Property Division Laws & Factors in Tennessee Divorce Answers to FAQs
Tennessee divorce property division: house, agreement, laws, factors, process, marital, retirement, debts, fault, pet, dog, taxes, dissipation, commingling, transmutation, and legal information answers to frequently asked questions.
EQUITABLE DIVISION IN TENNESSEE DIVORCE
What is equitable distribution of marital property in a Tennessee divorce?
Tennessee law is very clear – equitable distribution does not mean equal distribution. Equal division describes awarding 50% to each spouse, also described as a 50/50 split. But it is not unusual for divisions (settlements and trial results) to be close to a 50/50 split. Many spouses are not concerned about reaching a mathematically precise division. A few spouses are very concerned about settling for exactly 50/50. In divorce trials, many judges begin with an equal property division and then adjust, adding or reducing, a spouse’s percentage based on Tennessee’s property division factors (discussed below).
What does equitable division of property mean in Tennessee divorce?
An equitable division means a fair distribution of marital property after considering all of the legally relevant circumstances and factors unique to the particular divorcing spouses.
Is Tennessee an equitable distribution state?
Yes. Tennessee is an equitable distribution state. Depending upon the context, equitable distribution can also be referred to as equitable division of marital property in divorce.
Is property division different in other states?
Yes. Each and every state’s law is different. Many other states have marital property laws that could also be described as equitable distribution but with different, yet similar, factors. Tennessee is not a “community property” state.
What effect does reconciliation have on equitable distribution?
In general, reconciliation will have no impact on a future equitable distribution unless the spouses, as a result of their reconciliation, commingled or transmuted assets, executed a post-nuptial agreement, or had a marriage that lasted more than ten (10) years when it otherwise would not have. If additional assets resulted from additional earnings or asset acquisition, then those assets could become subject to division. Also see the discussion below about marriages lasting longer than ten (10) years for social security benefits purposes. Lastly, note that length of the marriage is a factor to be considered by the court in its property division determination.
MARITAL PROPERTY IN TENNESSEE DIVORCE
What is marital property in Tennessee divorce law?
In very general terms, marital property describes either assets acquired during the marriage from earnings during the marriage, or assets acquired because separate property was transmuted or commingled.
Marital property must be divided in all Tennessee divorces. In order to divide marital property, a court must identify what marital property exists, classify the property as either marital or separate, value the assets, and divide the property equitably. In determining what is marital property, the details (and documents) matter a great deal.
How is marital property defined in Tennessee divorce law?
Tennessee law reads in part:
“‘Marital property’ means 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, except in the case of fraudulent conveyance in anticipation of filing, and including any property to which a right was acquired up to the date of the final divorce hearing, and valued as of a date as near as reasonably possible to the final divorce hearing date. . . . All marital property shall be valued as of a date as near as possible to the date of entry of the order finally dividing the marital property.”
“‘Marital property’ includes income from, and any increase in value during the marriage of, property determined to be separate property . . . if each party substantially contributed to its preservation and appreciation, and the value of vested and unvested pension, vested and unvested stock option rights, retirement or other fringe benefit rights relating to employment that accrued during the period of the marriage.”
“‘Marital property’ includes recovery in personal injury, workers’ compensation, social security disability actions, and other similar actions for the following: wages lost during the marriage, reimbursement for medical bills incurred and paid with marital property, and property damage to marital property.”
“As used [here], ‘substantial contribution’ may include, but not be limited to, the direct or indirect contribution of a spouse as homemaker, wage earner, parent or family financial manager, together with such other factors as the court having jurisdiction thereof may determine.”
What does the term property include?
In Tennessee divorce, property means assets. Assets can include cash, money, tangible and intangible personal property, real property, intellectual property, annuities, vested and unvested pensions and retirement savings, businesses, and more. In most discussions of marital property, debts are included. Technically, the division of debts has its own considerations, discussed below in more detail.
What are a spouse’s rights to property owned by the other spouse prior to the marriage?
None unless there is:
- A pre-nuptial agreement;
- A post-nuptial agreement;
- Commingling (see discussion below);
- Transmutation (see discussion below); or
- Dissipation (see discussion below).
What about appreciation of marital property in Tennessee divorce law?
The value of appreciation of marital property is marital property.
SEPARATE PROPERTY IN TENNESSEE DIVORCE
What is separate property in Tennessee divorce law?
Separate property is not subject to division by a divorce court. Marital property includes those assets and debts subject to division in divorce.
How is separate property defined in Tennessee divorce law?
In Tennessee, “non-marital property” is commonly called “separate property.” Separate property means:
- All real and personal property owned by a spouse before the marriage;
- Property acquired in exchange for property a spouse acquired before the marriage;
- Income from property (for example, rent) and appreciation of property (increase in value) owned by a spouse before marriage, except when characterized as marital property;
- Property acquired by a spouse at any time by gift, bequest, devise, or descent (inheritance);
- If a spouse suffers a personal injury or is the victim of a crime, then pain and suffering awards, victim of crime compensation awards, future medical expenses, and future lost wages; and
- Property acquired by a spouse after an order of legal separation where the court has made a final disposition of property.
To learn more about Tennessee classification law (determination of whether property is marital or separate), see our Family Law Blog category Tennessee Property Classification.
IDENTIFICATION OF PROPERTY IN TENNESSEE DIVORCE
How do I learn about assets in a Tennessee divorce?
In most Tennessee divorces, learning what assets exist involves several layers of effort. First, before filing for divorce obtain documents for all banking and investment accounts and any other assets available to both spouses. (For more detailed advice and instructions, see Grab the Documents.) Read the tax returns. Often, valuable assets may generate income which may appear on the marital tax returns. Next, divorcing parties can issue written discovery, namely interrogatories and requests for production of documents. These require one spouse to share information and documents with the other spouse. Also, a lawyer can issue subpoenas to banks and investment companies and take the deposition of the other spouse. Finding a personal financial statement listing assets and debt, something given to a lender as part of a loan application, is likely to list all valuable assets and all income.
CLASSIFICATION OF PROPERTY IN TENNESSEE DIVORCE
What does classification of assets mean in Tennessee divorce law?
In Tennessee divorce law, classification of assets means determining which assets are marital property and which are separate property. Only marital property is subject to division in divorce. Separate property will remain with the original owner. Keep in mind, however, that existence and amount of separate property is a factor to be considered in division of marital property. Which means that if one spouse has significantly more in separate property than the other spouse has, then the less propertied spouse could be awarded more than half of the marital property.
What does appreciation of separate property mean in Tennessee divorce law?
In general, appreciation of separate property maintains its character as separate property. There are some important exceptions to the general rule with retirement assets such as 401(k) accounts.
COMMINGLING OF PROPERTY IN TENNESSEE DIVORCE
What is commingling of funds in Tennessee marriage?
In Tennessee divorce law, separate property (usually money) which gets commingled with marital property can become marital property. When separate property is commingled during a marriage, it is mixed together to such an extent that the funds cannot be separated. Commingled property is described as “inextricably” mingled. If separate property can be traced easily, then the court is more likely to award it to the spouse who originally owned it.
If the spouses have not kept their non-marital property separate, but they have combined their ownership, can that property be divided as marital property in Tennessee divorce law?
Spouses often commingle their marital and non-marital property. If separate property is commingled, it becomes marital property. This can cause difficult issues for the court. Even when a court finds the property was once separate but became marital property, the court can consider other property division issues, as part of the equation, and look to make a fair distribution overall.
Can you give me examples of commingling of assets?
Yes, see Divorce Commingling Funds Assets with Marital Property in Tennessee for three specific Tennessee case law examples of commingling.
TRANSMUTATION OF PROPERTY IN TENNESSEE DIVORCE
What is transmutation of assets in Tennessee divorce law?
Transmutation converts separate property into marital property and, consequently, making the money, funds, or assets subject to division in divorce. Transmutation happens when a spouse transfers his or her separate property to ownership by the spouses jointly. By transferring property from one spouse to both spouses, a rebuttable presumption is created that the spouse has made a gift of separate property to the marital estate. This presumption can be rebutted by evidence that clearly indicates an intent that the property remain separate.
Can you give me an example of transmutation of assets in Tennessee divorce law?
Yes. Say a spouse owns a house before marrying. During the marriage, that spouse refinances the house. In refinancing, the new mortgage is made in both spouse’s names and the other spouse is added to the deed. Absent some sort of written agreement to the contrary, the court will treat the house as marital property during the divorce. Transmutation converts separate property into marital property.
Can my spouse share in my inheritance in divorce?
In Tennessee, an inheritance is separate property. However, there is a risk that it could become marital property – and thus subject to sharing with your spouse – because of how you treat the money.
To prevent your inheritance from becoming marital property, see an attorney just in case — especially if it’s a large sum of money. Don’t commingle the money by putting it in a jointly-owned bank account. If your house is owned jointly with your spouse, then don’t use the money to pay the mortgage on your home, and don’t use the money to pay for home repairs or renovations. For more on this discussion, see Commingling in Tennessee: Keeping Premarital Property Separate.
It’s important to note, however, that the value of a spouse’s separate property is a factor in dividing marital property. Thus, if your inheritance is significantly larger than the amount of marital property, then you may get less of the marital property.
If a married person owns a house prior to marriage, can a spouse claim an interest in it in Tennessee?
Yes. Real property is different than other types of assets. By virtue of marriage, every spouse acquires a marital interest in real property, which is deemed a claim against the title. Regardless, in divorce one of the first issues most judges will determine is what contributions, if any, did the non-titled spouse contribute to the appreciation or preservation of the real property. Did the non-titled spouse help make mortgage payments, pay taxes, or help fix-up the house? If so, then most judges will consider awarding a fair share of the appreciation (if any) to the non-titled spouse.
DISSIPATION OF PROPERTY IN TENNESSEE DIVORCE
What is dissipation of assets in Tennessee divorce law?
In general, dissipation of assets means wasteful spending. If a court determines a spouse dissipated assets, then that spouse can be required to pay an equitable share of those assets to the other spouse. Even when the assets are already lost or given away.
How is dissipation of marital assets determined in Tennessee divorce law?
A Tennessee legal opinion stated:
“Trial courts must distinguish between what marital expenditures are wasteful and self-serving and those which may be ill-advised but not so far removed from ‘normal’ expenditures occurring previously within the marital relationship to render them destructive. . . . In determining whether dissipation occurred, we find the trial court should consider the following:
(1) whether the evidence presented at trial supports the alleged purpose of the various expenditures, and if so,
(2) whether the alleged purpose equates to dissipation under the circumstances. . . .
The first prong is an objective test. To satisfy this test, the dissipating spouse can bring forward evidence, such as receipts, vouchers, claims, or other similar evidence that independently support the purpose as alleged. The second prong requires the court to make an equitable determination based upon a number of factors. Those factors include:
(1) the typicality of the expenditure to this marriage;
(2) the benefactor of the expenditure, namely, whether it primarily benefited the marriage or primarily benefited the sole dissipating spouse;
(3) the proximity of the expenditure to the breakdown of the marital relationship;
(4) the amount of the expenditure.”
Can you give me examples of dissipation of assets in Tennessee divorce law?
Examples of dissipation include foolishly spending money, giving money away without benefit to the marital estate, buying jewelry for a paramour, gambling, and spending money for an improper or illegal purpose, such as drugs. Courts do not look favorably upon such activities. Often, courts will determine how much property was dissipated and make a substantial award to the other spouse. This award could be paid as property division or alimony in solido. For additional discussion, see our video: Dissipation of Marital Property in Tennessee Divorce Law.
VALUATION OF PROPERTY IN TENNESSEE DIVORCE
How does the court determine the value of a marital asset?
It’s easy to tell how much a bank account or publicly traded stock is worth. Just look at the monthly statements or current stock quotes. In general, courts look to determine each asset’s fair market value. When spouses cannot agree on the value, the court will decide. The spouses may testify and give their opinions. In valuating some assets, however, the most persuasive proof might be provided by an appraiser or other qualified expert. Common examples of property that might require professional testimony include businesses, pensions, jewelry, collections, and real estate. The valuation process can be expensive, especially if both spouses hire experts.
See Business Valuation in Tennessee Divorce Law for more information about valuation issues.
Is a professional license or degree an asset subject to valuation and division in divorce?
No. The license or degree itself cannot be valued and divided. The professional practice, or certain assets contained therein (office equipment, for example), could be subject to valuation and division in certain circumstances. Whether it is a medical practice, law practice, accounting firm, architectural firm, or dental practice, division of professional practices can be some of the most complicated issues family lawyers face.
For more information, see When Professionals Divorce in Tennessee: Valuing Professional Practices. Also, see our Tennessee Family Law Blog category on Business Valuation which includes many professional practice and business valuation case law summaries, updates, and analysis.
How is the valuation of property determined?
At trial, Tennessee divorce courts must determine the value of assets at the date of divorce, or as near as possible to that date. Other states’ laws requires valuation of assets in the marital estate as of the date of separation. The standard of valuation of particular assets generally depends upon the asset itself. What is it? If the asset is an amount held in an investment account, then the account balance will serve as its value. For non-cash assets, in general, the value is the fair market value – the amount a buyer may pay for it on a particular date. Many judges refer to this as a “garage sale” value. When it comes to determining the value of a business, the standard of value issues can be very complicated. For further discussion, see Business Valuation in Tennessee Divorce Law.
PROPERTY DIVISION PROCESS IN TENNESSEE DIVORCE
Who will divide your property in Tennessee divorce law?
In Tennessee, if the spouses can agree on how to divide their property, then their agreement will be documented in a Marital Dissolution Agreement. If they cannot agree, then they will have to go to court and the judge will decide how to divide their property.
Judges have a lot of discretion with how to divide marital property. One judge may divide property one way for a couple from Covington, Tennessee, and a different judge might divide property in a different way for a couple from Fayette County, even though both couples have similar situations.
What is the process by which property and debt are distributed between the parties in a divorce trial?
In very general terms, each party is first awarded his or her separate property. Then the marital estate is divided according to the factors listed above. Finally, the debt is divided. Debt secured by specific property is usually given to the spouse receiving that property. A spouse will usually receive the debt which that spouse incurred prior to the marriage or incurred after separation. See the Tennessee Property Division Video Series to learn more.
What are the steps that courts take in dividing property in Tennessee divorce?
First, the court identifies property. Second, the court determines if the property is marital property or separate property. Third, assets are valued. Finally, the court divides the property.
In Tennessee, is the division of property in divorce always fifty-fifty?
No. Courts are directed to divide marital property equitably. Equitable does not mean equal. However, courts can divide marital estates equally and often start from that point, moving one way or the other based upon the property division factors.
What factors are considered in an unequal distribution of property?
The property division factors are listed in the statute. See Tennessee Property Division Factors. A typical situation in which a court could award marital property in an unequal distribution – in which all other factors are equal – could be when one spouse earns a great deal more money or contributed a great deal more to the marital estate. Additionally, for short-term marriages, Tennessee courts are directed to return the spouses to their financial condition prior to the marriage, at least to the extent that can be done.
Can I hide money from my spouse in a secret account?
No. Hiding money is unethical. Lying about hiding money could result in criminal charges of perjury. When a spouse is caught hiding money, that spouse’s credibility will likely be irreparably damaged. Forensic accountants (and divorce lawyers) often know where to look. For in-depth discussion, consider The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers by Memphis attorney Miles Mason, Sr., available on Amazon.com.
What if my spouse is hiding assets in a Tennessee divorce?
If a divorcing spouse suspects assets are hidden, hire a forensic accountant. Forensic accountants are specially trained to find hidden assets and income by examining financial statements, tax returns, bank statements, and research. If you find undisclosed assets or secreted income, proving the bad act could result in the hiding spouse being prosecuted for perjury or losing credibility with the judge. For more information, see Hidden Income and Hidden Assets in Tennessee Divorces.
Once a divorce action is filed, can a spouse be restricted from dealing with marital property or non-marital property?
One spouse’s right to transfer, assign, or convey property is not restricted unless that spouse is specifically enjoined (prevented) by a court from doing so. When many divorces are filed, attorneys can make sure that the “automatic injunction,” also called “mandatory injunction,” is issued. That injunction “restrain[s] and enjoin[s] both parties from transferring, assigning, borrowing against, concealing or in any way dissipating or disposing, without the consent of the other party or an order of the court, of any marital property.” Tennessee Code Annotated Section 36-4-106(d).
Parties are allowed to spend money “from current income to maintain the marital standard of living and the usual and ordinary costs of operating a business are not restricted by this injunction.”
If one spouse is still concerned that the other spouse will give away, hide, or foolishly spend money, then that spouse may ask the court to enjoin (forbid) certain financial activities to preserve the marital assets in addition to, or in conjunction with, the automatic injunction.
Where can I learn more about strategies in property division under Tennessee divorce law?
TENNESSEE PROPERTY DIVISION FACTORS
What factors does a Tennessee court consider in deciding property division?
- 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 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;
- 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 amount of social security benefits available to each spouse; and
- Such other factors as are necessary to consider the equities between the parties
For more detail and exact language, see Property and Debt Division Factors in Tennessee Divorce Law.
What factors does a Tennessee court consider in deciding debt division?
Tennessee law states that the court will consider the following factors in deciding debt division:
- The debt’s purpose;
- Which party incurred the debt;
- Which party benefited from incurring the debt; and
- Which party is best able to repay the debt.
As a practical matter, where debt secures a particular asset (for example, a car loan taken out to buy a car), a court will almost always require the party receiving the asset (the car) to pay the associated debt (the car loan). If both spouses signed on the loan, the court may require the spouse who receives the asset to refinance the debt, removing the other spouse from the loan. For more information, see Division of Marital Debts in Tennessee Divorce: A Practical Approach.
FAULT IN TENNESSEE DIVORCE
Can I get more in property division if my spouse is at fault?
No. If the other spouse is at fault for the end of the marriage, a spouse cannot receive more money in property division. In Tennessee, fault is not a factor when determining property distribution. However, fault is a factor for a Tennessee court to consider when determining alimony.
Is fault a factor in property division?
Not in Tennessee divorce law. As a practical matter, though, if a judge is presented with evidence of fault with respect to a request for alimony or attorney’s fees, many experienced family lawyers suggest that fault could indirectly impact property division. That is, if the trial judge decides to award more money in property division (money paid now) rather than alimony (money paid over time).
Does an affair matter in property division in a Tennessee divorce?
No. When a spouse has an affair, most people describe that as cheating or adultery. Cheating and adultery are grounds for divorce and, additionally, fault is a factor when Tennessee courts consider awarding alimony. Relative fault for having caused the end of the marriage is not a factor for division of marital property. But judges are human and could award additional money on property division instead of alimony (even if that reasoning isn’t stated on the record). For further discussion, read How Much Can An Extramarital Affair Cost Under Tennessee Divorce Laws?
Can I get more money in my divorce if my spouse cheated and had an affair?
Yes, in alimony, but not in property division. Cheating and having an extramarital affair is called adultery. Adultery is a ground for divorce in Tennessee. If no settlement is reached, then a ground for divorce may have to be proven at trial. Adultery can also be fault for consideration under the alimony factors. However, cheating and having an affair will not be considered by a divorce court under Tennessee’s property division factors.
How does adultery impact property division in Tennessee?
Technically, adultery should not impact property division. Adultery is grounds for divorce and a factor for awarding alimony, but adultery is not a factor for division of marital property. In practice, though, a judge could unofficially award additional money as property division indirectly – in addition to or instead of more alimony – because of the misconduct.
HOUSE IN TENNESSEE DIVORCE
How do you divide a jointly owned house in a TN divorce?
In divorce, there are only four options in dealing with a house: 1) the wife buys out the husband; 2) the husband buys out the wife; 3) the house is sold with the proceeds split between the husband and wife; and 4) the spouses own the house together after the divorce. Usually, no one wants to choose the last option. Generally, the party receiving the house must refinance the debt secured by the home.
How is the value of a marital home determined for a divorce?
For settlement purposes, the spouses usually consult with a real estate agent to determine the marital home’s value if sold. The spouses could also obtain separate real estate appraisals or agree to share the cost of an appraisal. For trial purposes, the spouses can offer their own opinion. Many will hire a real estate appraiser as an expert witness to testify and offer an expert opinion as to the fair market value of the marital residence.
What if the house is in my name only?
Assuming the house was owned prior to the marriage, if title is in the name of one spouse only, then the house should be separate property. But the other spouse may claim a “marital interest.” Discuss this complicated legal concept with your Tennessee divorce attorney or a real estate attorney. Additionally, to claim appreciation of separate property as marital property, the non-owning spouse may claim that he or she has made a substantial contribution during the marriage to the preservation or appreciation of the value of the house (or equity in the house).
What if I transferred title of my home to both spouses?
In Tennessee law, if a spouse transfers ownership of his or her home to both spouses during the marriage (most often to refinance a mortgage), then the transfer is presumed to be a gift of the separate property to the marital estate. This means the house that was separate property becomes marital property subject to division in divorce. The term for this is “transmutation.” An exception could be if there was adequate evidence of an agreement between the spouses (such as a postnuptial agreement or other writing) showing their explicit intent to keep the house separate property.
How can I keep my spouse out of the house?
If there has been domestic violence and a threat of violence continues, consider seeking an order of protection. An order of protection enjoins the other spouse from coming around the protected spouse. If the other spouse has already moved out of the house, then the remaining spouse can change the locks, essentially locking the other spouse out of the house. Depending upon the circumstances, some judges take a dim view of this decision. If the other spouse has not left the house, then a divorcing spouse could seek a court order granting exclusive use of the marital residence. In the absence of violence or threat of violence, opinions vary on whether Tennessee law grants judges the authority to award exclusive use of a residence to one spouse.
Can a spouse stay in a house during a divorce even though the spouse is not listed as an owner on the deed?
That depends upon the circumstances unique to the situation and the judge’s opinion. If there are children, then the children will be the primary concern. Staying in the house can also depend upon whether the spouse not listed on the deed is self-supporting. If not self-supporting, then a court is more likely to allow the non-owner to stay in the house during the divorce.
Who stays in the house during a divorce?
That depends. There is no legal requirement that either spouse stay in the house. However, who pays for the mortgage and associated monthly expenses is an important issue. In a traditional marriage in which both spouses are liable for the mortgage yet only one pays for all or most of the mortgage, usually that spouse will remain liable to pay. Payment of the mortgage can be determined at a temporary support hearing (also called a pendente lite hearing). Discuss all options with your attorney before making any decisions about leaving the marital residence.
Can I kick my spouse out of the house?
If there is violence or threat of violence, then a spouse can seek an order of protection. The order of protection enjoins the other spouse from being around the protected spouse and, essentially, evicts the other spouse from the house. When there is no violence or threat of violence, then the question becomes much more difficult. A spouse can seek exclusive use of the marital residence by filing an action with the trial court. How a judge will decide the question depends upon the unique circumstances of the case. Some judges refuse to hear such petitions, citing a lack of judicial authority to consider the issue. Other judges may grant the petition as a matter of course, considering the spouses are going to be divorced in the immediate future anyway.
PETS IN TENNESSEE DIVORCE
Who gets the dogs in the divorce?
Dogs are personal property. When there is a dispute, courts will first look to who “owns” the dog. If the dog was owned prior to the marriage, the spouse who owned the dog prior to the marriage will most likely receive the dog. What if the dog was acquired during the marriage? Then, the court will look a little deeper. Was the dog was a gift from one spouse to the other? Even if the dog was a gift, the court will likely determine which spouse fed, trained, and took the dog to the veterinarian. If these answers are clear, then the person who primarily cared for the dog will most likely be awarded the dog, even if the other spouse paid all of the expenses. In some cases, testimony may conflict. One judge in Shelby County, as the story goes, had each spouse stand at opposite ends of the hallway outside the court room and awarded the dog to the spouse the dog ran to when called by both at the same time.
The good news is that even in the most challenging cases where both spouses dearly love their dogs, the spouses usually come to a settlement.
Who gets custody of the pets in divorce?
Pets are important to all of us. When pets are marital property, they are subject to division as in any divorce case. In general, pets are awarded to the spouse who fed, cared for, and sweated over the pets the most. If children are attached to the pets, then it makes sense to award the pets to the primary residential parent so they can be with the children most of the time. No judge wants to decide pet custody. To save money and angst, spouses should make every effort to settle.
Before launching into a full-blown custody war over the pets, make sure you have enough space and money to care for the animals. A person’s life is never more stressed and complicated than right after a divorce. If the pets were ever neglected in the past, consider which spouse is really better suited to care for the pets.
Can I have pet visitation rights?
Tennessee does not have statutory rights to pet visitation. But it is possible for spouses to agree, like any other contract, to allow for pet visitation after the divorce. While such provisions are unusual, they are possible. If one spouse wants visitation rights, the interesting question is will that spouse also agree to pay a portion of the pet’s day-to-day care or veterinary expenses?
RETIREMENT ASSETS IN TENNESSEE DIVORCE
How are retirement accounts divided in divorce?
Retirement benefits can be considered marital property and subject to division in Tennessee divorce to the extent that they were acquired during the marriage. In certain circumstances, appreciation of retirement assets (increase in value) could also be divided as marital property. When discussing retirement accounts in general, most people are describing accounts with tax benefits deferring taxable earnings. The most popular examples of retirement accounts include 401(k), Individual Retirement Arrangements (IRAs), and pensions. Because all retirement accounts have different legal and tax treatment, they are discussed separately below. If there was value in a retirement account at the beginning of a marriage, then it’s likely that amount will be determined to be separate property (not subject to division in divorce as marital property). Be ready to prove each retirement asset’s value at the time of the marriage.
For more information, see How Divorcing Women Should Handle Retirement Accounts and Pension Plans.
How are pensions divided in divorce in Tennessee?
In Tennessee, pension benefits accrued during the marriage are considered marital property, whether vested or unvested. Which means that an employee-spouse may owe the other spouse part of his or her pension even before that pension becomes vested.
Here is a very general description of the steps involved in handling a divorce with a pension. First, the non-employee spouse should learn that the pension exists. This can be learned through discovery or by issuance of a subpoena to the spouse’s employer. Second, both spouses’ lawyers need to review the most recent annual benefits statements, the summary plan description, Qualified Domestic Relations Order (QDRO) instructions and sample form, and any other communications available between the plan administrator and the employee-spouse. The QDRO is a document necessary to divide the pension, if it is divisible. Next, the pension may need to be valued. Normally, this is done by a forensic accountant. Finally, a division of the marital portion should be negotiated.
There are three ways to divide a pension. First, a separate interest can be created so that the employee’s and non-employee’s interests are separated. Second, the spouses can off-set some exchange of assets against the value of the pension. If so, the valuation of the pension interest becomes very important. Finally, if the pension cannot be divided into a separate interest, or if there are not enough assets from which to off-set the value of the pension, then the employee-spouse can be required to pay a portion of the pension each month when the benefits are received. This is called the deferred jurisdiction approach in Tennessee.
Military pension division is best done by an experienced attorney very familiar with the technical requirements. For more information about when military pensions may be divided, see Dividing a Military Pension in Tennessee Divorce.
How are 401(k)s and IRAs divided in divorce?
Most 401(k)s and IRAs can be divided with the help of a financial advisor. Some employers have retirement plans that require Qualified Domestic Relations Orders to divide the account. The main benefit of dividing the asset pursuant to a divorce is that the division normally qualifies for favorable tax treatment, meaning no federal or state income taxes will be owed as part of the transaction. In general, if a spouse had a balance prior to the marriage, that balance will be considered separate property. For more information, see IRAs: Dividing Personal Retirement Assets in Tennessee Divorce.
Can deferred compensation be divided in divorce?
Deferred compensation is a contractual arrangement between the employer and employee in which a portion of an employee’s income is paid out at a later date, after the income was actually earned. Examples of deferred compensation include pensions, employment contributions to retirement plans, and employee stock options. What makes deferred compensation so tricky in a divorce is that the employee-spouse might not disclose the arrangement to the non-employee spouse. There may not be a way to learn of the existence of the arrangement from looking at the joint tax return or even a recent pay stub. If the income has never been disclosed on prior tax documents and is not due and payable for some time, then the deferred compensation could be missed. To determine the existence of deferred compensation arrangements, discovery may need to be issued (including a subpoena issued to the employer). For more information, see The Forensic Accounting Deskbook: A Practical Guide to Financial Investigation and Analysis for Family Lawyers – Deferred Compensation in Divorce and Deferred Compensation in Divorce.
SOCIAL SECURITY IN TENNESSEE DIVORCE
How does the divorce process impact social security benefits?
Very few divorce settlement documents refer to social security. Why? Even if they want to, the spouses cannot agree to alter their status with respect to social security benefits. For example, for a divorced individual to receive benefits based on the former spouse’s earnings record, the couple must have been married for at least ten (10) years. This presumes that the divorced individual is not entitled to a higher benefit under his or her own work record. If the spouses were married nine years and 364 days, there is no right to receive benefits through the employed spouse. Also, those rights will be lost on remarriage. All divorcing spouses are encouraged to receive financial advice from a qualified financial advisor, such as a certified financial planner, to make sure that they are not foolishly losing financial opportunities otherwise available to them.
For more information, see Considering the Impact of Tennessee Divorce on Social Security and also I’m Getting Divorced – Can I Still Collect Social Security Retirement Benefits Based on My Husband’s Earnings?
TAXES IN TENNESSEE DIVORCE
After a divorce, is money received as the result of property distribution taxable by the federal government?
Generally, there is no recognized gain or loss on the transfer of property between spouses, or between former spouses if the transfer results from a divorce. Again, generally speaking, no gain or loss is recognized on a transfer of property from you to (or in trust for the benefit of): your spouse, or your former spouse, but only if the transfer is incident to your divorce. This rule applies if the transfer was in exchange for cash, the release of marital rights, the assumption of liabilities, or other consideration. This rule does not apply in the following situations: 1) your spouse or former spouse is a nonresident alien; 2) certain transfers in trust; and 3) certain stock redemptions under a divorce or separation instrument or a valid written agreement that are taxable under applicable tax law, as discussed in Regulations section 1.1041-2. The term “property” includes all property whether real or personal, tangible or intangible, separate or community. It includes property acquired after the end of your marriage and transferred to your former spouse. It does not include services.
Source: IRS Publication 504 is a great resource for tax reference. But it is always strongly recommended you consult with a CPA or tax attorney. For more information, see Divorce and Taxes | Tennessee Divorce Law & Tax Resources.
What are the tax implications for selling the marital home when dividing property in divorce?
If you sell your main home, you may be able to exclude up to $250,000 of gain on the sale (up to $500,000 if you and your spouse file a joint return). For more information, including special rules that apply to separated and divorced individuals selling a main home, see IRS Publication 523, Selling Your Home. Also read IRS Publication 504, it’s a great resource for tax reference. We still strongly recommend you consult with a CPA or tax attorney.
PRENUPTIAL AGREEMENT LAW IN TENNESSEE DIVORCE
Can a prenuptial agreement impact property division in Tennessee divorce law?
Yes. Tennessee law recognizes and will enforce prenuptial agreements, also called premarital agreements or ante-nuptial agreements. There are several requirements for enforcement of prenuptial agreements including, but not limited to, full disclosure of financial assets and income. For more information, please take a look at Tennessee Prenuptial Agreement Pros and Cons in Family & Divorce Law.
MILITARY DIVORCES IN TENNESSEE
Does a spouse being in the military impact property division?
Yes. There are very specific and complicated rules that apply when dividing military pension benefits. For a more detailed discussion about divorce involving a service member in Tennessee, see Military Divorce Laws in Tennessee.
How are military pensions divided in Tennessee divorce?
Know that in Tennessee pension benefits accrued during the marriage are marital property, whether vested or not vested. Which means that even if the service member has no vested benefits, there may be value owed to the other spouse. In general, the process involves first determining whether benefits may be divided. If so, the spouses must negotiate the terms of the property settlement. This requires the assistance of a lawyer who is experienced at dividing military pensions. After the divorce is settled, very specific paperwork is submitted for pension division administration. For a more detailed discussion, see Dividing a Military Pension in Tennessee Divorce.
SHORT-TERM MARRIAGE LAW IN TENNESSEE DIVORCE
What does Tennessee consider a short-term marriage?
There is no hard and fast rule, but some Tennessee cases have said that marriages lasting seven years or less qualify for consideration as a short-term marriage.
What is Tennessee divorce law for short-term marriages for property division?
With respect to property division in Tennessee, the law requires courts try and return both spouses to their respective financial positions at the time of the marriage. That legal requirement puts a premium on being able to prove what assets existed at the time of the marriage and which assets were contributed to the marital estate. In application, the legal standard of returning the spouses to their pre-marital financial position can be unworkable in many divorce cases. Almost always, the spouses have commingled assets by purchasing a home, co-signing a mortgage, or putting joint living expenses on one or more credit cards. Also, one spouse may have quit work to raise a child. When unworkable, the court will default to the regular divorce protocol of property division law. That is, identifying property, classifying property as marital or separate, valuing the property, and dividing it according to Tennessee’s equitable property division factors.
References, Resources and More:
- Property Division in Tennessee Divorce
- When Professionals Divorce in Tennessee: Valuing Professional Practices
- Business Valuation in Tennessee Divorce Law
- Property Division – Tennessee Family Law Blog for analysis, commentary, updates and case law summaries
- Tennessee Law – Legal & Legislative Materials Available @ the Tennessee State Library & Archives
- Tennessee Laws (including divorce and property division)
- Breakin’ Up Is Hard to Do | Tennessee Bar Association – Property Division in Tennessee
- American Bar Association – Law in the 50 States
- Tennessee Administrative Office of the Courts – Approved Divorce Forms