When it comes to property ownership in the name of more than one person, there are four legally recognized arrangements: community property ownership, joint tenancy, tenancy in common, and tenancy by the entirety. A tenancy by the entirety form of ownership particularly deals with married couples and stipulates that both spouses hold an undivided, equal ownership interest in joint ownership. It can sometimes be difficult to wrap our heads around the often complex nature of shared ownership, but in the case of tenancy by the entirety, it is best to view the married couple as a legal entity and not as two individuals; this legal entity ultimately holds all ownership rights pertaining to the property. Because tenancy by the entirety involves a legal entity and not two individuals, any actions or changes in the ownership interest must be approved by both spouses.
We can assume that married couples, in general, will most likely seek to establish a legal form of property ownership that is most advantageous to their financial needs, goals, and objectives. Tenancy by the entirety can provide protection of property from potential creditors seeking debt payments one spouse may be responsible for. In this circumstance, the non-liable spouse will not have their ownership interest at risk of seizure by debt collectors to satisfy debt payment. However, under tenancy by the entirety a property may be subject to debt claims if applied to both spouses jointly. In the event that a couple is subject to a debt claim jointly, a court-ordered sale might have the legal power to terminate a tenancy by the entirety. Married couples seeking the benefits that come with initiating a tenancy by the entirety will be happy to learn that the creation such arrangement and title transfer between spouses can be done with relative ease. With these advantages in mind, one should also take into consideration the drawbacks of such joint ownership. As with most laws and legal arrangements, the stipulations of tenants by the entirety will vary from state to state.
Although a tenancy by the entirety can be used to avoid probate, there are limitations. For instance, probate can be avoided only in the event that the first spouse passes on and cannot be avoided in the event that both spouses pass away at the same time. With regard to varying degrees of recognition across all states, roughly half of U.S. states do not make tenants by the entirety available to married couples where other states may recognize the application of such ownership beyond real estate. Keep in mind that although ownership in the form of tenancy by the entirety belongs to a legal recognized unit (the married couple), consent is required of both spouses if one spouse ever sought to change or modify their individual ownership stake in any way (i.e. sale, donation, ownership transfer). Within this legally recognized entity, both spouses must hold a half ownership stake.
Rights, Limitations, and Stipulations
In addition to weighing the pros and cons of a tenancy by the entirety, it is important for property owners to understand the rights and limitations that come with such ownership arrangement. In the event that one spouse dies, the surviving partner will automatically gain full ownership rights to the property at hand. This automatic ownership enables the surviving spouse to become a sole owner in severalty, meaning that the surviving owner is “severed” from all other owners. Rights of survivorship for a married couple is naturally built into tenancy by the entirety. The nerve center of a tenancy by the entirety depends on the cohesiveness of the marriage unit, and when a couple decides to file for divorce, the termination of the tenancy by the entirety will ensue.
In the normal course of bankruptcy proceedings, one’s ownership interest in assets are confiscated by a bankruptcy estate, which in turn will provide the necessary payments to the respective creditors. However, just as is the case when debtors try to claim the assets of one liable spouse, a tenancy by the entirety would protect a property jointly owned by the marital entity; this is of course subject to whether or not a state recognizes tenancy by the entirety.
Comparison to Other Forms of Ownership
The difference between a tenancy by the entirety and a joint tenancy lies in the individual power of each spouse, or tenant, to modify or break the tenancy. While a tenancy by the entirety requires the approval of both spouses to perform such actions, a joint tenancy allows for this spousal, individual power. In a tenants in common (TIC) form of ownership, a deceased spouse’s fractional ownership interest in a property is retained by that deceased spouse’s estate and is not absorbed into the surviving spouses ownership stake, as is the case in a tenancy by the entirety. Unlike the ownership in a tenancy by the entirety, tenants in common ownership can be divided unequally. A joint tenants with rights of survivorship (JTWROS) is similar to a tenancy by the entirety in that a deceased spouse’s ownership interest is automatically absorbed into the interest of the surviving spouse. These various forms of property ownership help shed light on the array of choices married couples have when it comes to protecting assets of shared ownership throughout the course of a marriage.