During a divorce, the main points of contention are always child custody and property division. Who gets the house? Who gets the family heirlooms? When determining property division during divorce, the place to start is to determine whether the property is considered marital property or separate property.
Marital property is defined as "all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of the final divorce hearing and owned by either or both spouses as of the date of filing of a complaint for divorce." T.C.A. 36-4-121(b)(1)(A). Of course that's not all, the statute goes to to explain in great detail what would and would not be considered marital property. For our purposes, using this simple statement as a guidepost should give a good idea of what a court would consider marital property.
Separate property is "all real and personal property owned by a spouse before marriage." T.C.A. 36-4-121(b)(2)(A). Further, gifts to one spouse during the marriage, inheritance, and pain and suffering awards are also considered separate property in Tennessee. The main takeaway here is to realize that separate property remains separate if it fits the statute and if it was intended by the spouse to remain separate property.
Now that we have an understanding of what is considered marital property and what is considered separate property by Tennessee courts, we can delve deeper into how the court divides property.
Division of Marital Property When deciding how to divide marital property in Tennessee, a court will consider all relevant factors including: (1) The duration of the marriage; (2) The age, physical and mental health, vocational skills, employability, earning capacity, estate, financial liabilities and financial needs of each of the parties; (3) The tangible or intangible contribution by one party to the education, training or increased earning power of the other party; (4) The relative ability of each party for future acquisitions of capital assets and income; (5) The contribution of each party to the acquisition, preservation, appreciation, depreciation or dissipation of the marital or separate property, including the contribution of a party to the marriage as homemaker, wage earner or parent, with the contribution of a party as homemaker or wage earner to be given the same weight if each party has fulfilled its role; (6) The value of the separate property of each party; (7) The estate of each party at the time of the marriage; (8) The economic circumstances of each party at the time the division of property is to become effective; (9) The tax consequences to each party, costs associated with the reasonably foreseeable sale of the asset, and other reasonably foreseeable expenses associated with the asset; (10) In determining the value of an interest in a closely held business or similar asset, all relevant evidence, including valuation methods typically used with regard to such assets without regard to whether the sale of the asset is reasonably foreseeable. Depending on the characteristics of the asset, such considerations could include, but would not be limited to, a lack of marketability discount, a discount for lack of control, and a control premium, if any should be relevant and supported by the evidence; (11) The amount of social security benefits available to each spouse; and (12) Such other factors as are necessary to consider the equities between the parties. T.C.A. 36-4-121(c). The above factors are applied and analyzed by courts to divide marital property. Remember, marital property is all real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage. This does not apply to separate property, which will be discussed in the next section. It is also extremely important to understand that courts divide marital property according to these factors equitably, not equally. Courts strive to be fair and divide property accordingly.
Separate Property and When it Becomes Marital Property Any gifts to one spouse before or during the marriage, inheritance, pain and suffering awards, and real or personal property owned before the marriage are considered separate property in Tennessee. Just like the name sounds, separate property is not divided by the courts after a divorce or separation and remains with the spouse who originally possessed it. That being said, separate property can become marital property by the actions of the owner. There are two ways that separate property can become marital property: transmutation and commingling. Transmutation occurs as a result of a transfer by contract or a mere change in legal title. For example, if a wife has a bank account before the marriage, it is separate property. If after the marriage, she adds her husband's name to the account, then it becomes marital property by transmutation. The same applies to a deed on a house. A house owned by one party starts as separate property, but becomes marital property after they add their spouse to the deed. Courts will look to the intent of the parties. If property is titled in one spouse's name and the other spouse is added post marriage, the general rule is the property changes from separate to marital property. Commingling is when separate property becomes marital property if inextricably mingled with marital property or the separate property of the other spouse. Going back to the bank example, imagine that the wife had a separate bank account prior to marriage. For 10 years during the marriage, she and her husband used that account as their primary bank account, and deposited all money earned from work and post marriage investments into it. It would be impossible to decipher what amount belongs to whom, because of the commingling of the separate and marital property. The bank account would be considered marital property. ______________________ I hope that this was helpful, and thank you for taking the time to read it. As with any legal issue, the best course of action is to consult an attorney. All legal situations are nuanced and slightly different. It is important to apply the law to the exact facts of your case. Finally, timing is everything. If you think you have a legal issue, contact us immediately.
Disclaimer: this post is intended to be informational and is not to be considered legal advice. Use of the information contained above does not create an attorney/client relationship.