Obergefell v. Hodges Decision Creates Tenancy by the Entirety Opportunity for Same-Sex Married Couples

In the recent landmark decision in Obergefell v. Hodges, the United States Supreme Court expanded the rights available to same-sex couples, ruling that same-sex partners have a constitutional right to marry. This ruling not only requires recognition of all same-sex marriages in Tennessee, but also creates an opportunity for those couples to establish a tenancy by the entirety to Tennessee property.

Since tenancy by the entirety (TE) ownership can only be established between spouses, such a form of ownership has previously been out of the question for same-sex couples. Post Obergefell, a married same-sex couple that takes title together to Tennessee property can now create a TE. Supported by the ruling, the State of Tennessee must recognize same-sex marriages legally consummated in other jurisdictions.

Before establishing a TE, a couple’s decision of how to take joint title assets in Tennessee should undergo some careful consideration of their unique personal needs. With a variety of concurrent ownership options to choose from, ranging in form as well as potential benefits and drawbacks, it is best to consult an attorney to help determine which option is the best fit.

There are several distinct characteristics to be aware of when considering the creation of a TE. For one, at the death of the first spouse, TE property avoids probate by automatically vesting in the surviving spouse. This leads to one-half of the fair market value of TE property being included in the deceased spouse’s estate for estate tax purposes. Additionally, this kind of joint ownership cannot be unilaterally severed by a spouse and requires an agreement between both spouses in order to sell or gift TE property.

Other points of concern can vary from state to state. For couples in Tennessee concerned about creditor protection, TE property can provide creditor protection from each spouse’s separate creditors. On the flipside, however, individuals must be aware of the fact that TE is not able to shield both spouses from creditor claims if they are joint creditors.

Once the decision has been made to create a TE, there are a few recommended steps to take in order to ensure that it is established properly. Once both spouses are going into title, it is vital that the marital status of the couple is stated on the deed as instructed in either the purchase contract or in a separate writing. Additionally, title to the TE property should clearly indicate it is vested properly in both spouses.

While the Obergefell decision legalizes same-sex marriage, it is important to remember that the ruling is not able to alter property ownership without formal action being taken by the individuals themselves. A same-sex couple should not assume that titles vested prior to the recent Supreme Court decision instantly transform into a TE. In fact, same-sex couples married in another jurisdiction and vested in title before the Obergefell ruling are treated in a similar fashion as non-married heterosexual couples who take title and are married later.

Regardless of a newfound marital status, neither title for either of the above mentioned couples would automatically convert to a TE. Thus, a couple must take positive steps in order to ensure a proper conversion of ownership. Another area in which same-sex couples are held under an equal standard as heterosexual couples is in cases involving joinder of the spouse on execution deeds and deeds of trust. Similar to the process for creating a TE, consulting a licensed attorney on matters involving a re-title or joinder is generally advisable.

While the Obergefell ruling requires the State of Tennessee to recognize previously consummated same-sex marriages from prior jurisdictions, same-sex couples should be proactive in re-evaluating their property rights to reflect the relationship status to which they are now entitled.

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