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When couples in Maryland acquire real estate together, they often hold the property as "tenants by the entirety." This form of ownership has particular legal implications, especially during a divorce. Understanding what tenants by the entirety means, how it is affected by divorce, and its risks and benefits can help divorcing couples make informed decisions about property division.
What Is Tenancy by Entirety?
Tenancy by the entirety is a specific type of property ownership available only to married couples. When a couple holds property this way, they own it as a single legal entity, not as two individuals.
Both spouses have an equal and undivided interest in the property, and neither can sell, mortgage, or transfer their share without the other’s consent. This form of ownership provides protection against individual creditors; if one spouse owes a debt, creditors cannot typically place a lien on the property or force its sale.
How Divorce Affects Property Held as Tenants by the Entirety
Divorce has a direct impact on property held as tenants by the entirety. When a couple divorces, the legal bond that created the tenancy by the entirety dissolves. In Maryland, this termination converts the ownership structure from tenancy by the entirety to tenancy in common. This change means that the former spouses will now own the property as individuals, with each having an undivided one-half interest.
The shift from tenancy by the entirety to tenancy in common has significant implications. Once the property is owned as tenants in common, either party can sell or mortgage their share without the other’s consent. Additionally, the protection against individual creditors is lost. Each party’s share of the property may now be subject to individual debts, which can lead to complications if one party has significant financial obligations.
Example Scenario
Imagine a couple, John and Mary, who own their home as tenants by the entirety. If they divorce, the home will automatically convert to a tenancy in common, and they will each hold a 50% interest. If John has accumulated significant debt, his creditors may now be able to pursue his half of the property, which was previously protected under the tenancy by the entirety arrangement.
Risks and Benefits of Holding Property as Tenants by the Entirety
Before deciding to hold property as tenants by the entirety, it's essential to understand both the benefits and risks associated with this form of ownership, especially if a divorce could be on the horizon.
Benefits of Tenancy by the Entirety
- Protection from Individual Creditors: One of the most significant benefits of tenancy by the entirety is protection from individual creditors. If only one spouse has debts, creditors generally cannot place liens on the property or force its sale. This protection is not available with other forms of ownership, such as joint tenancy or tenancy in common.
- Automatic Right of Survivorship: If one spouse passes away, the surviving spouse automatically inherits the entire property. This transfer occurs without the need for probate, making the process smoother and quicker for the surviving spouse.
- Simplified Management During Marriage: Since the property is owned as a single legal entity, management is often more straightforward. Decisions must be made jointly, but this can lead to more coordinated financial planning and investment decisions.
Risks of Tenancy by the Entirety
- Complications During Divorce: As explained, tenancy by the entirety is terminated upon divorce, converting the property to tenancy in common. This change can lead to disputes over property division, particularly if one party wants to sell their share or if there are unresolved debts. The automatic conversion to tenancy in common can also complicate financial matters, as each party’s share becomes subject to individual liabilities.
- Lack of Flexibility: Since both spouses must agree to sell, mortgage, or transfer the property, tenancy by the entirety can limit flexibility. If one party does not consent, the other cannot take action. This lack of flexibility can become a significant issue if the marriage is already under strain.
- Possible Exposure to Joint Debt: While individual creditors cannot pursue property held as tenants by the entirety, joint creditors (creditors to whom both spouses owe money) can still place claims on the property. If both spouses have accumulated joint debt, this form of ownership does not protect the property from those obligations.
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Considerations for Divorcing Couples in Maryland
If you are considering a divorce in Maryland and you own property as tenants by the entirety, it's essential to plan for how this property will be managed, divided, or sold. Because of the automatic conversion to tenancy in common, couples should try to address property division during divorce negotiations. Here are a few strategies to consider:
- Sell the Property Before Divorce is Finalized: If both parties agree, selling the property before the divorce is finalized can simplify the division of assets. The proceeds can be divided as part of the divorce settlement, reducing the potential for disputes.
- Agree to Keep the Property: If one spouse wishes to keep the property, the other can agree to transfer their interest in exchange for other assets. This arrangement can help preserve the stability of the home, especially if children are involved. However, both parties should be aware that transferring ownership will remove the protections of tenancy by the entirety.
- Negotiation in Mediation or Court: If the parties cannot agree on how to handle the property, the matter may need to be resolved in mediation or through the court system. In Maryland, the court has broad discretion to divide marital property equitably, which may include ordering the sale of the property or awarding it to one spouse.
Conclusion
Tenancy by the entirety can offer valuable protections for married couples in Maryland, but it also comes with certain risks, especially in the event of a divorce. Understanding how this form of ownership works, its benefits and limitations, and how it changes upon divorce is crucial for making informed decisions about real estate and asset management.
If you are considering a divorce and own property as tenants by the entirety, consulting with an experienced Maryland family law attorney is essential. An attorney can help you navigate the complexities of property division, ensure your rights are protected, and guide you toward a resolution that aligns with your financial goals and personal needs.
Contact Our Family Law Firm Today
If you have questions about how divorce might affect your property, or if you need legal guidance on dividing assets, our Maryland-based family law firm is here to help. Baumohl Hamburg LLC has extensive experience handling complex property division issues, and we can provide the clarity and support you need during this challenging time. Contact us today to schedule a consultation.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as legal advice. It is always recommended to consult with a qualified attorney for personalized guidance and representation in legal matters.
About the Author
Harry Baumohl, one of Maryland’s foremost family law practitioners, is a founder of Baumohl Hamburg LLC, located in Pikesville, Maryland, just off the Baltimore Beltway. With significant experience representing clients in Baltimore County, Baltimore City, Carroll County, Harford County, Howard County, and Anne Arundel County, Harry offers steady, compassionate, and strategic legal guidance. Known for his proactive approach and insightful representation, he is dedicated to securing the best possible outcomes for his clients during their most challenging times.
