It is important to know the difference between what the Tennessee courts classify as marital property and separate property. I find that a lot of couples believe that if they maintain separate accounts, title property in their individual names, or keep their spouses names from being associated with assets they purchase or obtain during the marriage, that they are somehow protecting its separate identity. This is not true and not consistent with the way the court may define separate and marital property.
In fact, marital property can be defined as broadly as any items acquired during the marriage. It can include income from, and any increase in the value during the marriage of, property determined to be separate property if each party substantially contributed to its preservation and appreciation. Substantial contribution may include the direct or indirect contribution of a spouse as homemaker, wage earner, parent or family financial manager.
So, it is important to understand that any items that were owned prior to the marriage or received during the marriage, such as inheritance, which would normally be deemed separate property, can change or “transmute” to marital property in certain situations. For example, if wife receives an inheritance and places the funds from the inheritance into a separate account in her individual name, said funds would remain the separate funds of wife and not divisible upon a divorce. However, if wife places husband's name on the account where the inherited funds are deposited or uses said funds toward a marital asset (like pay off a mortgage on real property deeded to the parties jointly), then wife may transmute said funds and create a marital interest for husband in the inheritance. Another example would be if the funds were used to purchase real property that is jointly titled, this creates a marital interest. The courts have even upheld that using your spouses credit and obtaining a mortgage on real property owed by one party prior to the marriage, can create a marital interest, even where the deed has not been changed to include the spouse's name.
In order to completely protect yourself from having separate assets become marital assets in a divorce, contact my office and discuss the possible tools and obtain advise as to how to avoid a transfer of separate assets to marital assets.