse is sued or files for bankruptcy as a result of individual debts, the TBE-held property is not generally within reach of creditors.

Automatic right of survivorship is included. When a property is held in tenancy by the entirety, the property will automatically transfer to the surviving spouse if the other passes away.

Probate is bypassed. If one owner passes away, the other assumes ownership without the property needing to go through the probate courts. This saves the surviving spouse both time and money and ensures an easy transition. The caveat to this is that probate is only skipped for the first to die. When the second or surviving spouse dies, the property will need to either pass through a trust or probate with the rest of their estate. Probate also isn’t bypassed on a TBE property if both spouses pass away at the same time (simultaneous death).

Both owners have equal, shared interest in the property. Regardless of who purchased the property or where the funds came from, property held in TBE is considered equally shared. Both owners maintain an equal interest, and neither can sell, develop, transfer or make improvements to the property without permission from the other.

Potential Downsides of Tenancy by the Entirety

A tenancy by the entirety can pose problems in two key situations. The first is divorce. If a married couple owns property in a TBE and then divorces, they will become tenants in common. Both parties retain their ownership and interest in the property, which may become a source of conflict. In some cases, the courts may require that the property be awarded to one party as part of the divorce settlement or sold and the proceeds split.

The second relates to potential heirs. Since TBE property passes to the other spouse directly, it is not immediately inherited by any beneficiaries. Say you have adult children from a previous marriage and you intend for them to receive a share of your estate when you die. However, you pass away first and your spouse assumes ownership of the property. In this case, he or she is under no further obligation to fulfill your wishes for your children.

Where Tenancy by the Entirety Is Available

Currently, tenancy by the entirety is only offered in about half of the states in the U.S.: Alaska, Arkansas, Delaware, District of Columbia, Florida, Hawaii, Illinois, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia and Wyoming.

In certain states, tenancy by the entirety is only available on real estate property. It may be offered exclusively to spouses in some states while others allow for same-sex domestic partnerships. In some cases, TBE is further limited to homestead property.

Differences Between TBE and Joint Tenancy

Tenancy by the entirety is similar in some ways to joint tenancy. For starters, both TBE and joint tenancy offer survivorship benefits. These allow your property to pass to the other joint owner after your death without going through probate. Both are most often associated with real estate property, as well.

There are some important differences between tenancy by the entirety and joint tenancy, however.

Joint tenancy is available to two or more individuals in a variety of relationships. This may include siblings, spouses, business partners, parents and children, friends or other relatives. To qualify for tenancy by the entirety, though, the two owners must be married to one another at the time the property deed is written (some states do allow for same-sex partners).
Tenancy by entirety offers added financial protections against creditors and other liabilities, which joint tenancy does not.
TBE is only offered in certain states.

Understanding the differences can help you make an estate plan that works for you. Consider talking to a professional financial advisor who can help you make the plans that are best for your situation.

Bottom Line

TBE lets spouses jointly own property while establishing certain financial protections, survivorship and equal ownership. Though similar to joint ownership, TBE requires owners to be married to one another at the time the property is deeded. Property held in TBE cannot be sold, transferred, conveyed, developed or improved without the consent of the other owner, meaning a divorce could complicate things. While half of the states in the U.S. don’t offer tenancy by the entirety, some automatically designate the property as TBE if it’s purchased jointly by spouses.

Tips for Tenancy by the Entirety

Consider working with a financial advisor as you do your estate planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Talk to an estate planning attorney about titling assets and property owned by your estate as joint tenants, particularly if you have an unusual arrangement. Your attorney can help you assess the gift and estate tax implications of co-owning property with a spouse, parent, child, sibling, business partner or any other individual.