Tenancy by the entirety is a form of property ownership reserved solely for married couples. If you buy a house together before you get married, you can't take title as tenants by the entirety – but you can create a new deed after you're married to reflect this type of ownership. Another catch is that you can only hold title to your personal residence in this way. You must actually live there, so it doesn't apply if you and your spouse buy an investment property.
If you and your spouse hold title to your property as tenants by the entirety, you each own an undivided interest in the property -- you both own 100 percent of it. This is similar to joint tenancy ownership -- although with a joint tenancy, each of you owns 50 percent of the property. And it can differ quite a bit from a tenancy in common, where the parties to the deed can own unequal percentages of the property.
Transfer of Ownership
Tenants in common and joint tenants can sell or transfer their ownership interest to a third party without the consent of the other owner or owners. This isn't the case if you hold title as tenants by the entirety. You can't transfer your ownership to anyone else unless your spouse agrees to the transaction. If your spouse approves the transfer, he would then become tenants in common with the individual who took your interest. If your spouse doesn't agree to a transfer of ownership, you have no options. Unlike with other forms of property ownership, you can't ask the court to partition ownership of a property held by tenants by the entirety so one owner can take out his investment in the property and move on -- there's nothing to partition, since you each own 100 percent of the property. You can "undo" the deed, however, by transferring full ownership to one spouse or the other.
A deed held as tenants by the entirety carries survivorship rights. This means that if either you or your spouse dies, the other automatically retains 100 percent ownership of the entire property. This is similar to a joint tenancy with rights of survivorship: when one joint tenant dies, the other automatically receives his interest in the property. In both cases, the transfer bypasses probate. This is distinctly different from ownership held as tenants in common. Tenants in common can bequeath their ownership shares to whomever they like.
The greatest advantage to holding ownership of your home as tenants by the entirety may be that in most cases, your property is immune to creditor claims. If you owe a debt solely in your name, the creditor can't place a lien against the property, even after your death. However, if your spouse dies and you assume full ownership of the property, this legal ban is lifted if the debt is in your name alone. Tenancy by the entirety doesn't protect your property against joint debts, and Internal Revenue Service tax debts of either spouse override this creditor protection. If you or your spouse decide to change the deed to your home to tenants by the entirety after a creditor has already gotten a judgment against one of you, the court can undo the deed to allow the creditor to place a lien against the property. In other words, you can't use this ownership as a means to thwart existing creditors.
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.