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How Non-Marital Property Can Transform Into Marital Property for Purposes of Divorce

How is property divided in a divorce in Georgia?

In a Georgia divorce, if the parties proceed to trial, a judge must fairly divide the marital property in a process known as equitable division, unless the parties decide to take the issue to a jury. Marital property includes the property acquired during the marriage. Although title to the property is not determinative of property division, title-based considerations do have significance in a Georgia divorce. Originally, title was determinative of who would be awarded property in divorce unless there was a showing of fraud or the non-titled spouse successfully sought ownership of the property as a form of lump sum alimony.

In Stokes v. Stokes. 273 S.E.2d 169 (Ga. 1980), equitable division in a Georgia divorce was recognized. Title was no longer determinative of who received the property; rather the home in Stokes was equitably divided because its purchase price and mortgage were paid for by the joint efforts of both spouses.

Source of Funds Rule

Thomas v.  Thomas, is a landmark Georgia divorce case that involved a pre-marital home that was later contributed to with marital assets. 377 S.E.2d 666 (Ga. 1989). The court in Thomas implemented a “source of funds” rule, which allowed the court to hold that the marital unit could claim an interest in the home equal to the amount of marital funds that were used to reduce the principal mortgage balance, as well as a proportionate interest in the home’s appreciation.

What is considered marital property?

The transmutation of property theory states that separate property can become marital if placed in joint names during the marriage. Although Georgia courts have emphasized the importance of marital contributions to funds instead of title, title has been considered closely in distributing assets in several recent Georgia Supreme Court decisions. In Lerch v. Lerch, the husband’s gift deed of his pre-marital property to be jointly held with his wife indicated an intent to transform his separate property into marital property. 608 S.E.2d 223 (Ga. 2005). Georgia law states that gifts between spouses are marital property so the court found that there was transmutation in Lerch because of a gift implied from the form of title.

Another landmark case, Coe v. Coe. dealt with a marital home, which was titled jointly, that the husband argued he purchased with his separate property and therefore the court should award it to him as separate property. 684 S.E.2d 598 (Ga. 2009). The court in Coe essentially found that if the husband had purchased the marital home with his separate funds but placed title to the home in the couple’s joint names, then the Court would be entitled to find transmutation. This presumption of transmutation could be rebutted if the husband could show that he held equitable title through a purchase money resulting trust. The husband in Coe did not transfer title to the wife, rather the home was purchased as a joint asset. The decision appears to state that a spouse must now rebut a presumption of a gift whenever separate property is contributed toward a jointly titled asset.

Coe and Lerch, as well as Miller v. Miller, Mallard v. Mallard, Shaw v. Shaw and Steis v. Steis illustrate how parties can transform or transmute separate property into marital property in various ways. The ways in which property can be changed from non-marital to marital include: (1) express or implied gift of one spouse’s separate property to the other spouse or to the marital unit, (2) express contract, (3) commingling of marital and separate property, (4) re-titling of separate property into the joint names of both spouses, or (5) use of separate property for family purposes. Therefore, title does still hold some significance in the equitable distribution of property in Georgia, especially in cases of a high-asset divorce.

 

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