In Tennessee, Transmutation Does Not Include Joint Tax Return Refund
Tennessee law case summary for transmutation and prenuptial agreements in Tennessee family law from the Tennessee Court of Appeals.
In the case of Noel C. Hunt and Trisha L. Jolley Hunt, the wife claimed that she should have received a portion, if not all, of the tax refunds paid rather than allowing this to become a portion of the property of the husband’s estate. Hunt, the decedent, died on May 15, 2008 and his wife, Trisha L. Jolley Hunt survived him. At the time of his death, the couple had been together for 18 years, though they were married for just two years. The decedent received a diagnosis of cancer two years prior to his death.
He had a taxable estate and contacted his lawyer to proceed to undertake measures to reduce the size of the gross estate. This occurred through a trust account, where the IRA accounts funds went. After this wiring of the funds, some funds went to the IRS as an estimated tax payment towards the income tax liability. No funds went into a joint account and no payments for estimated federal or tax income tax came from a joint account.
Before marriage, the couple entered into an antenuptial agreement starting from September of 2006. The agreement provides that all wages and earnings before and during the marriage will remain the separate property of each party. In this case, it is undisputed that the two filed a joint tax return for 2007 and that the 2007 refund check was mailed to the Hunt’s home. She deposited it into a joint account, though the decedent was deceased at the time of the refund. At the time of the 2008 filing, filed as joint tax returns, Mrs. Hunt had very little income and no withholding from any source. The refund was $33,658.
The Executor of the will, H. Wayne Grant, demanded that Mrs. Hunt endorse the refund checks to the Estate. She refused to do so and he filed a declaratory judgment action on behalf of the estate in August of 2010. Mrs. Hunt believed she was entitled to the tax refunds. In February of 2011, the court heard the case and, on June 29, 2011, the court awarded Mrs. Hunt a portion of the state and federal tax refund based upon the 165 days of the year over the total number of 365 days.
The Estate appealed stating that the trial court erred in awarding a portion of the 2008 state and federal income tax refunds to Mrs. Hunt who disputed the antenuptial agreement. Mrs. Hunt contended that the trial court erred when it failed to find the decedent and Mrs. Hunt held the tax return checks as tenants by the entirety and erred in divesting Mrs. Hunt of the alleged jointly held property.
In the appeals court’s decision, the court noted that filing a joint tax return does not change the underlying nature of the funds, nor does a jointly filed return create any property rights in the refund. For this reason, the appeals court reversed the order of the trial and remanded for further proceedings, including the necessity to name the full amounts the property of the Estate.
Court of Appeals of Tennessee At Knoxville, Direct Appeal from the Chancery Court for Hamilton County, No. 10-0718, Part II, Jeffrey M. Atherton, Chancellor.
Disclaimer: See original opinion for exact language. Legal citations omitted.
Memphis divorce lawyer, Miles Mason, Sr., JD, CPA practices family law exclusively and is founder of the Miles Mason Family Law Group, PLC, which handles Tennessee family law matters including divorce, child support, alimony, prenuptial agreements, child custody, parental relocation, child support modification, and alimony modification.