Property and Debt Division

Answers to Frequently Asked Questions From a Memphis Divorce Lawyer

1. Who will divide our property?

If you and your spouse are able to agree on how to divide your property, then the agreement will be documented with what is called a Marital Dissolution Agreement. If you are unable to agree, you will go to court, and the judge will decide and order an equitable distribution of your property. One judge may divide property equitably but differently for a couple from Covington, Tennessee, as compared to another judge presiding over another divorcing couple in Memphis, even though the both sets of parties have similar assets and debts.

2. What is an equitable distribution, and is Tennessee an equitable distribution state?

Equitable means fair, just, and reasonable, based on the factors set out in the law. Yes, Tennessee is an equitable distribution state. While equitable does not mean equal, most judges will admit that they begin the trial at 50/50 and move one way or the other based on the evidence and arguments presented.

3. What factors does a court consider in deciding property division?

• The duration of the marriage;
• The age, physical and mental health, vocational skills, employability, earning capacity, estate, financial liabilities and financial needs of each of the parties;
• The tangible or intangible contribution by one (1) party to the education, training or increased earning power of the other party;
• The relative ability of each party for future acquisitions of capital assets and income;
• The contribution of each party to the acquisition, preservation, appreciation, depreciation or dissipation of the marital or separate property, including the contribution of a party to the marriage as homemaker, wage earner or parent, with the contribution of a party as homemaker or wage earner to be given the same weight if each party has fulfilled its role;
• The value of the separate property of each party;
• The estate of each party at the time of the marriage;
• The economic circumstances of each party at the time the division of property is to become effective;
• The tax consequences to each party, costs associated with the reasonably foreseeable sale of the asset, and other reasonably foreseeable expenses associated with the asset;
• The amount of social security benefits available to each spouse; and
• Such other factors as are necessary to consider the equities between the parties

4. What factors does a court consider in deciding debt division?

Debt division can be difficult to navigate. Tennessee law states that the Court will consider the following factors:

• The debt's purpose;

• Which party incurred the debt;
• Which party benefited from incurring the debt; and
• Which party is best able to repay the debt.

As a practical matter, where debt secures a particular asset, a court will almost always require the party receiving the asset to pay any and all associated debt and hold the other spouse harmless. The court may also require the party to refinance the debt, removing the other spouse from the liability.

5. Can I get more money if my spouse is at fault?

Technically, no. Fault is only a factor for deciding alimony. As a practical matter, however, if a judge is presented with evidence of fault with respect to a request for alimony or attorney's fees, there is a common belief that the proof can affect property division as well as other decisions.

6. Is it different in other states?

Every state has different laws.

7. By the way, can my spouse share in my inheritance from my grandmother?

No. Inheritance is separate property. There are things you can do to prevent inheritance from becoming marital property subject to equitable division. In order to protect your inheritance, see an attorney just in case -- especially if it is a large sum of money. Do not commingle the money by putting it in a joint bank account. Do not spend the money on your house if your house is owned jointly. It is important to note, however, that the amount of separate property is a factor in dividing marital property.

8. How does the court determine the value of a marital asset?

Some types of property have a readily ascertainable value, such as a bank account or publicly traded stock. For other assets, if the parties cannot agree on the value, the court will decide. The parties may testify and give an opinion. For some assets, however, the most persuasive proof might be provided by an appraiser or other qualified expert. The most common examples of property that might require professional testimony include businesses, pensions, jewelry, and real estate. The valuation process can become expensive, especially if both parties hire experts.

9. Once a divorce action is filed, can a spouse be restricted from dealing with marital property or his or her non-marital property?

The right of a spouse to transfer, assign, or convey property is not restricted unless the spouse is specifically enjoined by a court from doing so. If one party is concerned that the other party will give away, hide, or foolishly spend money, the party may ask the court to enjoin certain spending activities to prevent dissipation and preserve the assets.

10. What is “marital property”?

Tennessee law reads in part: “'Marital property' means 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 the final divorce hearing and owned by either or both spouses as of the date of filing of a complaint for divorce, except in the case of fraudulent conveyance in anticipation of filing, and including any property to which a right was acquired up to the date of the final divorce hearing, and valued as of a date as near as reasonably possible to the final divorce hearing date.... All marital property shall be valued as of a date as near as possible to the date of entry of the order finally dividing the marital property.”

"'Marital property' includes income from, and any increase in value during the marriage of, property determined to be separate property... if each party substantially contributed to its preservation and appreciation, and the value of vested and unvested pension, vested and unvested stock option rights, retirement or other fringe benefit rights relating to employment that accrued during the period of the marriage."

"'Marital property' includes recovery in personal injury, workers' compensation, social security disability actions, and other similar actions for the following: wages lost during the marriage, reimbursement for medical bills incurred and paid with marital property, and property damage to marital property."

"As used [here], '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."

11. What is considered "non-marital property"?

Tennessee calls this separate property. "Separate property" means:

• All real and personal property owned by a spouse before marriage;
• Property acquired in exchange for property acquired before the marriage;
• Income from and appreciation of property owned by a spouse before marriage except when characterized as marital property under subdivision (b)(1);
• Property acquired by a spouse at any time by gift, bequest, devise or descent;
• Pain and suffering awards, victim of crime compensation awards, future medical expenses, and future lost wages; and
• Property acquired by a spouse after an order of legal separation where the court has made a final disposition of property.

12. What is the definition of “dissipation” of marital property and can you tell me some examples of dissipation?

A recent Tennessee legal opinion stated: “Trial courts must distinguish between what marital expenditures are wasteful and self-serving and those which may be ill-advised but not so far removed from ‘normal’ expenditures occurring previously within the marital relationship to render them destructive. . . . In determining whether dissipation occurred, we find trial court should consider the following: (1) whether the evidence presented at trial supports the alleged purpose of the various expenditures, and if so, (2) whether the alleged purpose equates to dissipation under the circumstances. . . . The first prong is an objective test. To satisfy this test, the dissipating spouse can bring forward evidence, such as receipts, vouchers, claims, or other similar evidence that independently support the purpose as alleged. The second prong requires the court to make an equitable determination based upon a number of factors. Those factors include: (1) the typicality of the expenditure to this marriage; (2) the benefactor of the expenditure, namely, whether it primarily benefited the marriage or primarily benefited the sole dissipating spouse; (3) the proximity of the expenditure to the breakdown of the marital relationship; (4) the amount of the expenditure.”

Examples of dissipation include: foolishly spending money, giving money away without benefit to the marital estate, buying jewelry for a paramour, gambling, and spending money for an improper or illegal purpose. Courts do not look favorably upon such activities. Often, courts will determine how much property was dissipated and make a substantial award to the other spouse. This award could be order to be paid as property division or alimony in solido.

13. What is the process by which property and debt are distributed between the parties in a divorce trial?

In very general terms, each party is first awarded his or her separate property. Then the marital estate is divided according to the factors listed above. Finally, the debt is divided. Debt secured by specific property usually is given to the spouse receiving that property. Finally, as a practical matter, a spouse will usually receive the debt which that spouse incurred after separation.

14. If the spouses have not kept their non-marital property separate, but they have combined their ownership, how does the court decide on property division?

Spouses often commingle their marital and non-marital property. If separate property becomes commingled, it may lose its status and become marital property. This can cause difficult issues for the court. If separate property can be traced easily, the court is more likely to award it to the original spouse. If it cannot be easily traced, the court is less likely to award it as separate property. Even if a court finds the property was once separate but became marital property, the court will consider other property division as part of the equation and look to make an equitable distribution.

15. Is a professional license or degree an asset subject to valuation and division?

No. The license or degree itself cannot be divided. The professional practice or certain assets contained therein could be subject to valuation and division in certain circumstances.

16. What about retirement accounts, pensions, and other deferred compensation?

Retirement benefits can be considered marital property and subject to division by the court to the extent that they were acquired during the marriage. In certain circumstances, appreciation could also be divided. These issues can be very complex.

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