Batson Nolan explains the process courts utilize to divide marital property.
One of the most important, complicated, and frequently misunderstood aspects of Tennessee divorce actions concerns the division of marital property. The distribution of marital property in Tennessee is governed by statute – Tenn. Code Ann. § 36-4-121. Accordingly, this article will focus on providing a general explanation of the process courts utilize to divide marital property.
The first step in property division in a divorce is, naturally, identifying all of the property that may or may not be subject to division. For purposes of a divorce action, the term “property” includes not just tangible items like a car, house, land, etc., but encompasses debt, retirement funds, investments, and the like. Thus, it is extremely important for both parties to identify every piece of property they own either jointly or separately, as Court’s can and will decline to finalize a Final Decree of Divorce where the parties did not make a full and fair disclosure of their assets.
The second step in property division is a determination of whether each piece / item of property is either separate or marital, as only marital property is subject to division.
“Separate Property,” as defined by Tenn. Code Ann. § 36-4-121(b)(2), generally includes the following:
- All real and personal property owned by a spouse before marriage;
- Property acquired in exchange for property acquired before the marriage;
- Income from and appreciation of property owned by a spouse before marriage;
- Property acquired by a spouse at any time by gift, bequest, devise, or descent;
- Pain and suffering awards, victim of crime compensation awards, future medical expenses, and lost wages; and
- Property acquired by a spouse after an order of legal separation where the court has made a final disposition of property.
Any property which is determined to be separate property, pursuant to the Tenn. Code Ann. 36-4-121, is not subject to division during divorce.
However, under Tennessee common law, there are two ways that separate property can become marital property – “commingling” and “transmutation.”
“Commingling” occurs when separate property is “inextricably mingled” with marital property or with the separate property of the other spouse, such that it is impossible or not unreasonable to expect the same to be re-divided. If separate property is treated as marital property, a presumption arises that there has been a gift of the separate property to the marital estate. “Transmutation” occurs when separate property is treated in such a way as to give evidence of an intention that it is marital.
What constitutes “Marital Property,” pursuant to Tenn. Code Ann. § 36-4-121(b)(1), is much more complicated and is the subject of a great deal of Tennessee litigation. Generally speaking, marital property is property that was acquired during the course of the parties’ marriage, regardless of which spouse purchased it. It also includes the following, more specific types of property:
- Income from and increased value of separate property if each party “substantially contributed” to its upkeep and increased value;
- Pension benefits, stock option rights, retirement benefits, and other fringe benefits accrued as a result of employment during the marriage;
- Damages recovered in legal actions for wages lost during the marriage, reimbursement for medical bills paid with marital funds, and property damage to marital property.
Any property determined to be marital property by the court is subject to division in the divorce. However, it is important to note that the division of marital property and assets is not considered as income, nor affects child support or alimony purposes, unless the asset will later create additional income after the division.
After determination is made as to whether the property is marital or separate, assuming the parties’ cannot agree amongst themselves, the court will then determine how to equitably divide the marital property. Tennessee is an “equitable distribution” state. An equitable distribution of property does not mean, however, an equal 50/50 type split, or that each party will receive a share of each piece of property. In determining the equitable division of marital property, Tennessee Court’s look to the factors provided by Tenn. Code Ann. § 36-4-121(c), which are as follows:
- The duration of the marriage;
- The age, physical and mental health, vocational skills, employability, earning capacity, estate, financial liabilities and financial needs of each of the parties;
- The tangible or intangible contribution by one (1) party to the education, training or increased earning power of the other party;
- The relative ability of each party for future acquisitions of capital assets and income;
- 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 a homemaker, wage earner or parent, with the contribution of a party as a homemaker or wage earner being given the same weight;
- The value of the separate property of each party;
- The estate of each party at the time of the marriage;
- The economic circumstances of each party at the time the division of property is to become effective; 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;
- The value of a business interest or interest in other similar asset;
- The amount of social security benefits available to each spouse; and
- Any other factors necessary to consider the equities between the spouse.
In short, Tennessee Courts will utilize the above factors and its best judgment to determine how to divide the parties’ marital property in the manner that is most fair in accordance with Tennessee law.
The overview presented above is by no means an exhaustive analysis of the law in Tennessee; rather, it is a simple snapshot. It is always in your best interest to consult with an attorney when you make the decision to enter into the divorce process, especially if you want to ensure your property is the subject of a fair division.
The experienced attorneys at Batson Nolan routinely deal with the complexities of property division, as well as all manner of domestic issues, and are ready and available to help you navigate your way through. Give us a call today!