Introduction
In Tennessee, every divorce must deal with the “equitable” distribution of the marital estate. This division shapes the financial futures of divorcing parties and is fundamentally important to our protection of our clients. But what does an equitable distribution of the marital estate mean? In Tennessee, this is shaped by the statutory framework, judicial interpretations, and practical procedures which are unique to each judge in Shelby, Fayette, and Tipton Counties. By understanding the relevant provisions of the Tennessee Code Annotated and significant appellate decisions, you can begin to understand some of the issues which will need to be addressed in your case.
What is the marital estate?
Answering this question is first step in any divorce case. In Tennessee, marital property is
All real and personal property, both tangible and intangible, acquired by either or both spouses during the course of the marriage up to the date of final divorce or legal separation
Tenn. Code Ann. § 36-4-121(b)(2)(A). There are a couple of important concepts tied up in this definition. First, it encompasses every single thing acquired during the marriage by either spouse. This is not only assets, but also debts. The next thing to understand is that it encompasses everything acquired up to the date the court enters its divorce decree or legal separation order.
If the marital estate is what is divided, separate property is what is not divided. In its simplest possible terms, Tennessee defines separate property to be all assets and debt acquired or incurred by either party prior to the marriage. It can also include property acquired by gift or inheritance, property acquired from other separate property, and the value of retirement accounts (or some other accounts) which existed prior to the marriage. However, this is just the tip of the iceberg. Separate property can be changed into marital property.
Okay, I understand it is everything, but what happens with it?
The basic division of marital property in Tennessee is governed primarily by Tennessee Code Annotated § 36-4-121. This statute tells courts how to identify, value, and divide the marital estate in a divorce. Courts are directed to
equitably divide, distribute or assign the marital property between the parties without regard to marital fault in proportion to the value of each party’s separate property.
The statute further defines both “marital property” (which gets divided) and “separate property,” (which does not get divided) providing the legal foundation for the division process.
So what do we learn from the statute about this “equitable distribution?” First, the requirement is for an equitable distribution. The statute does not use the term equal. Second, the statute directs that the distribution be done without regard to fault in the divorce. Finally, while separate property is not divided, the court is to consider the “value of separate property of each party.” Tenn. Code Ann. § 36-4-121(c)(6).
Principles of Equitable Division
As I previously said, Tennessee courts adhere to the principle of equitable rather than equal division of marital property. An equitable division seeks fairness in light of the financial circumstances of the parties. This may—but does not always—result in an equal split. Courts are guided by statutory factors set forth in Tenn. Code Ann. § 36-4-121(c), which include:
- The duration of the marriage.
- The age, physical and mental health, vocational skills, and employability of each spouse.
- The contribution of each spouse to the acquisition, preservation, or appreciation of marital property, including contributions as homemaker or wage earner.
- The value of separate property and the economic circumstances of each spouse at the time of division.
- The tax consequences to each party.
- Social Security benefits available to each spouse.
- Any other relevant factors necessary to achieve equity.
Notice that fault in the divorce is not included in this consideration. While fault may play a role in alimony or spousal support, it is not be considered by the court in the distribution of the marital estate.
How do courts actually implement this statute?
While the Tennessee legislature will give us the law, it does not implement the law. That is left to the court system. This is where experienced legal counsel can provide the most benefit. Anyone can read a statute, but what does a judge do with that statute. To understand this, you have to understand that we have trial courts and 2 levels of appellate courts in Tennessee’s civil court system. The trial courts (called chancery and circuit) are the front line judges who apply the law. While we have extensive experience practicing in front of the judges in Shelby, Tipton, and Fayette Counties, no blog article can cover each judge and chancellor’s predilections. However, by looking at some appellete decisions, we can gain some guidance in understanding the direction most trial courts take.
Batson v. Batson, 769 S.W.2d 849 (Tenn. Ct. App. 1988)
This is an important case to understanding the concepts we have been over to this point. First, it recognizes that Tennessee courts have to determine what property is marital and what property is separate. Next, it clarifies that if one spouse gives another a gift, that gift is considered separate property. Third, it establishes that if separate property increases in value due to the contribution of each party, that increase is marital property. The Batson court also concluded that a “substantial contribution” does not have to be direct. It can also include such things as being a “homemaker, … parent, or family financial manager.” Most significantly, the Batson court emphasized that the distribution is equitable and not equal.
Cohen v. Cohen, 937 S.W.2d 823 (Tenn. 1996)
In this case, the Tennessee Supreme Court discussed the classification of property as either marital or separate, how separate property can become marital, and how separate property can create marital property. The Court clarified that increases in the value of separate property during marriage may become marital property if that increase is attributable to the efforts of either spouse. The Court also underscored the necessity of a factual inquiry into the source and nature of property acquired during marriage, emphasizing the importance of a detailed presentation at trial (and in your trial preparation) of how your and your spouse’s property was acquired and treated during the marriage.
Conclusion
Both of these cases emphasized that the trial court has broad discretion in classifying and dividing marital property. So long as the trial court applies the correct legal standard, (i.e., the statutory factors discussed previously) most often the appellate courts uphold that determination. This only highlights the importance of making a good presentation of your case to the trial court. It also highlights the critical importance of the final factor, having a well written final divorce decree. Having read hundreds of court decisions in this area it is very clear that the one thing that can always derail an otherwise good ruling from a trial court is a poorly written divorce decree. If the appellate court cannot see how the trial court made the decisions that it did, it most often will reverse the trial court’s ruling and you will get to spend the time and money to do it again.
