Divorce Distribution Must Be As of Date of Judgment

The husband and wife in this Tipton County, Tennessee, case were married in 2015 and separated in 2019.

In 2017, the wife received from her grandfather shares of stock.  Everyone agreed that the stock was the wife’s separate property, but the husband began selling the shares later that year.  He also took out credit cards without her knowledge and ran up a large debt.

In 2022, the husband pled guilty to the theft of the wife’s property in the amount of $394,000.  He was ordered to pay restitution and sentenced to eight years in prison, but he was only required to serve six months, with the remainder on probation.  He was incarcerated from July 2022 until January 2023, and the divorce became final two months after his release.

There were two significant assets.  The marital home was purchased by the wife’s grandfather prior to the marriage, although the husband testified that he lived there before the wife moved in.  The wife also had a 401(k) retirement account which began shortly after they were married.  At the time of separation, it was worth about $32,000, and $62,000 at the time of divorce proceedings.

The trial court held that $175,000 of equity in the home was the wife’s separate property, despite an earlier holding that it had transmuted into marital property.  It also set the price of the home and 401(k) as of the time of separation, rather than the time of divorce.  Upon final judgment, the husband appealed to the Tennessee Court of Appeals.

The husband first argued that the trial court’s treatment of the house was improper.  The parties had agreed that the home had transmuted into marital property during the course of the marriage.  The appeals court called the case one arising from extreme circumstances, due to the husband’s theft.  But it held that these extreme circumstances did not warrant converting the house back into separate property once concluding that it had transmuted.  For these reasons, the Court of Appeals reversed this portion of the lower court’s judgment.

The appeals court then turned to the issue of when property should have been valued.  It noted that, normally, it should be a date as close as possible to the entry of final judgment.  The trial court had relied upon an earlier date, because the delay in the proceedings was the result of the husband’s criminal actions.  But the appeals court pointed out that the relevant statute used mandatory language in setting the date as of the final decree.  For that reason, it also reversed and remanded as to this issue.  It also reversed and remanded with respect to the timing of the valuation of the 401(k),

After addressing some procedural issues, the appeals court concluded by remanding the case.

No. W2023-00943-COA-R3-CV (Tenn. Ct. App. Oct. 24, 2024).

See original opinion for exact language.  Legal citations omitted.

To learn more, see The Tennessee Divorce Process: How Divorces Work Start to Finish.

To learn more, see Property Division in Tennessee Divorce and view our video Is Tennessee a 50 50 divorce state?

To learn more, see Transmutation in Tennessee Property Division Divorce Law.

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