Investment Advice and Use of Word “Ours” Were Insufficient to Transmute Wife’s Trust Fund
Luttrell v. Luttrell, No. W2012-02279-COA-R3-CV (Tenn. Ct. App. Jan. 28, 2014).
Investment Advice and Use of Word “Ours” Were Insufficient to Transmute Wife’s Trust Fund
William and Beverly Luttrell were married in 1987 in Mississippi. The wife came from a well-to-do family, since her grandfather had started Bryan Foods, which later became part of the Sara Lee Corporation. Prior to the marriage, she was the beneficiary of a trust with in initial value of almost $600,000. Over the years, her family added gifts of cash and stock with an additional value of over half a million dollars. She kept those assets in accounts titled in her name alone.
Shortly after getting married, they moved to Illinois, where the husband earned his MBA from Northwestern University. While he was in graduate school, the wife worked in a preschool until she became pregnant in 1989. In 1990, the husband accepted a job with International Paper in Memphis, Tennessee. They had three more children, and because of the wife’s wealth, she was able to be a stay-at-home mom.
They led a well-to-do lifestyle, and bought a home in Germantown for $515,000 in 1996. The wife used $290,000 of her funds for the down payment, while the husband’s income paid most of their living expenses.
After two years at International Paper, the husband started a job as product manager for Smith & Nephew, but left due to a heavy travel schedule. In 2003, the husband decided to open an antique store in Germantown. The wife withdrew $94,000 to purchase the property and start the business.
The business didn’t do well, but despite the wife’s urgings to seek more traditional employment, the husband persisted with trying to make a go of the antique shop. Eventually, he began looking for other employment and listed the antique shop property for sale. It was still on the market at the time of trial.
In 2006, the wife learned that the husband was having an affair. She filed for divorce, but then attempted reconciliation. But in 2011, the husband filed for divorce, and the wife counterclaimed. The husband stayed in the marital home, and the wife used $392,000 to buy another house in Germantown. The marital home was eventually listed for sale, but had not yet sold.
The parties resolved most of the parenting issues, but a solution to the property issues eluded them. Trial was held in Shelby County in 2012 before Judge Robert L. Childers. The court granted the wife an absolute divorce on the grounds of inappropriate marital conduct. After the court divided the property, there was an appeal to the Tennessee Court of Appeals in which both parties made arguments.
The most contentious issue was the status of the wife’s trust accounts, which had a value of over $1.7 million. The wife argued that this was her separate property, but the husband asserted that the asset had been transmuted into marital property. He argued that the evidence showed that the parties had treated the trust as marital property through the years. He first noted that he had actively participated in the management of the investments, had attended meetings with bankers, and had communicated directly with them. He also pointed out times when the wife had referred to the funds as “ours” and used the word “we” in relation to them.
But the court examined the evidence and concluded that the wife never intended to relinquish control over the investment accounts. For example, the trust officer testified that he had communicated with the husband, but that he always checked with the wife for approval before taking any action. In addition, the trust officer testified that he never acted on the husband’s investment advice. The accounts were always titled in her name alone.
The court also noted that the husband had borrowed money from his mother to purchase inventory for the antique store, something that would have been unnecessary if he had access to the finds.
The husband next argued that the investment accounts were commingled with marital property. But the court concluded that there was no evidence to support this claim.
Finally, the husband argued that the appreciation of the trust was marital property. But the court noted that the wife’s contributions to the marital property over the years had greatly exceeded that of her husband. Even if the husband’s actions caused some of the appreciation, this was more than offset by the benefits he had received, such as the wife using trust assets to pay off his student loans.
The Court of Appeals considered a number of other issues, but found that the trial court should be affirmed on those issues as well. Therefore, the Court of Appeals affirmed.
This post is part of a series, Appreciation of Separate Property: The Forensic Accountant’s Full Employment Act.
