Tenancy by the Entirety

An Old Concept With a New Twist, Understanding Tenancy By Entirety in Tennessee

A new statute which became effective 7/1/2014 has made it important that you make yourself aware of how a very old legal concept works, called “tenancy by the entirety.” The summary created by the team at Carpenter & Lewis PLLC is meant to act as a quick guide to make you familiar with tenancy by the entirety. Remember, Tennessee recognizes tenancy by the entirety in the common law, while some other states do not. Tennessee now allows the long-standing asset protection exemption of Tenancy by the Entirety to apply even after a transfer is made into a trust – so this is a timely and important topic.

Defining Tenancy by the Entirety

A tenancy by the entirety is a form of joint ownership similar to the more familiar joint tenancy form of ownership where the surviving spouse has a right of survivorship, but offers exemption from the claims of creditors of either of the spouses. A tenancy by the entirety can be created only between husband and wife, because the couple is considered to be one person or one unit. As such, the spouses do not take the estate in equal shares, but rather they hold title as one unit, with each being deemed to have full ownership.

How A Couple Creates a Tenancy by the Entirety

In Tennessee, where a conveyance is not clearly intended otherwise, it is presumed that a conveyance to a husband and wife creates a tenancy by the entirety. The marital designation (such as “husband and wife” or “married”) generally is the only “legalese” that is required to take ownership as a tenancy by the entirety, although it is appropriate to be clearer as to intent for assets other than the marital home.

How One Spouse Or Other Event Can Sever a Tenancy by the Entirety?

Although the tenancy by the entirety resembles a normal joint tenancy, it is very different from the joint tenancy because severance of the tenancy by one tenant (an individual spouse) is not possible. Neither spouse acting alone can destroy or disrupt the nature of the tenancy (as would be possible in a typical joint tenancy). In other words, an individual spouse cannot convey his or her interest individually. The interest must be conveyed by the marital unit. A divorce terminates the unity of husband and wife and, therefore, the tenancy by the entirety; in Tennessee, the tenancy by the entirety is converted into a tenancy in common at divorce. The death of either spouse terminates a tenancy by the entirety (see below).

Rights Or Limitations) Creditors Have

Since the property is held by the marital unit, an individual spouse’s creditor cannot seize that individual’s interest (and then force the sale of the property). Only a creditor of the marital unit may enforce a lien against the property – meaning that both spouses must be liable before the tenancy by the entirety property will be subjected to creditors. Note that, in bankruptcy, Tennessee has an odd rule about an “expectancy” value so this is not an absolutely effective exemption. If upon the death of one spouse the surviving spouse has a creditor, that creditor can reach the property after the death of a spouse. However, if the deceased spouse is the one with a creditor, the surviving spouse will not be subject directly to the claims of the deceased spouse’s creditors (although there are some circumstances where the exemption is limited in scope after the death of a spouse in probate court or in a trust administration).

Why This New Statute Matters

As indicated above, a new Tennessee statute specifically makes the creditor protection exemption continue to apply to property that is tenancy by the entirety prior to being transferred into a joint revocable living trust where the spouses are the sole beneficiaries (and other conditions are met). In the past, it was common that property would be left outside of a trust to retain that exemption – but now all married couples should examine whether property should now be moved into a trust.

Knoxville Tenancy by the Entirety FAQ

What is tenancy by the entirety?

Tenancy by the entirety is a type of joint property ownership reserved exclusively for married couples. Both spouses hold equal, undivided interest in the property, and neither can sell, transfer, or encumber it without the other’s consent. It is commonly used for real estate but can apply to other assets in some states.

Does Tennessee recognize tenancy by the entirety?

Yes. Tennessee recognizes tenancy by the entirety for married couples. It applies to both real and personal property, which makes Tennessee broader in its application than many other states that limit this ownership type to real estate only.

How does tenancy by the entirety differ from joint tenancy?

The key difference is creditor protection. With joint tenancy, a creditor of one spouse may be able to attach that spouse’s interest. With tenancy by the entirety, a creditor of only one spouse generally cannot force the sale or place a lien on the property.

What protections does tenancy by the entirety offer?

The primary benefit is asset protection. If one spouse has individual debts or a judgment against them, creditors typically cannot reach property held in tenancy by the entirety. Both spouses must be liable for the debt before jointly held property is exposed.

Does tenancy by the entirety protect against all creditors?

No. It does not protect against joint debts, federal tax liens, or obligations both spouses share. The protection applies specifically to individual debts of one spouse. A Knoxville tenancy by the entirety attorney can help you understand what is and is not covered in your situation.

What happens to the property if one spouse dies?

The surviving spouse automatically inherits the full ownership of the property through the right of survivorship. Probate is not required for the transfer, which can simplify the estate administration process significantly.

Can tenancy by the entirety be severed?

Yes. It can be terminated by:

Mutual agreement of both spouses
Divorce, which typically converts ownership to tenancy in common
Sale or transfer of the property by both parties
Death of one spouse

What happens to this ownership structure during divorce?

In Tennessee, divorce severs tenancy by the entirety. The property typically converts to tenancy in common, meaning each spouse holds a divisible share that can be addressed in the divorce settlement.

Can we hold accounts or personal property this way, not just real estate?

Yes. Tennessee allows tenancy by the entirety for personal property and financial accounts in addition to real estate. This is worth discussing with a Tennessee property ownership lawyer, since titling requirements vary by asset type.

How is tenancy by the entirety established in Tennessee?

The deed or title document must clearly indicate the intent to hold property as tenants by the entirety. Language matters here. Improperly worded documents may default to a different ownership structure and lose the associated protections.

Is tenancy by the entirety the same as community property?

No. Tennessee is not a community property state. Tenancy by the entirety is a distinct ownership form with its own rules. Community property laws apply in states like California and Texas and work differently regarding ownership rights and creditor exposure.

Who should consider holding property this way?

Married couples who want built-in creditor protection, a clear right of survivorship, and simplified estate transfer often find this ownership structure useful. It is particularly worth considering for couples where one spouse operates a business or carries professional liability.

Do I need a lawyer to set up tenancy by the entirety?

While not legally required, working with a Knoxville estate planning attorney reduces the risk of improper titling. If the deed language is wrong, you may not receive the protections you intended, and correcting that later can be time-consuming.

How does this fit into a broader estate plan?

Tenancy by the entirety works well alongside wills, trusts, and powers of attorney. It handles the right of survivorship automatically, but it does not replace a complete estate plan. Think of it as one piece of a larger strategy for protecting your assets and your family.

Married couples in Knoxville who want to understand how property titling fits into their overall plan are encouraged to connect with Carpenter & Lewis PLLC. Getting the details right from the start protects both spouses and avoids problems down the road.

Tenancy by the Entirety