Equitable Distribution: Inherited Funds and Transmutation
The Tennessee case of Grider v. Grider, filed January 30, 2023, is the case of a 29-year marriage gone by the wayside with very little to show from it. This marriage ended badly for both the Husband and the Wife. The Husband received an order of protection, a heart attac,k and $2,000 of marital assets. The Wife received roughly $151,500 in assets and 68,600 in debt. In all fairness, the trial judge did award the Husband $135,000, which was the value the trial court placed on properties purchased on Alabama with inherited funds during the marriage.
The Husband’s father died intestate in July 2004, during the parties’ marriage, and the Husband inherited $312,000.00 from his father’s estate. What did he do with it? Did he put it into a separate account from his wife, labeling the account as his inheritance? No, he did what a good husband would do in a happy marriage. He deposited the $312,000 into a joint savings account 2004. From these funds, the Husband purchased/inherited three properties in Alabama.
1. In 2005, the Husband purchased real property with a house from his mother, the “family home” property for $64,000 with the funds from the joint account. The Husband titled the property in his name alone. This lot was valued at $105,000 at the time of trial.
2. Lot 25 was owned by the Husband’s brother and it was disputed whether that property was purchased or outright inherited and transferred from Husband’s brother to Husband in 2005. It was titled in the Husband’s name alone and as “Administrator of the Estate of” his father.
3. Lot 26 was another lot owned by the Husband’s brother and the Husband agreed that he purchased that lot for $8,000 from his brother in 2012. That lot was also titled in the Husband’s name alone and as Administrator of the Estate.
The Husband listed the Alabama properties as "marital property" on his list of assets and liabilities, which was presented as an exhibit at trial, although he testified that he believed all of the Alabama real properties were his separate property. Further, the Husband testified that he told the Wife that these properties were his own inherited properties. Wife denied he told her that.
As to the joint account of inherited funds, it was undisputed that the Wife had access to that account and withdrew the funds to pay for the Alabama properties (2 of them). The taxes, insurances and expenses were paid from joint savings (inheritance) account or their joint checking account. The Wife enjoyed equal access to this account and made regular withdrawals from it for the benefit of both parties during the marriage. When the Wife filed for the divorce in April 2018, she closed the joint savings account, and she split the remaining funds (approximately $2,000.00) with Husband at that time.
The Tennessee Supreme Court has described the difference between commingling and transmutation: “[S]eparate property becomes marital property [by commingling] inextricably mingled with marital property or with the separate property of the other spouse. If the separate property continues to be segregated or can be traced into its product, commingling does not occur. . . . [Transmutation] occurs when separate property is treated in such a way as to give evidence of an intention that it become marital property. . . . The rationale underlying 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 to be marital. The presumption can be rebutted by evidence of circumstances or communications clearly indicating an intent that the property remain separate.”
Due to the facts above, the Appellate Court found that the properties, except Lot 25, were marital property purchased during the marriage. The burden shifted to the Husband to prove that the property was not intended to be marital. Though the Husband titled the property separate, even titling as, “Administrator of the Estate” of his father, the Husband’s word that he told the Wife that this was his separate property was denied by the Wife, so he did not carry his burden. Plus, the trial court found the Husband was not credible.
Lot 25 was not found to be marital because it appeared from the evidence that it was given to the Husband by inheritance; he did not pay for it.
Moral of the Story: There is no good moral of the story when after 29 years of marriage, these parties had remarkably little in the way of assets to split.
Take away from this case: Not romantic, but do not share your inheritance by putting it in a joint account and still title anything you buy in your own name, and to further prove you wanted to keep it separate, put it in writing and have your spouse sign with two witnesses in front of a notary. Although, in this case, one would have thought that the deeds to these properties said it all, but apparently, you just can’t be too cautious. The other solution: don’t pay your family for the properties, just have them give it to you as a gift then give them some money as a gift. Problem solved … until the next court decision.
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