Divorce Court Cannot Look at Trust Assets; Separate Property Awarded to Wife

Tennessee case summary on commingling and trusts in divorce.

Desiree Daniels Disterdick v. John Disterdick

The husband and wife in this Hamilton County, Tennessee, case were married in 1986.  The wife filed a complaint for divorce in 2012, and the case was eventually heard by Judge L. Marie Williams after the recusal of another judge.  The wife and her mother were trustees of a trust, of which both spouses were beneficiaries.  Early in the proceedings, the trial court ordered the wife to release funds for the husband to pay his attorney.  The husband later filed a motion to replace the trustee.  He alleged that he had established the trust from his separate premarital assets and that he had traditionally managed the assets.  The wife argued that the parties were mere beneficiaries, and that the court had no power to divide the assets of the trust.  The trial court agreed with the wife’s position.

One asset at issue was an oil partnership which the wife asserted was her separate property.  The trial court agreed and awarded the partnership interest to her.  It also awarded her an engagement ring as her sole property.

The husband appealed to the Tennessee Court of Appeals.  He argued that the trial court had erred in treating the oil partnership and ring as the wife’s separate property.  He also argued that the trial court should have addressed the trust assets.

After discussing some procedural issues, the appeals court turned to the classification of the property.  It noted that for purposes of standard of review, this was a factual question with a presumption of correctness of the lower court’s findings.

The husband argued that the oil partnership interest was acquired and managed by him during the marriage, but was placed in the wife’s name only for tax reasons.  He also asserted that marital funds had been used for the purchase.  The wife, however, argued that her separate funds had been used.

The appeals court noted that the lower court had reviewed the conflicting evidence, and that the evidence did not preponderate against the lower court’s resolution of the conflicting testimony.  It did note that purchase funds had come from a bank account in the wife’s name only.

The husband argued that the engagement ring transmuted into marital property by virtue of “costly changes” to the ring over the years.  However, the appeals court pointed out that he had not offered proof of such changes or the amount paid.  Therefore, the appeals court held that the evidence supported the lower court’s findings.

Turning to exclusion of matters regarding the trust, the appeals court quoted the trust documents, in which the spouses divested themselves of ownership interest.  Citing an earlier case, the appeals court concluded that since assets were owned by the trust rather than the parties, it was not appropriate for the divorce court to adjudicate those assets.

After addressing a number of other issues, the Court of Appeals affirmed the lower court’s ruling in its entirety.

No. E2017-00743-COA-R3-CV (Tenn. Ct. App. June 18, 2018).

See original opinion for exact language.  Legal citations omitted.

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