In Tennessee, funds or assets received by a spouse from a third party or entity in the form of a gift constitutes separate property meaning a Court cannot distribute any portion of it to the other spouse in a divorce proceeding. The statute defines “separate property” to include “[p]roperty acquired by a spouse at any time by gift[.]” Tenn. Code Ann. § 36-4-121(b)(2)(D)
Classification of particular property as either separate or marital is a question of fact to be determined in light of all relevant circumstances.” See Snodgrass v. Snodgrass, 295 S.W.3d 240, 245 (Tenn. 2009). The court will begin with the presumption that property acquired by a spouse during the course of the marriage is marital property. More specifically the court of appeals has held that “It is well settled that assets acquired during a marriage are presumed to be marital property and that a party desirous of disputing this classification has the burden of proving by a preponderance of the evidence that the asset is separate property.”); Woodward v. Woodward, 240 S.W.3d 825, 828 (Tenn. Ct. App. 2007). However, this presumption may be rebutted by showing that the property was acquired by gift. Trezevant, 2018 WL 1956486, at *11; Dunlap, 996 S.W.2d at 814.
In Tennessee, the party asserting the gift has the burden of proving two formal elements of a gift: (1) an intention by the donor to make a present gift; and (2) delivery of the gift by which the donor surrendered complete dominion and control of the property. Davis v. Davis, 223 S.W.3d 233, 238 (Tenn. Ct. App. 2006). The donor’s intent must be determined “from the totality of the circumstances.” Trezevant, 2018 WL 1956486, at *12. Any doubts in evidence present will be resolved against the gift.
In the matter of Tarver v. Tarver (Tennessee Court of Appeals, Western Section, March 13, 2019) No. W2017-01556-COA-R3-CV, the court adjudicated the issue of whether the trial court erred by classifying the real property and buildings located at Shelby Drive as marital property when Husband’s interest in said property was given to him by his father, he paid no consideration and made no monetary contribution to the improvements, and there was no proof that Grandfather’s gift of said property related to Husband’s agreement to return to work for his father. There was no employment agreement executed between husband and his father who testified that he routinely operated on “gentlemen’s agreements.” The husband had been terminated by his father a number of times and wife testified that she discussed with husband that he should demand an interest in the railroad service business or its real property to reduce the chance of being fired again. Husband’s father testified that there were no negotiations over his returning to work and there was no quid-pro-quo of receiving any property interest in return for husband’s return to work. Husband’s father testified that adding his husband’s name on the deeds to parcels of real estate owned by the business was merely an estate planning strategy and quite oddly testified that he did not consider it be a gift. Husband and his father were represented by same attorney. The grandfather was not properly prepared on the issue of whether placing husband’s name on deed was a gift. This statement was in conflict with husband’s testimony and argument that property transfer was a gift. The court of appeals specifically stated that: [“Considering “the circumstances, history and timing of the acquisition and development of the property and Husband’s return to work,” the court concluded that Husband received his ownership interest as an “incentive to return to work” for Shelby Railroad. According to the court, the surrounding facts and circumstances were “consistent with an agreement for Husband to receive his ownership interest in the property from Grandfather in exchange for his renewed employment at Shelby Railroad[.]” The court of appeals affirmed the trial court’s holding that husband failed to overcome the legal presumption that the real property he was deeded was marital property and thus not separate property in the form of a gift.
In any divorce proceeding the court will look to events and communications surrounding a transfer of property or funds to determine whether it is a gift. If you expect to receive property or funds from a person or entity, it is wise to have clear written communications as to the intent of the donor that it is a gift and that donor no longer have any possession or control of the property. There should be nothing expected in return by the donor, hence no quid-pro-quo. The other spouse should have no influence in the transfer in order to avoid the presumption that it was to be treated as marital property. Furthermore, the funds or property should not be commingled with marital property to remain classified as separate property.
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