Tenancy by the entirety is a type of real estate ownership only available to married couples in North Carolina. Entirety ownership means that the marriage owns the real property, not the individual parties to the marriage. This means that one party to the marriage cannot sell or borrow against the property without the consent of the other party. The primary benefit of tenancy by the entirety ownership is asset protection. If a creditor secures a judgment against one party to the marriage, the creditor will not be able to foreclose against and sell the real property owned by the married couple as tenants by the entirety.
Liens will be protected, even if one of the parties has an outstanding judgment docketed against them in the county where the real property is purchased. For instance, if a husband has a $10,000 small claims judgment against him docketed in New Hanover County, the judgment will not attach to property bought in the County by the husband and his wife if acquired as tenants by the entirety.
Tenancy by the entirety property ownership is automatic in a sense, but not required. N.C. Gen. Stat. § 39-16.3 governs tenancy by the entirety property ownership in North Carolina and states that if a married couple acquires real property and both parties are identified on the deed, the married couple will own the property as tenants by the entirety unless the deed states something to the contrary.
Tenancy by the entirety can also be a helpful estate planning tool. Title to the property automatically goes to the surviving spouse when one party to the marriage passes.
Since tenancy by the entirety is a creation of North Carolina state law, it is limited by the Supremacy Clause in the United States Constitution. Federal law takes precedent over tenancy by the entirety ownership. The consequences of this are that the federal government may sever the entirety ownership and collect against a debtor’s interest in entirety owned property for things like criminal sanctions and tax delinquency.
Ownership of tenancy by the entirety property can be terminated by a deed which expressly alters the prior deed. A grant of divorce also immediately converts tenancy by the entirety ownership to ownership as tenants in common. Tenancy by the entirety is a type of property ownership available in North Carolina that is easy to establish and serves as a powerful asset protection measure.