Property and Debt Division in a Tennessee Divorce

From The Mid-South Divorce Guide, chapter 13, by William W. Jones
IV, a Memphis family law attorney and Rule 31 Listed Family Mediator
licensed in Tennessee and Mississippi. This guide covers Shelby, Tipton
and Fayette Counties in Tennessee and DeSoto, Tate and Tunica Counties
in Mississippi.

Questions this page answers

• How is property divided in a Tennessee divorce?
• What is marital property in Tennessee?
• Who is responsible for debt after divorce?
• What does equitable distribution mean?

In a divorce that is ultimately settled, you have two documents. One
divides your property, your debts, and your assets. The other one deals
with the children.

I generally refer to separating your property, your debts, and your
assets as splitting up the pots and pans. She is going to keep this pot,
I am going to keep this pan.

This chapter is about pots and pans.

Marital versus separate

Everything you own falls into one of two buckets.

Marital property is generally what the two of you
acquired during the marriage, up through the date of the final divorce
hearing. It does not matter whose name is on it. A 401(k) in your name
alone, funded during the marriage, is marital property. So is the truck
titled to your spouse.

Marital
property also includes the increase in value of separate
property, where both spouses substantially contributed to preserving
or growing it. And it includes vested and unvested pension, retirement,
and stock option benefits that accrued during the marriage.

Separate property is what you brought into the
marriage, plus anything you received during the marriage by gift,
inheritance, bequest, or devise. It also includes pain and suffering
awards and victim compensation awards.

How separate
property stops being separate

This is where people get surprised.

Commingling. You inherit sixty thousand dollars and
deposit it into the joint checking account, where it mixes with marital
money and gets spent on marital things. That money can lose its separate
character. Same inheritance parked in an account in your name alone,
untouched, generally stays yours.

Transmutation. You owned the house before the
marriage, then you add your spouse to the deed, refinance jointly, and
use marital income to pay the mortgage and remodel the kitchen. That
house may have transmuted into marital property. You treated it as
marital, so the law may treat it as marital.

The lesson from both doctrines is the same. Separate property stays
separate when you keep it separate. If you have an inheritance, a
premarital account, or a family property interest, tell your lawyer at
the first meeting, and bring documents showing where it came from and
what you did with it. Tracing is a document exercise. No documents, no
tracing.

Fair, not identical

Tennessee Code Annotated section 36-4-121 requires the court to
divide marital property equitably, in proportions the court deems just,
and specifically without regard to marital fault.

The statute lists a set of factors, including the duration of the
marriage; the age, health, earning capacity, and financial needs of each
party; each party’s contribution to acquiring, preserving, appreciating,
or dissipating the property, including contribution as a homemaker; the
value of each party’s separate property; the economic circumstances of
each party at the time the division takes effect; and the tax
consequences of the division.

A long marriage with one spouse out of the workforce raising children
often divides close to evenly, because homemaking is expressly a
recognized contribution. A short marriage with two earners and separate
finances may divide very differently.

Dissipation

Dissipation is
wasteful spending of marital money for a purpose contrary to the
marriage. Money spent on an affair. Gambling losses. Assets sold to a
friend for far less than they were worth. It can be considered whether
it happened before or after the complaint was
filed.

If your spouse spent marital money that way, the court can account
for it in the division. That is the real reason to read those credit
card statements line by line rather than skimming the totals. A hotel in
Nashville, a jewelry store in February, four thousand dollars to an
account nobody can explain. Prove where it went and the value comes off
the top before anything gets divided.

Debt

Debt gets divided too, and debt is where people get hurt after the
divorce is over.

Understand the difference between the decree and the contract. The
decree can order your spouse to pay the Chase card. It does not remove
your name from the Chase account. If your spouse stops paying, Chase
comes after you, and Chase is not a party to your divorce and does not
care what a judge ordered.

So whenever it is possible, close joint accounts, refinance joint
debt into one name, and get your name off things rather than relying on
a promise. Where that is not possible, ask your lawyer about
indemnification language and about security. Being able to sue your ex
for breaching the decree is a remedy. It is a slow, expensive,
unsatisfying remedy compared to just not being on the loan.

Valuation date

Marital property is generally valued as of a date near the final
hearing, which means a volatile asset can change value while your case
is pending. If your case involves a business, a large investment
account, or real estate in a moving market, ask your lawyer about how
valuation timing is being handled.

Download the whole guide. All 35 chapters plus four blank client forms, complimentary, no email required. Download The Mid-South Divorce Guide (PDF)

Questions about your own situation? The Jones Law Firm, 5100 Poplar Ave, Suite 708, Memphis, TN 38137. Call (901) 761-5353.