Purchasing a home is an exciting time, but it is easy to be overwhelmed by the process. If you are married, before you sign on the dotted line, there is one thing you should consider; how you and your spouse want to hold your interest in the property you two are about to purchase.
A number of states offer extra protection in ownership called a tenancy by the entirety. Luckily, the Commonwealth of Pennsylvania is one of them. A tenancy by the entirety is a special interest in property that is only available to married couples. There are significant benefits to holding the ownership of property as a tenant by the entirety with your spouse. These benefits are most prevalent following the death of a spouse and/or when a spouse carries debt or sustains a liability judgment (car accident or lawsuit) during the course of the marriage.
When married persons own property as tenants by the entirety, each spouse owns a 100% interest in the land and the couple is viewed as a joint entity. In having this undivided interest in the property, neither spouse can sell his or her share or, in most cases, place a lien against the property without the consent of the other spouse. This, therefore, means that creditors cannot go after the property for the debt that is in one spouse's individual name. Even further, if one spouse succumbs to bankruptcy, the property can be shielded from the bankruptcy action. These protections are specific to this form of ownership and are not available to other forms of ownership such as a tenancy in common or a joint tenancy with right of survivorship.
As mentioned, with a tenancy by the entirety, each party owns a 100% interest, so when one of the spouses passes away, the surviving spouse becomes the sole owner of the property. This is automatic, and therefore, the property is not subject to probate and the surviving spouse does not have to worry about transferring title.
So what if you and your spouse own a home as joint tenants for example, but want to acquire this extra protection? You may convert your interest in the property to a tenancy by the entirety with a deed containing special language (i.e. that the parties are married or are spouses and wish to own the property as "tenants by the entirety"). The deed must be clear that the couple is married and wants to convert to the new form of ownership. Additionally, the deed must meet all of the standard recording and notary requirements. It is important to note that the Commonwealth of Pennsylvania does not tax this type of transfer between married couples, so there is no reason not to make the change.
Finally, if you are wondering what happens to the interest after a divorce, the simple answer is that a tenancy by the entirety terminates. As the relationship ends, so does the protection of the special interest that is unique to a marriage. Pursuant to Section 3507 of the Divorce Code, whenever married persons holding property as tenants by entireties are divorced and a decree is recorded, their interest converts to the ownership interest of tenants in common with equal one-half shares in value. Usually, as part of the divorce, the future ownership is determined and necessary for a sale or transfer of the property to occur.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.