Today, we discuss tenancy by the entirety ownership in Virginia and Maryland. The discussion is obviously not an exhaustive restatement of the law upon which you can strictly rely, but is intended only as a broad summary.
Tenancy by the entirety is a form of ownership that is a remnant of “common law” (in other words, laws based on the legal tradition of England) that only exists between spouses. It creates the “fiction” that something titled “tenancy by the entirety” is owned by the husband and wife as if they are one person and not two individuals. As a result of this, only both spouses can ever sell the property – one cannot do this without the consent of the other.
This is quite helpful to married couples because this type of ownership protects them from the debt of an individual spouse. For example, let’s say that my wife and I own a house as a tenancy by the entirety. Let’s further say that I have a mid-life crisis and borrow money myself to buy an expensive car behind my patient wife’s back. If I eventually default on the loan, the common law tradition says that the car creditors cannot go after our house since we, and not I, own it.
In recent years, the law has chipped away at this protection. First, only about half of US states allow property to be titled as a tenancy by the entirety. Of these states that do, about a third only allow it to be applied to a personal residence.
Additionally, the U.S. Supreme Court ruled in 2002 that the IRS can go after tenancy by the entirety property even if only one of the spouses has an unpaid tax debt. See U.S. v. Craft, 535 U.S. 274 (2002). Bankruptcy courts have also been able to attack tenancy by the entirety property in limited circumstances. Also, in practice, many financial institutions do not recognize the “tenancy by the entirety” term to be used when spouses establish the account and highly discourage its use.
In Virginia, “tenancy by the entirety” is assumed if the term or its equivalent is used in a deed between spouses, as well as in any document indicating ownership of personal property as well. In Maryland, tenancy by the entirety can be assumed if the spouses alternatively hold their title as “joint tenancy with right of survivorship”.
To summarize, if you are married and own property in Virginia, it is best if you own it as “Tenants by the Entirety” or “Tenants by the Entirety with rights of survivorship” if you want to best protect your property from the debts of one spouse. In Maryland, other wording can also protect your property as long as you use the “with survivorship” language. But remember that the protections given to property titled this way are not quite as certain as it once was.
Improper setup of titling could result in potentially less advantageous types of ownership without the same protections. Be sure to discuss what the best design would be in your situation with a lawyer.