Is Tennessee a Community Property State?
Is Tennessee a Community Property State?
Tennessee is not a community property state. Regarding the division of marital property in divorce, Tennessee is an equitable distribution state. Equitable distribution means property will be divided equitably according to a set of listed statutory factors. See Tennessee Code Annotated § 36-4-121(c).
Difference Between Community Property and Equitable Distribution
Community Property States in Divorce
Only nine states follow community property law in that property acquired during the marriage (marital assets and debts) belong in equal shares to the community – that is, they belong 50-50 to both spouses. Therefore, community property should be divided equally between the parties in a divorce. Those nine states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
The majority of states are equitable distribution jurisdictions. Tennessee and 40 other states, plus Washington D.C., are considered to be equitable distribution states. Be mindful that each jurisdiction, whether it is a community property state or equitable distribution state, has passed laws on how assets and debts are to be divided in divorce.
Equitable Distribution in Tennessee Divorce
In Tennessee equitable distribution law, there are two categories of property: marital property and separate property. Absent the parties’ written settlement agreement (to swap separate cars, for example, or keep their respective retirement accounts intact), the separate property of one spouse is not divisible in divorce. Only marital property is divided.
Is it marital property? Answering that question is a multi-step process. The initial three steps occur during the discovery phase of divorce:
1) Identification of each asset or debt;
2) Classification as marital property (and not separate property);
3) Asset valuation; and finally
4) Division between the spouses.
The same basic process is also followed in community property states. It is how the property is divided, the final step, that is unique to Tennessee and other equitable distribution states.
In general, marital property includes what was acquired during the marriage through earned income, as well as that separate property which was transformed during the marriage. Transformation of separate property into marital property can occur through commingling and transmutation. T.C.A. § 36-4-121(b)(1)(B).
Importantly, the equitable distribution of marital property in divorce must be fair. But fairness does not necessarily result in an equal split. Unlike community property states, there is no 50-50 right to marital property in Tennessee law. However, the spouses could agree to what they believe is an equal division of their marital property. They could also agree to a fair, yet unequal, division. These are possible settlement terms for the parties’ marital dissolution agreement (MDA).
What the Court Considers
When dividing marital property in a Tennessee divorce, numerous factors are considered by the court. A few property division factors, by way of example only, are the length of the marriage; age, health, and earning capacity; financial needs after the divorce; benefits from Social Security; and the value of each spouse’s separate property. (For details, see T.C.A.§ 36-4-121.) Emphasis is on equity and a fair division, not an equal division.
What if one spouse wasted money? Another factor to consider (relevant in community property states, too) is a spouse’s dissipation of marital assets. There are many ways a spouse can waste money, but not all will rise to the level of marital dissipation. In an adultery case, for example, dissipation could involve spending marital funds on a paramour by paying for expensive motel rooms, entertaining at fine restaurants, and buying luxury gifts for the paramour to continue the extramarital affair.
Dividing marital debts introduces other considerations. These are the four questions the court needs answered:
- What was the debt for?
- Which spouse incurred it?
- Who benefited from the debt?
- Which of the spouses is in the best position to pay it back?
Yet another consideration would be the existence of a valid prenuptial agreement containing the contracting parties’ agreed terms for property division in the event of divorce.
Is a spouse in the military? Division of military retired pay is another matter that raises special concerns, in community property and equitable distribution states alike. This is because dividing military pensions in divorce also falls under federal law – namely, the Uniformed Services Former Spouses’ Protection Act (USFSPA). If this is applicable, then consult an experienced military divorce lawyer.
References, Resources and More:
- Tennessee Property Division Divorce Laws & Factors | Answers to FAQs
- When Professionals Divorce in Tennessee: Valuing Professional Practices
- Business Valuation in Tennessee Divorce Law
- The Tennessee Divorce Client’s Handbook, What Every Divorcing Spouse Needs to Know
- Blog – Property Division Category – updates, commentary, analysis and case law summaries