6 min read Jan 30, 2024

Protect Your Assets With Tenancy by the Entirety

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Carol Coutinho

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25% of Americans say they consider estate planning vital, especially due to rising inflation. However, 40% won’t even consider it until they face a life-threatening situation.

Without proper estate planning, a favorable resolution in probate court typically requires an average of $12,500. This eats into your inheritance. One way you can save this money is by opting for tenancy by the entirety if you are a married couple.

Tenancy by the entirety is a form of ownership that provides the right of survivorship. It also offers creditor protection to the surviving partner.

Why Tenancy by the Entirety?

  • A tenancy by entierity avoids probate, ensures a seamless transfer of property between spouses upon death.
  • Nearly 67% of properties go into probate after the owners death. A probate results in expensive court fees for the surviours.
  • On average, over 50% of probate costs go towards the attorney as legal fees. This percentage can be higher based on your location.

What Is Tenancy by the Entirety?

Tenancy by the entirety is a form of property ownership for married couples. If one spouse passes away, the property transfers to the survivor automatically. The property goes into probate after the death of the surviving partner.

This agreement also offers protection against creditors of individual partners. The creditor cannot claim a stake in the property if only one spouse owes money. This is true even if the couple declares bankruptcy.

How Does Tenancy by the Entirety Work?

In a tenancy by the entirety, both spouses own 100% of the property jointly. A common illusion is that the property is split 50/50, however, that’s not the case.

Requirements of Tenancy by Entirety

The tenancy by the entirety concept works on the principle of “unity”. It requires a couple to come together on the following key elements:

  • Marriage: Lawful marriage is a requirement; certain states may also recognize them as domestic partners.
  • Time: Both individuals must purchase the property together.
  • Title: The property’s title must be obtained through the same deed for both spouses.
  • Interest: The couple should share an equal interest in the property.
  • Possession: Both spouses must jointly exercise control and ownership over the property.

Rights of Tenants by the Entirety

Tenants by the entirety have certain rights and protections:

  • Right of Survivorship: On the death of a spouse, the survivor inherits the property without the need for a probate.
  • Creditor Protection: Tenancy by the entirety protects from individual creditors of either spouse. Creditors generally cannot seize the property to meet the debts of only one spouse.
  • 100% Ownership: Selling the property requires the consent of both spouses, and specific states prohibit placing a lien without both partner’s approval.

How Can Tenancy by Entirety Be Terminated?

Tenancy by the entirety can be terminated through the following methods:

  1. Divorce or Annulment: If the couple divorces or annuls a marriage, the tenancy by the entirety is dissolved.
  2. Mutual Agreement: Both spouses can agree to terminate the tenancy and amend the property agreement to a different form of ownership.
  3. Sale of the Property: Selling the property terminates the entire tenancy, and the proceeds are divided between the spouses.
  4. Bankruptcy: If the couple declares bankruptcy, the property may be subject to the claims of creditors, which could result in a forced sale and then termination.

Consult local legal experts to navigate the joint tenancy termination process, which varies by jurisdiction.

Pros and Cons of Tenancy by the Entirety

Here are the pros and cons of being tenants by the entireties:

Pros

  • Avoid Probate: Simplifies the transfer of assets upon the death of a spouse, avoiding probate proceedings.
  • Offer Creditor Protection: Shields the property from individual debts of one spouse, protecting it from being seized by creditors.
  • Preserve Familial Ownership: Ensures that the property remains within the family and benefits the surviving spouse.

Cons

  • Restricted to Married Couples: Exclusively available only to legally married couples in most states.
  • Difficult to Terminate: These can only be terminated through divorce, mutual agreement, or death.
  • Is a Shared Ownership: To prevent the division of the property into separate portions both spouses share complete ownership.

What Are Other Types of Tenancy?

Tenancy refers to the way people hold or possess property. Here are common types of ownership agreements other than tenancy by the entirety:

  • Sole Tenancy: One person owns a property individually without a co-owner.
  • Tenancy in Common: Multiple individuals own a single property in tenancy in common. There is no right of survivorship, i.e. each owner cannot directly pass their share to heirs.
  • Joint Tenancy: Co-owners equally share a property with the right of survivorship. If one owner passes away, their share goes to other owners.
  • Periodic Tenancy: With no set end date, it’s like a month-to-month rental agreement.
  • Fixed-Term Tenancy: It has a specific duration without the option to extend the tenancy, and often accompanies a lease agreement.
  • Estate for Years: It is a fixed-term tenancy for a specific period. It’s also called a tenancy for years or estate for term.
  • Commercial Tenancy: It is available for businesses to rent properties for commercial purposes.
  • Estate at Will: It does not have a set end date, but can be terminated by either co-owner.
  • Estate at Sufferance: It’s a case when a tenant stays after their lease expires. It is also called holdover tenancy.
  • Residential Tenancy: Homes rented to individuals or families have this type of tenancy.

Tenancy by Entirety vs. Joint Tenancy vs. Tenants in Common

There are three major types of tenancies: Tenancy by Entirety, Joint Tenancy, and Tenants in Common. The key differences between them are:

Aspect of OwnershipTenancy by EntiretyJoint TenancyTenants in Common
Ownership Type Exclusive to married couplesMultiple owners, not limited to married couplesMultiple owners, not limited to married couples
Right of Survivorship The surviving spouse inherits the entire propertySurviving co-owners inherit the share of the deceased co-owner(s)No automatic right of survivorship, each owner can pass their share to heirs
Termination Can be terminated only through a divorce or mutual agreementCan be terminated by selling or transferring the property with the consent of all co-ownersEach owner can sell or transfer their share without the consent of others
Creditor Protection Offers protection from individual creditors of one spouseCreditors of one co-owner can seek repayment from that co-owner's shareCreditors can only access the share of the co-owner with the debt

States That Recognize Tenancy by the Entirety

Tenancy in the entirety is valid in Washington D.C. and these 25 states:

The Bottom Line

Tenancy by the entirety is an inviting option as it eases the transfer of assets, offers creditor protection, and preserves family assets.

It is a unique layer of protection with added convenience for married couples who invest in real estate.

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Frequently Asked Questions

What is a disadvantage of tenancy by the entirety?

One of the biggest disadvantages of tenancy by the entirety is that it is exclusively available to only legally married couples in most states.

What is an example of tenancy by entirety?

John and Jane, a married couple, buy a house together and choose to hold it as tenants by the entirety. If John were to pass away, Jane would become the sole owner of the house without the need for a will or legal complications.

What is the difference between joint tenancy and tenancy by entirety?

The main difference between joint tenancy and tenancy by the entireties is the level of ownership interest and the right of survivorship. In joint tenancy, co-owners, irrespective of their relationship, have an equal and undivided interest in the property. In tenancy by entirety the co-owners have to be married.

Which tenancy is best for married couples?

Tenancy by the entirety is typically the best choice for married couples. This is because of the many special benefits that are available only to married couples, such as the right of survivorship.

What happens to tenants by the entirety after death?

In tenancy by the entirety, the property is transferred to the living spouse after their partner's death. Once the living partner dies, the property goes into probate.

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