When courts divvy up marital assets in a divorce, they often face issues regarding whether to classify real estate either as marital property or separate property. The issue becomes critical because a court’s final decree of divorce divides all marital assets between the parties in a manner that is fair under the circumstances, but not necessarily equal.(1) Property deemed entirely the separate property of one spouse will not be equitably divided at all in divorce.(2)
All property, including real estate, acquired as a direct result of the labor and investments of the parties during their marriage constitutes marital property.(3) This rule holds true whether such real estate is jointly titled or titled in the name of only one spouse.(4) The rule also holds true where such property acquired during the marriage was originally titled in one spouse’s name (or jointly titled) but then conveyed to the other spouse during the marriage.(5)
Real estate and other property acquired during a marriage by one spouse through gift or inheritance ordinarily remains the separate property of the recipient spouse.(6) An exception occurs where one spouse receives a gift from the other spouse of property constituting marital property. In such instances, the property will retain its status as marital property notwithstanding the purported gift.(7) Property acquired during the marriage by one spouse through gift or inheritance, as well as a spouse’s pre-marital property, also may be deemed marital property where he/she titles the property jointly in the names of both spouses. Such cases raise a rebuttable presumption that he/she made a gift of the property to the marital estate, thereby transforming what would have been separate property into a marital asset.(8) If, however, a spouse gifts his/her separate property to the other spouse alone, that gift can convert the property into the separate property of the other spouse.(9)
Events transpiring after marriage can transform pure separate property of a spouse into a mix of separate and marital property. 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.(10) That property will be considered both separate and marital in proportion to the contributions (monetary or otherwise) separately and jointly provided by the spouses.(11) 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.(12) Stated differently, non-marital property which appreciates in value during the marriage as a result of the efforts of either or both spouses will render that appreciation in value a marital asset subject to equitable division.(13)
(1) Wright v. Wright, 277 Ga. 133, 134, 587 S.E.2d 600 (2003); Payson v. Payson, 274 Ga. 231, 231-232(1), 552 S.E.2d 839 (2001).
(2) Payson, supra, 274 Ga. at 232.
(4) Steis v. Steis, 297 Ga. 483, 488(3), 775 S.E.2d 139 (2015); McArthur v. McArthur, 256 Ga. 762, 763-7664, 353 S.E.2d 486 (1987).
(5) McArthur, supra, 256 Ga. at 763.
(6) Id.; and Coe v. Coe, 285 Ga. 863, 864-865(1), 684 S.E.2d 598 (2009).
(7) Coe, supra, 285 Ga. at 864-865(1).
(8) Coe, supra, 285 Ga. at 864-865(1); and Lerch v. Lerch, 278 Ga. 885, 608 S.E.2d 223 (2005).
(9) Graham v. Graham, 291 Ga. 1, 727 S.E.2d 101(2012); and Lerch, supra, 278 Ga. at 885(1).
(10) 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).
(11) Id., at 526, citing Thomas v. Thomas, 259 Ga. 73, 76, 377 S.E.2d 666 (1989).
(12) Id., 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).
(13) Mallard v. Mallard, 297 Ga. 274, 277, 773 S.E.2d 274 (2015), citing Armour v. Holcombe, 288 Ga. 50, 51–52(1),701 S.E.2d 169 (2010).