Did you know that every state has its own rules governing how married persons can legally hold title to real estate? There are five common methods of holding title – although no state recognizes all five. Here’s a summary of how each method affects a married couple upon death or divorce.

In this month’s Doma Title Insurance, Inc. underwriting blog, we summarize how each method affects a married couple’s property ownership upon death or divorce.

1. Tenants in common

All states recognize some form of tenancy in common (Louisiana statutes refer to “Ownership in Division,” which is, in effect, similar to a tenancy in common). Two or more persons or entities can hold title to real estate as tenants in common, with equal or unequal percentages of ownership. Each owner has the right to occupy and use the entire property. Tenants in common hold title individually in their respective shares or interests in the property, and can dispose of or encumber that interest, without the consent of the other tenants in common.

Each tenant in common’s interest can be willed to other parties, and in the event of death, ownership will descend to that owner’s heirs, either by will or through the intestacy rules of the state where the property is located. Rights of ownership do NOT pass automatically upon death to the surviving tenants in common, even if the tenants in common are a married couple.

Exception: In Florida, if a married couple hold title as tenants in common, and the property is their homestead, the joinder of the other spouse/tenant in common is required for the spouse desiring to convey their interest to a third party. Also, if the property is homestead, the deceased tenant in common is not free to will the property to whomever they wish. Florida’s Constitutional homestead protections apply to transfers made when the homeowner dies leaving a spouse or minor children.

In most states, tenancy in common is the legally presumed method of holding title, unless there is language in the deed to the contrary. This may even be true for married couples. If a married couple holds title as tenants in common then, upon divorce, each spouse will retain their respective share of the property, unless there is a court order awarding one spouse’s interest to the other.

2. Joint tenants

All but three states (Alaska, Louisiana and Oregon) recognize joint tenancy. A joint tenancy, like a tenancy in common, is a form of co-ownership that may involve two or more owners. Unlike tenants in common, however, each joint tenant holds an identical undivided interest in the property. A joint tenant cannot transfer an individual interest in the property without destroying the joint tenancy. When one of the joint tenants conveys their interest in the property, the new owner will not take title as a joint tenant with the remaining owners, and the holding automatically converts to a tenancy in common.

No state presumes joint tenancy for non-married joint tenants. Only two states, Iowa and Utah, permit a legal presumption of joint tenancy for married couples.

Deeds to joint tenants can establish a “right of survivorship.” Survivorship means that if one joint tenant dies, the deceased’s interest in the property automatically passes to the surviving joint tenants. This method of holding title is popular with married couples, because if one spouse dies, the surviving spouse gains a 100-percent interest in the property, without that real estate going through probate court.

For most states, a joint tenancy with right of survivorship can only be established by stating “joint tenants with right of survivorship” in the vesting deed. Many states will allow some variation in the survivorship language so long as the intent to create a right of survivorship is clear. Exception: In Texas, joint tenants with right of survivorship can only be established by a separate written survivorship agreement executed by the joint tenants.

When a married couple is divorced, the joint tenancy may not be automatically terminated. However, the divorce decree, property settlement agreement, and state statutes must be reviewed to determine the disposition of the property and how the property is to be held after the judgment of divorce.

3. Tenants by the entirety

Tenants by the entirety (TBE) is a method of holding title which is only available to owners who are legally married. Each spouse owns an undivided interest in the property, and each has full rights to occupy and use the property. However, individual spouses cannot transfer their interest in the property without the consent of the other spouse. TBE is recognized in 25 states and the District of Columbia.

Married couples holding title as TBE have a “right of survivorship,” meaning that if one spouse dies, the surviving spouse gains a 100-percent interest in the property outside of probate. In several of the states that permit TBE, deeds to a couple as “husband and wife” are presumed to establish TBE. For the remaining states, a deed must specifically state that the property is to be held as TBE.

(Note: Some states’ TBE statutes refer specifically to “husband and wife,” and the law may still be unsettled as to whether deeds to a “married couple,” or deeds which state something other than “husband and wife” establishes a TBE.)

In the case of divorce, property held as TBE automatically converts to a tenancy in common. Unless there are court orders to the contrary, each spouse would retain their respective share of the property and the tenants in common rules would apply.

4. Community property

Community property is a form of ownership by a married couple for property they intend to own together. Community property includes anything earned or acquired by one or both parties during the marriage, including real property paid for with community income. Community property does not include assets owned by either spouse prior to the marriage or acquired after a legal separation. Gifts or inheritances received by one spouse during the marriage are also excluded. Sale or encumbrance of community property requires the approval and agreement of both spouses.

Upon death of a spouse, one half of the property is retained by the surviving spouse and the other half is passed down to the heirs of the deceased spouse, either by will or trust or by intestacy.

In the case of divorce, a court in a community property state will split all community property assets 50/50, unless both parties agree on another arrangement.

There are only nine true community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Five other states – Alaska, Florida, Kentucky, South Dakota, and Tennessee – have laws which permit married couples to establish community property agreements, or community property trusts that allow an equal division of property. 

5. Community property with right of survivorship

Of the nine community property states, all but Louisiana, New Mexico and Washington permit married couples to establish community property with right of survivorship. The standard rules for community property will apply, except that upon the death of one spouse, the community property assets of the deceased spouse will pass to the survivor.

In Arizona, California, Idaho, Nevada and Wisconsin, a deed to a married couple intending to create community property with right of survivorship must state “community property with right of survivorship,” or words to that effect. In Texas, a written survivorship agreement must be executed by the married couple. In Alaska, which permits optional community property agreements, survivorship can be established as part of the agreement.

We hope you find this information helpful. However, this article addresses only the most common ways that death and divorce may impact how real property can be owned and transferred. It is important to remember that there are many nuances in this area with respect to applicable local and state laws. Should you have any questions regarding these methods of holding title, please consult your local Doma Title Insurance, Inc. underwriting counsel.

Pat Schwery is Vice President, Regional Underwriting Counsel for the Midwest Region of Doma Title Insurance, Inc.