HOW SEPARATE PROPERTY BECOMES MARITAL PROPERTY DURING A DIVORCE

HOW SEPARATE PROPERTY BECOMES MARITAL PROPERTY DURING A DIVORCE

When a married couple divorces, Tennessee law creates a presumption that any property which either spouse owned before the marriage is that spouse’s separate property which he or she is allowed to keep.  However, Tennessee law also says that what started as a spouse’s separate property can be transformed into marital property, which is then subject to division in the divorce.  A common situation where this arises is when one of the spouses owned a house before the marriage, and the other spouse tries to claim a share of the property’s value in the divorce.

Tennessee courts use four factors to determine whether a house owned by one spouse before the marriage has been transformed into marital property:  whether the property was used as a marital residence; the amount of on-going management and maintenance of the property contributed by both parties; whether title to the property was placed in joint ownership; whether the credit of the non-owner spouse was used to improve the property.  The court considers the specific facts of each case to determine whether, based on these factors, separate property has turned into marital property.

A recent case from the Court of Appeals in Nashville, Liner vs. Liner, Jr., demonstrates how this works.  Husband owned a house before he and Wife married.  During the marriage, Husband refinanced the house, did not put Wife’s name on the title to the property, but did add her name to the mortgage, making her equally responsible for the mortgage debt.  Wife earned much less income than Husband during the marriage, but what she did earn went into a joint checking account from which the mortgage, utilities, and other expenses were paid.  Wife also contributed to the upkeep of the house by making repairs, painting, laying flooring, installing counter tops, landscaping, and other actions.  The court determined that the house had become marital property based on:  it was used as a marital residence; Wife’s credit was used in the refinancing; Wife had made substantial contributions (more sweat equity than financial) to the maintenance and management of the property.

This case does not set out any new legal standards, but it contains a clear statement of the rules for determining when separate property has been transformed to marital property.  The full text of the decision is available at
http://www.tba2.org/tba_files/TCA/2011/linerc_041411.pdf