When couples go through a divorce in Tennessee, dividing assets can be one of the most complex and emotionally charged aspects of the process. The state’s equitable distribution system requires courts to distinguish between marital property and separate property before dividing assets. These distinctions can significantly impact the outcome of a divorce settlement.
In this article, we’ll break down the differences between marital and separate property in Tennessee and explore how these classifications affect divorce settlements.
Marital Property in Tennessee
Marital property includes all assets, debts, and income acquired by either spouse during the marriage. This property is subject to division during a divorce.
Examples of Marital Property:
- Income earned by either spouse during the marriage.
- Real estate purchased during the marriage.
- Retirement accounts, pensions, and stock options accrued during the marriage.
- Joint bank accounts and investments.
- Vehicles, furniture, and other personal property acquired after the wedding.
Tennessee follows the principle of equitable distribution, meaning marital property is divided fairly but not necessarily equally.
The court considers factors like the length of the marriage, contributions of each spouse (financial and non-financial), and the economic circumstances of each party.
Separate Property in Tennessee
Separate property includes assets and debts owned by one spouse before the marriage or acquired independently during the marriage through specific means. Separate property is generally not subject to division in a divorce.
Examples of Separate Property:
- Assets owned by a spouse before the marriage.
- Inheritances or gifts received by one spouse individually during the marriage.
- Property acquired after legal separation.
- Personal injury settlements awarded to one spouse (with some exceptions).
Separate property can lose its status if it becomes commingled with marital property. For instance, depositing inheritance funds into a joint account or using them to buy a jointly owned home could make those funds marital property.
How Tennessee Courts Handle Property Division
The court follows a multi-step process to divide property:
- Identify Property: The court determines what assets and debts belong to the couple.
- Classify Property: Assets and debts are classified as marital or separate property.
- Value Property: The court assigns a monetary value to each item.
- Distribute Property: Marital property is divided equitably, while separate property remains with its original owner.
Implications of Property Classification in Divorce Settlements
- Financial Security: Properly classifying property ensures that each spouse retains their rightful share, impacting their post-divorce financial stability.
- Avoiding Disputes: Clear records and documentation (e.g., proof of inheritance or property ownership) can help avoid disputes over property classification.
- Impact of Commingling: Mixing separate property with marital property can inadvertently convert it into marital property, complicating the division process.
- Example: Using funds from a separately owned inheritance to renovate a jointly owned home may lead to those funds being treated as marital property.
- Debts and Liabilities: Marital debts, such as a mortgage or joint credit card balances, are divided equitably. Separate debts, like student loans incurred before the marriage, typically remain with the individual.
Protecting Separate Property in Tennessee
Pre- or Postnuptial Agreements can specify how property will be classified and divided in the event of a divorce. Avoid commingling separate property with marital property. For instance, maintain separate bank accounts for inheritance or gifts. Keep clear records to demonstrate the origin and ownership of separate property.
Conclusion
Understanding the distinction between marital and separate property is crucial for protecting your rights and achieving a fair divorce settlement. Tennessee’s equitable distribution laws prioritize fairness, but property classification plays a pivotal role in determining how assets are divided.
If you’re considering divorce or need guidance on asset division, consult with one of our attorneys in our Johnson City office to help you move forward in a way that best enables you to have a successful future. Call 423-850-0021 to schedule your consultation today.