Property Issues

Property Issues. The difference between Separate Property or Marital Property

In divorce proceedings, separate property is not part of the marital estate.

separate property, marital estateSeparate property includes (1) property owned by a spouse before marriage, (2) property acquired in exchange for property acquired before marriage, (3) income from and appreciation of property owned by a spouse before marriage, and (4) property acquired by a spouse at any time by gift, bequest, devise, or descent.

However, if either spouse makes a gift of separate property to the marital estate, the property is “transmuted” or changed into marital property. A presumption of “transmutation” or change from separate property to marital property arises when a party uses separate funds to purchase property but places the property in the names of both spouses. This presumption can be “rebutted” or possibly challenged with “evidence of circumstances or communications clearly indicating an intent that the property remain separate.”

If one party contributed “sweat equity” by working to improve the house, the equity in the house could be deemed marital property.

Proceeds from the prior sale of a property are not necessarily separate property because they may include some marital property - the appreciation in the value of the prior property.
Regardless of the parties’ intent, income from separate property or an increase in the value of separate property during the marriage becomes marital property if the non-owner spouse makes a substantial contribution to the preservation and appreciation of the separate property. Marital property also includes the value of “pension, retirement or other fringe benefit rights accrued during the period of the marriage,” regardless of the non-owning spouse’s contributions during the marriage.

Marital property includes any increase during the marriage in the value of retirement or pension rights, whether through passive growth or through either party’s direct or indirect contribution.

Evidence that wife made substantial contributions to the marriage in her capacity as homemaker, wife, and stepmother demonstrated that increases during the marriage to the value of the husband's KEOGH and IRA were marital property, as was the increase in the value of the wife's retirement funds.

Even though husband used his own funds to purchase house, where title was placed in the name of him and his wife as tenants by the entirety and he did not treat the house as if it were his separate property, the house and any proceeds from the sale of the house were marital property in view of wife's significant contributions to the marriage as wife, homemaker, and stepmother.

Even though a party used his own funds to purchase the house, the title was placed in both party’s names as tenants by the entirety. There is no indication in the record that the Husband ever treated the Davidson Road house as if it were his separate property. If anything, the contrary is true.

Another panel of this Court recognized recently that separate property may become part of the marital estate if its owner treats it as if it were marital property. Professor Clark describes the doctrine of transmutation as follows:

[Transmutation] occurs when separate property is treated in such a way as to give evidence of an intention that it become marital property. One method of causing transmutation is to purchase property with separate funds but to take title in joint tenancy. This may also be done by placing separate property in the names of both spouses. The rationale underlying both these doctrines is that dealing with property in these ways creates a rebuttable presumption of a gift to the marital estate. This presumption is based also upon the provision in many marital property statutes that property acquired during the marriage is presumed marital. The presumption can be rebutted by evidence of circumstances or communications clearly indicating an intent that the property remain separate.

A spouse's non-monetary contributions as a homemaker are relevant not only to the division of the marital property [Tenn.Code Ann. § 36-4-121(c)(5)] but also to an award for maintenance and support [Tenn.Code Ann. § 36-5-101(d)(9)]

See case of Batson v. Batson, Tenn.App.,1988.

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