How is property divided in a divorce in Tennessee?
In Tennessee divorce law, all marital property is equitably distributed between the spouses. An equitable distribution is not the same as an equal distribution. Although an exact 50-50 division of the parties’ marital estate is possible, it is more rare than you may think.
The court equitably distributes all marital assets and debts between the parties. But what happens to the estate one spouse inherited? Or the mortgage debt the party incurred while single?
What assets cannot be touched in divorce?
Only basic rule is that property classified as “separate” will not be divided in divorce. Transmutation and commingling are exceptions to that rule. If either occurred during the marriage, then the separate property classification may change to marital, either partially or entirely.
Before anyone can get to the classification of property as marital or separate, the item must be identified. Experienced divorce attorneys look for clues to identify undervalued, overvalued, and concealed assets. A forensic accountant may be very helpful in this endeavor and with valuation. Off-shore accounts in the Cayman Islands exemplify hidden property.
Once the asset or account is identified, the next step is to classify it as marital property. Knowing the value of a concealed separate asset does not make it divisible property in divorce. But a spouse’s separate financial resources are important to the question of alimony and child support.
The next step, obtaining reasonable valuations, is essential for fair and productive settlement negotiations.
Valuation is the process of establishing a fair market value for the asset. Some assets can be difficult to value, such as a fine art piece to be auctioned. Some assets have more negotiating value than actual value. For instance, a family heirloom of sentimental value or the family pet. Other assets are easily valued, such as bank accounts or IRAs.
Finally, the parties’ property is divided between them. Again, the parties can split their marital estate by agreement. If they do, then the court can incorporate their property settlement into the divorce decree. Could the court object to the agreed distribution? Possibly. As when the settlement agreement would force an unrepresented party onto welfare while the other spouse takes everything of actual value.
What if spouses do not settle on how to split their property?
What if spouses do not settle on how to split their property?
In the absence of agreement, the court applies the 13 property division factors in Section § 36-4-121 of the Tennessee Code. The Tennessee court orders the equitable distribution of marital property – asset-by-asset, debt-by-debt. The court has broad discretion, but division must still be based on those statutory factors. The inquiry ranges from “duration of marriage” to “tax consequences” to the “value of the separate property” of each spouse. The court weighs the evidence on the relevant factors, balancing the equities between the parties.
What does “equitable distribution” really mean? It boils down to whatever the court deems is “just” given your circumstances.
Is marital fault a way to punish the other party by awarding fewer assets or more debt? No, not directly. Indirectly? The court may hold a party accountable for dissipating marital assets.
FOR EXAMPLE:
An extramarital affair is marital fault in Tennessee and grounds for divorce. However, having an affair is not a reason to reduce the guilty spouse’s property award. The division can reflect the marital funds spent on the affair by shifting the cost from one side of the ledger to the other. The innocent spouse can recover a share of the funds wasted by the other spouse on a paramour.
SPOUSES CAN AGREE TO A NON-EQUAL PROPERTY DIVISION.
This may sound strange to some, but spouses can agree to a plan for the division of their marital property – equal or unequal. Or agree to a 50/50 community division. Or agree to reclassify a separate asset as marital or vice versa. Or agree on specific valuations, such as a business valuation provided by an independent forensic accountant.
Spouses are encouraged to settle as many issues as possible for inclusion in an MDA (a Marital Dissolution Agreement). A big part of that effort goes into negotiating a property settlement with their attorneys’ assistance.
For a much more detailed discussion, visit Is Tennessee a 50/50 divorce state?
