Joint Ownership of Property in Tennessee: Tenancy by the Entirety (Part 3 of 3)
Tenancy by the entirety (TE) is the third and final form of joint property ownership in Tennessee. TE ownership may only be between spouses. Like joint tenancy with rights of survivorship (JTWROS) property, at the death of the first spouse TE property avoids probate by automatically vesting in the surviving spouse.
Tenancy by the entirety in Tennessee may not be unilaterally severed by a spouse. To sell or gift TE property both spouses must be in agreement.
In Tennessee, TE property can provide creditor protection from each spouse’s separate creditors. It does not, however, shield both spouse’s from creditor claims if they are joint creditors.
At the death of the first spouse, one-half of the fair market value of TE property will be included in the deceased spouse’s estate for estate tax purposes.
To recap, the three basic forms of concurrent ownership in Tennessee are 1) tenancy in common, 2) joint tenancy with rights of survivorship, and 3) tenancy by the entirety. Each of these ownership forms has unique characteristics – only a few of which we have discussed in this three part series.
Finally, it is important to note that these are just the basic forms of joint ownership in Tennessee. There are other advanced forms of property ownership in Tennessee which we have not covered in this series. For example, Tennessee permits spouses to convert property to community property via a technique called a Tennessee Community Property Trust. This form of joint property ownership can provide tremendous income tax advantages under the right circumstances. Other joint ownership structures utilizing trusts or entities (e.g., LLCs, partnerships, S-Corps, etc.) can be ideal vehicles for Tennessee residents seeking creditor protection, property management rights, and/or gift/estate planning flexibility.
Because each person’s situation is different, careful consideration should be taken when determining how to take joint title to assets in Tennessee.
Rob Hazard is an attorney and CPA with GSRM. If the “legal thing” doesn’t work out for Rob he’d like to play third base and switch-hit in the 3 spot for the Atlanta Braves.