All property, including real estate, acquired as a direct result of the labor and investments of the parties during their marriage constitutes marital property to be equitably divided upon divorce under Georgia law.(1) In contrast, a spouse’s business interests and other property acquired/created before marriage and property acquired during the marriage through gift or inheritance remain the separate property of that spouse, unless converted in whole or in part to the property of the marital unit or the other spouse.(2) This article explores the governing standards and proofs needed to resolve spouses’ competing claims regarding separate property on divorce.
If one spouse challenges the other’s assertion that an asset constitutes separate property, both parties must convince a trier of fact of their positions. This author knows of no legal requirement to establish a separate property claim through documentary evidence. While documentary evidence obviously presents the strongest, clearest proof that an asset is or is not separate property, a spouse theoretically can establish or refute a separate property interest through direct testimony alone. In that event, the resolution of the parties’ competing positions likely will hinge on the factfinder’s evaluation of the testifying witnesses’ credibility.
A finding that an asset originated in the marriage as one spouse’s separate property does not always end the trier of fact’s inquiry. For instance, “a spouse can make a gift of non-marital property to the marital unit, which transforms the separate property into marital property, subject to equitable division.”(3) “When a gift is given to the marital couple, … the property will become marital property absent evidence of a contrary intent by the donor.”(4) Examples of presumed gifts include real property jointly titled in the names of both spouses, assets transferred to businesses owned by both spouses, and assets deposited in jointly-titled financial accounts.
In order to rebut the presumption of a gift to the marital unit, the spouse who transferred ownership must present clear and convincing evidence that he/she did not thereby intend to make a gift to the marital unit.(5) A written agreement signed by the parties at the time of the transfer, specifying an intent other than a gift, presents compelling evidence of a contrary intent.(6) Without such written agreement, a spouse can attempt to establish a non-gift intent through parol evidence of either a) an expressed understanding for a non-gift conveyance, or b) an implicit understanding shown by the nature of the transaction, or the circumstances or the conduct of the parties, at the time the transaction was consummated.(7)
Even when an asset itself remains the separate property of one spouse, the increase in value of that asset during the marriage may create a marital interest subject to equitable division. The “source of funds” rule requires a trial court to determine the contribution of a spouse who brought separate property to the marriage and weigh it against the total nonmarital and marital investment in the property during the marriage.(8) That property will be considered both separate and marital in proportion to the contributions (monetary or otherwise) separately and jointly provided by the spouses.(9) For example, the use of marital funds to pay down a mortgage or to pay for maintenance and upkeep of a home brought to the marriage by one party will make the resulting increase in the home’s net equity a marital asset subject to equitable division on divorce.(10)
In order to designate the appreciation in value of separate property during the marriage as marital property, a trier of fact must be able to a) find and quantify the increase in value of the asset during the marriage and b) ascertain that the gain resulted from spousal effort, either separately or in conjunction with the other spouse.(11) To calculate what, if any, amount of appreciation occurred during the marriage, a factfinder must be able to determine the value of the asset both on the date of marriage and on the date of divorce.(12) “The party seeking the equitable division of the appreciation has the burden to establish the [asset’s] true market value at the time of marriage and at the time of divorce.”(13) Failure of the party to meet that burden results in ownership of the asset (including its appreciated value) remaining as it existed before trial.(14)
Georgia law permits direct testimony to establish market value and deems such direct testimony of market value as a form of opinion evidence.(15) As opinion evidence, such testimony cannot establish any fact as a matter of law, and cannot bind the finder of fact as to value of the property involved, even if the testimony remains uncontradicted.(16) Instead, if supported by the evidence, the factfinder may consider the nature of the property involved, together with any other fact or circumstance properly within the knowledge of the factfinder that tends to establish the value of the property.(17)
Parties typically utilize expert opinion testimony to establish market value, but the law does not necessarily require it. In fact, Georgia’s evidence code expressly provides that “[a] witness need not be an expert or dealer in an article or property to testify as to its value if he or she has had an opportunity to form a reasoned opinion.”(18) Lay opinion testimony of value simply must be: rationally based on the perception of the witness; helpful to a clear understanding of the witness’s testimony or the determination of a fact in issue; and not based on scientific, technical, or other specialized knowledge for which expert testimony is required.(19) In practice, lay opinion testimony has been deemed probative of fair market value when based upon a foundation that the witness has some knowledge, experience or familiarity with the value of the property or similar property, supported by reasons given by the witness for the value assessed and by evidence showing that the witness had an opportunity for forming a correct opinion on value (under current law, a “reasoned opinion” on value).(20) “The question of whether a witness has established sufficient opportunity for forming a [reasoned] opinion on value or has stated a proper basis for expressing that opinion is within the trial court’s discretion.”(21)
(1) Payson v. Payson, 274 Ga. 231, 231-232(1), 552 S.E.2d 839 (2001). (2) Coe v. Coe, 285 Ga. 863, 684 S.E.2d 598, 600(1) (2009); Payson, supra, 274 Ga. at 231-232(1); Thomas v. Thomas, 259 Ga. 73, 74-75, 377 S.E.2d 666 (1989); and Halpern v. Halpern, 256 Ga. 639, 352 S.E.2d 753, 754 (1987). (3) Coe, supra, 684 S.E.2d at 600(1). (4) Lerch v. Lerch, 278 Ga. 885, 886(1), 608 S.E.2d 223 (2005). (5) Brock v. Brock, 279 Ga. 119, 120(1), 610 S.E.2d 29 (2005); Talmadge v. Talmadge, 241 Ga. 609, 247 S.E.2d 61 (1978); and O.C.G.A. § 53-12-131(c). (6) See generally Brock, supra, 279 Ga. at 119(1); Scales v. Scales, 235 Ga. 509, 510, 220 S.E.2d 267 (1975); O.C.G.A. § 53-12-131(a); and O.C.G.A. § 44-5-84. (7) Scales, supra, 235 Ga. at 510; and O.C.G.A. § 44-5-84. (8) Hubby v. Hubby, 274 Ga. 525, 556 S.E.2d 127,128 (2001), citing Horsley v. Horsley, 268 Ga. 460, 490 S.E.2d 392 (1997). (9) Hubby, supra, 274 Ga. at 526, citing Thomas v. Thomas, 259 Ga. 73, 76, 377 S.E.2d 666 (1989). (10) Hubby, supra, 274 Ga. at 525-526, citing Avera v. Avera, 268 Ga. 4, 7(6), 485 S.E.2d 731 (1997); and Bass v. Bass, 264 Ga. 506, 448 S.E.2d 366 (1994). (11) Sullivan v. Sullivan, 295 Ga. 24, 757 S.E.2d 129, 132(1) (2014). (12) Id. (13) Sullivan, supra, citing Barber v. Barber, 257 Ga. 488, 489(3), 360 S.E.2d 574 (1987). (14) See Barber, supra, 257 Ga. at 489(3). (15) O.C.G.A. § 24-7-701(b). (16) Sullivan, supra, 757 S.E.2d at 132(1), citing Dep’t of Transp. v. Brannan, 278 Ga.App. 717, 718, 629 S.E.2d 481 (2006). (17) Brannan, supra, 278 Ga.App. at 718. (18) O.C.G.A. § 24-7-701(b). (19) O.C.G.A. § 24-7-701(a). (20) 4WD Parts Center, Inc. v. Mackendrick, 260 Ga.App. 340, 342-343, 579 S.E.2d 772 (2003); O.C.G.A. § 24-7-701(b); and former O.C.G.A. § 24-9-66. (21) Ridley v. Turner, 778 S.E.2d 844 (Ga. Ct. App., 2015), quoting The Martha K. Wayt Trust v. City of Cumming, 306 Ga.App. 790, 791(1), 702 S.E.2d 915 (2010).