Tenancy by Entirety
What it is:
Tenancy by entirety is property ownership in which all joint owners have equal portions of ownership that are immediately allocated to remaining owners if one owner dies.
How it works/Example:
Also called joint tenants with right of survivorship (JTWROS), property owned according to tenancy by entirety is wholly owned by all living owners. Unlike joint tenants in common (JTIC), an owner's particular ownership percentage does not posthumously become part his estate. Instead, the ownership portion is distributed among the surviving owners.
For example, suppose Bob and Jack own a seaside holiday apartment according to tenancy by entirety. If Jack dies, Bob automatically becomes the sole owner of the apartment.
Why it matters:
Tenancy by entirety should not be confused with joint tenants in common (JTIC), wherein the portion of a deceased owner does not transfer automatically to remaining owners. Note that even though a deceased owner's portion instantly passes to surviving owners under tenancy by entirety, its individual value may be subject to inheritance taxes.