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Tennessee Property Division
Property Distribution Laws in Tennessee

In Tennessee the courts generally accept a fair and reasonable property division the parties agree to, but if the parties cannot agree, the property is divided by the County Court within the Judgment of Divorce.

Using a dual classification model, Tennessee is an equitable distribution state. When the parties are unable to reach a settlement, the County Court distributes the marital assets between the two parties in an equitable fashion. Equitable does not mean equal, or even half, but rather what the County Court considers fair. Unless otherwise agreed by the spouses, all marital property is divided in an equitable fashion.

Factors in Equitable Distribution

According to the Tennessee Code - Volume 6A, Title 36, 36-4-121, the court considers:

  • the contribution of each spouse to the acquisition, preservation, appreciation, or dissipation of the marital property, including the contribution of each spouse as homemaker, wage earner, or parent;
  • the value of each spouse’s property at the time of the marriage and at present;
  • the economic circumstances of each spouse at the time the division of property is to become effective;
  • the length of the marriage;
  • the age and health of the spouses;
  • the vocational skills of the spouses;
  • the liabilities and needs of each spouse and the opportunity of each for further acquisition of capital assets and income;
  • the federal income tax consequences of the court’s division of the property;
  • the present and potential earning capability of each spouse;
  • the tangible and intangible contributions made by one spouse to the education, training, or increased earning power of the other spouse;
  • the relative ability of each party for the future acquisition of capital and income;
  • the employability and earning capacity of the spouses;
  • any social security benefits; and
  • any other factors necessary to do equity and justice between the spouses.

Courts do not consider fault in property division.

Marital Property vs. Separate Property

Marital property is any property acquired during the marriage by either spouse. It includes any increase in value of any property to which the spouses contributed to the upkeep and appreciation, and retirement benefits.

Separate property is acquired prior to marriage, property acquired by gift or inheritance, in exchange for any separate property, or obtained from income or appreciation of separate property, if the other spouse did not contribute to the preservation and appreciation.

Spouses often commingle their marital and separate property. If separate property becomes commingled with marital property, it may become marital property. Tainting, as this mixing is called, causes difficult issues for the court. The court is more likely to return property that can be traced back to the original owner. 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 may consider other property as part of the equation and look to make an equitable distribution.

Inheritance is separate property. It belongs only to the inheriting spouse. However, he or she must take care not to treat it as marital property owned by both spouses. An inheritance should not become tainted by being commingled in a joint account, or, for example, spent on a house owned jointly. Good legal advice is appropriate. However, the amount of separate property is a factor in dividing marital property. A large amount of separate inherited property may mean a smaller share of the marital property in the divorce settlement.

Property Defined

Property is either marital or separate, and it includes assets and liabilities. Some types of property have a readily ascertainable value. Other assets are difficult to value, particularly when the spouses cannot agree. The spouses advance opinions about value. An appraiser or other qualified expert might provide the most persuasive proof. Property that might require professional testimony includes businesses, pensions, jewelry, artwork, and real estate. Appraisals often become relatively expensive, especially if both parties hire experts.

Valuing and Dividing Property

First, the court classifies assets and liabilities, property and debt, as marital or separate. Then it assigns a monetary value to the marital property and debt. Finally, it distributes the marital assets between the two parties in an equitable manner.

The Marital Home

In Tennessee, as in many jurisdictions, the equity in the marital home is often one of the biggest assets the spouses divide. The equity is the market value of the house, less any debts or liens against it. Equity is established by determining what the current market value of the home is at the time of separation. Once the spouses agree to a current market value, any debts associated with the property (mortgage, taxes, home equity loans, etc.) from are deducted the market value to arrive at the equity to be divided. Normally, making this calculation requires a paid real estate appraisal or a real estate agent can prepare a market analysis for free.

From there, couples choose one of three options to divide the equity:

  • The spouses sell the home and divide the proceeds.
  • One of the parties may refinance the home and “buy out” the other party.
  • One spouse (usually the custodial parent) remains in the home with the exclusive use and possession for a certain period of time (for example, until the youngest child graduates from high school), then either buys out the other spouse or sells the home and divides the proceeds.

Pensions and Retirement Accounts

In Tennessee vested pensions are marital property. A pension vests when all the requirements to receive the pension have been met. Unvested pensions are also marital property. Until the pension has vested, the person under whom the pension is maintained has only an expectancy of interest in the pension.

Several different methods of valuation are used in determining how much a marital asset is worth, depending upon the asset to be valued and the level of agreement between the parties. Courts generally accept the value when the spouses mutually agree on a value of a particular asset. Experts may be retained by the parties or by the courts to determine the value of marital assets if the parties cannot agree. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.

In Tennessee the court may include the retirement benefits and plans earned by both spouses as marital assets available for division. Retirement benefits vary greatly but can generally be divided into two groups:

  • Defined Contribution Plans: A defined amount of money belonging to the employee. The employee and/or the employer make defined contributions. The balance of the plan is constantly changing, but its value is definable at any given point. 401(k)’s, 403(b)’s and profit sharing plans fall into this category.
  • Defined Benefit Plans: A retirement benefit where an employer promises to pay a benefit to an employee sometime in the future, based upon some type of formula. Normally, this formula is based on the employee’s salary near the end of his or her career and the number of years he or she worked for the employer before retirement. Defined benefit plans are much more complicated to value and often require the professional evaluation of an actuary to determine exact values.

In Tennessee if spouses share in each other’s retirement or pension plan, a Qualified Domestic Relations Order must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution - how much of the benefits are to be paid to each party, when such benefits can be paid, how such benefits should be paid, etc.

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