During a divorce, how and when you acquire property largely determines whether it is classified as marital or separate property.
In Tennessee, the Courts recognize the Doctrine of Transmutation as a mechanism that transforms separate property into marital property. The Courts have noted that when separate property is treated with the intent that it is marital, then transmutation occurs, and the property becomes marital.
Under the Doctrine of Transmutation, if the property is treated with the intent that it is marital property, “a rebuttable presumption arises that the owner of the separate property made a gift to the marital estate.” Pate v. Pate. Thus, under the Doctrine of Transmutation, the tracing of separate property does not occur because it is presumed to be a gift to the marital estate.
An example of the Doctrine of Transmutation is explained in Hayes v. Hayes, wherein the Court of Appeals reversed the portion of the trial court that determined that the former marital residence was the wife’s separate property. In that case, the parties had been married for six years and the wife owned the residence prior to marriage. The parties resided in the residence during the entire length of the marriage. After the parties were married, they opened a joint bank account and both parties contributed funds to the joint account. The mortgage payments for the residence were made for several years from the joint account. Eventually, the wife opened a separate account and began making the mortgage payments from her separate account, but husband argued that her earnings that went into the account were marital funds. The husband also noted his other contributions to the residence such as removing carpet, repainting the interior of the home and other improvements to the residence. In this case, the Court of Appeals determined that the residence that was initially the wife’s separate property had become marital property based on the Doctrine of Transmutation. The Tennessee Court of Appeals has consistently determined that the treatment of separate property during the marriage in a way that is evidence of the intent to make the property marital will change the classification of the property to marital under the Doctrine of Transmutation.
In Fox v. Fox, the Court reversed the trial Court’s determination that the marital residence was wife’s separate property and determined that it had become marital property under the Doctrine of Transmutation. Wife had purchased a tract of land prior to marriage. During the marriage, the parties constructed a marital residence on the separately titled tract of land. Most of the funds for the construction of the house were from wife’s separate assets. The title to the property remained solely in the name of wife throughout the marriage. However, during the marriage some payments for construction came from joint funds and husband helped contribute by coordinating the construction and painting and yard work. Other expenses associated with the residence were paid from a joint account such as insurance and property taxes. The parties lived in the home for approximately six years. Based on the evidence, the court concluded that the property should not have been classified as wife’s separate property and held that it should be considered marital.
Other fact patterns where the Court of Appeals has applied the Doctrine of Transmutation involve situations where one party purchases a home in contemplation of marriage and the parties move in together and live there as a married couple and contribute to upkeep with marital earnings. Here, the home was considered marital property even though it was purchased by one party prior to marriage. The Court has reiterated that the parties’ treatment of the property at issue determines its classification as either separate or marital property.
Learn more about how separate and marital property is classified here.
If you are contemplating a divorce and have some questions about how your assets will be classified, call Held Law Firm at (865) 637-6550 to schedule a consultation, and we will be happy to assist you.
This article was written and produced by Melanie Hogg.