Property owned during a marriage in Tennessee is classified as either separate property or marital property. This distinction becomes quite important for many spouses when considering divorce. The concept is worth understanding because only marital property is subject to equitable distribution during a divorce. Separate property includes property which was owned by a spouse before marriage; property which was acquired in exchange for property which was already owned prior to the marriage; income and appreciation of separate property; property acquired by a spouse through gift, bequest, devise or descent; pain and suffering awards; victim of crime compensation; future medical expenses; future lost wages; and property acquired by a spouse after an order of legal separation in which a court has completed a final disposition of property.
Where the separate property analysis gets tricky is a carve out section, T.C.A. § 36-4-121(b)(1)(B)(i). This section states: ” ‘Marital property’ includes income from, and any increase in the value during the marriage of, property determined to be separate property in accordance with subdivision (b)(2) if each party substantially contributed to its preservation and appreciation” This requires an understanding of substantial contribution and preservation and appreciation. Thankfully, the statute includes some more helpful information by defining a substantial contribution. A substantial contribution may include, but not be limited to, the direct or indirect contribution of a spouse as homemaker, wage earner, parent or family financial manager, together with such other factors as the court having jurisdiction thereof may determine.” Preservation and appreciation are not further defined in the statute.
Let’s consider a few hypotheticals. In Marriage A, Wife was gifted a significant amount of publicly traded stocks from a family member prior to marriage. Husband paid taxes on Wife’s stocks when sold. Are the stocks marital property? In Marriage B, Husband bought a house before the marriage that was never used as the marital home. Wife’s name was never put on the deed. However, when the house needed repairs, Wife paid for the HVAC to be replaced. Is the house Husband’s separate property? In Marriage C, Wife purchased a house during the marriage and the house was foreclosed on. Can Husband be awarded dissipation?