Pre-marital Stock Options Became Marital Property When Comingled

Tennessee case summary on commingling in divorce.

Kathryn Lynn Jones v. Gary Edward Jones

The husband and wife in this Tennessee divorce case met in 1985 and were married in 1990.  In 2011, the wife filed a complaint for divorce, and trial was held in 2014, after their youngest child had turned 18.  The marital assets were divided, and the wife was awarded assets valued at about $228,000 and debts of about $35,000.  The husband was awarded assets valued at about $270,000 and debts of about $29,000.  The husband then appealed to the Tennessee Court of Appeals.

One of the issues on appeal related to funds that the husband had received from an account while the divorce was pending.  The account in question was a brokerage account that had been purchased both prior to and during the marriage, and was in the husband’s name only.  Much of the funds for this account had come from stock options earned by the husband prior to marriage.

The lower court had found that during the marriage, funds had been added to this account, and there had been considerable comingling of marital and non-marital assets.  The lower court interpreted this to show an intention to make the account a martial asset.  The lower court also found that the wife had made a substantial contribution to this asset by paying debts and taxes out of marital funds, as well as working.

To counter the finding of this intention, the husband introduced a letter signed by both the husband and the wife, directing that some funds be moved from her account to his separate account.  The husband argued that this was evidence that the money was a gift, but the appeals court agreed that this was an incorrect interpretation of the letter.  It noted that earlier precedents made clear that the intention to make a gift must be clear, and any doubts must be resolved against the gift.

The appeals court then examined the doctrine of comingling.  Under this doctrine, separate property becomes marital property if it is “inextricably mingled with marital property.”

In this case, the appeals court found that the test was met.  The account included some assets that had been the husband’s separate property, but numerous other transactions had taken place over the years, many of them involving marital property.

After examining the evidence, the appeals court agreed with the lower court that the account had become marital property because of comingling.  For this reason, it affirmed the lower court’s ruling, although it made some modifications as to other rulings.

No. M2015-00042-COA-R3-CV (Tenn. Ct. App. Aug. 12, 2016).

See original opinion for exact language.  Legal citations omitted.

To learn more, see Commingling Money & Assets with Marital Property in Tennessee Divorce.