Owning Property as Tenants By Entirety

Owning Property as Tenants by the Entirety: What Married Couples Should Know

If you are married and want to buy property in North Carolina, tenancy by the entirety - a type real property ownership - provides three important benefits to you:

  1. Neither spouse can sever their interest in the property without joinder of the other. For example, you cannot sell or encumber the property or any interest in the property without the other spouse. Both spouses are required to sign a Deed, Deed of Trust or any other instrument conveying an interest in the property.
  2. Should one spouse die, their interest automatically passes to the other spouse. The deceased spouse’s interest in the property does not have to be probated (administered in probate court) because technically the marital unit, not the deceased spouse owns the property.  Therefore, when one of the unit members passes away the other automatically by operation of law becomes the only owner of the property. Neither spouse can convey their interest in the property by a will.
  3. Judgments only against one spouse cannot attach to the property unless it is a federal tax lien. Federal tax liens against one spouse will attach to that spouse’s interest in the tenants by the entirety property.  

With a tenancy by entirety, the marital unit owns 100%.  It is destroyed in the following circumstances: death, absolute divorce or if the spouses voluntarily execute and record a deed conveying the property from themselves to themselves expressly stating the intent on the deed to dissolve the tenancy by entirely.  

Over the years, I’ve noticed two common misconceptions of tenancy by entirety:

Misconception #1: Getting married after the conveyance will automatically change the ownership interest to tenancy by the entirety.

In North Carolina, if you are unmarried at the time of purchase, both spouses must execute a new deed to themselves to create a tenancy by the entirety ownership.  It is important to note that a couple must be married at the time the property is purchased for it to be considered held as tenants by entirety. The instrument does not have to state the couple is married, as long as they are legally married at the time of conveyance tenants by entirety is automatic unless there is express language to the contrary.

Misconception #2: How property interests are handled after divorce if the property was held as tenants by entirety.

For couples in the process of ending a marriage, you should know that a divorce severs the tenancy by the entirety and results in the couple owning the property as tenants in common with a 50/50 ownership interest each. Conveying one’s half interest in the property after a divorce involves recording a new instrument of conveyance.  Executing a separation agreement or including it in the divorce decree will not automatically convey the property. If the separation agreement or divorce decree states the wife will convey her entire half interest to the husband, the wife must execute and record a deed conveying that interest. 

In a nutshell, ownership interests can get complicated whether you are beginning a marriage or ending one. If you are unsure as to how you own a property with your spouse or ex-spouse, be sure to contact your local real estate attorney. If you need to change your ownership interest, a simple deed is likely the answer. 

Published by Bess Harris Reynolds on December 1, 2016