Georgia is not a community property state. Brown v. Little, 227 Ga. App. 484, 489 S.E.2d 596 (1997). Rather, this state has extensive case law on treating assets as either separate or marital for the purposes of equitable division. Only the property acquired during the marriage is subject to equitable division. Payson v. Payson, 274 Ga. 231, 552 S.E.2d 839 (2001). O.C.G.A. § 19-3-9 provides that separate property of each spouse shall remain the separate property of that spouse, except as specifically provided by other laws. Property brought into the marriage by one of the parties is not marital property subject to equitable division as it was not generated by the marriage. Property acquired by gift, inheritance, bequest or devise during the marriage is separate property. The last date on which property may be acquired and considered marital is the date of the final decree of divorce or separate maintenance. Friedman v. Friedman, 259 Ga. 530,532, 384 S.E.2d 641 (1989) overruled on other grounds.
If real property was owned by one party prior to the marriage and marital funds have been used to reduce the debt, the property is considered both separate and marital under a “source of funds” analysis. The “source of funds” rule considers the property separate and marital in proportion to contributions provided. Thomas v. Thomas, 259 Ga. 73, 377 S.E.2d 666 (1989). Under the “source of funds” rule, a house is considered two separate units, one marital and one separate. The court determines the contribution of the party bringing the house to the marriage and weighs it against the total marital and separate investment in the property.
In Maddox v. Maddox, 278 Ga. 606, 604 S.E.2d 784 (2004), the Supreme Court of Georgia approved the jury charge that if the properties increased in value as a result of the efforts of either or both parties during the marriage, then the increase would be subject to an equitable division but that if any increase in value was not as a result of the efforts of either or both parties, then that increase would not be subject to an equitable division. The court found that the charge as a whole was a correct statement and adequately explained how the jury should deal with the appreciation of properties.
The question of whether “a particular item of property actually is a marital or non-marital asset may be a question of fact for the trier of fact.” Bloomfield v. Bloomfield, 282 Ga. 108, (2007) quoting Payson v. Payson, 274 Ga. 231, 552 S.E.2d 839 (2001). On appeal the standard by which findings of fact are reviewed is the “any evidence rule”. In Bloomfield, an account was established by Wife’s grandfather and father for benefit of Wife prior to the marriage. The Husband claimed to have managed the property but it did not increase in value. Instead, the Husband had removed money, diminishing its value. Thus, the court concluded that the trial court did not err in determining that it was the separate property of the Wife.
In Bloomfield, Husband also argued that a gift of $10,000 Wife received from her father was marital property. Husband argued that the sum became marital when it was placed into a joint account with Husband. The appellate court noted the trial court’s finding that at the time the Wife received the gift, Husband would not allow her to hold an individual account and she had no other account in which to place the funds. Family law attorneys have speculated about the significance of the Wife not having an individual account to place the gift. Would the outcome have been different if she had an individual account but chose to put the sum in the joint account?
The Georgia Supreme Court’s decision in Lerch v. Lerch, 278 Ga. 885 (2005), sparked a great deal of discussion among family law attorneys. In Lerch, Husband purchased a home prior to the marriage. During the marriage Husband deeded the home to both Wife and himself, to be held as “tenants in common” with right of survivorship. The trial court determined that as a result of the gift, half of the home qualified as marital property and the other half remained the Husband’s separate property. The trial court then awarded the entire home to Husband, giving the portion of the home qualifying as marital property to Husband as his portion of the equitable division of marital property. The supreme court reversed finding the trial court erred by treating only one-half of the home as marital property. The supreme court explained that when a gift is given to the marital couple, the property becomes marital property absent evidence of a contrary intent by the donor. By deeding the home to Wife and himself as “tenants in common”, Husband manifested an intent to transform his own separate property into marital property. Since Husband and Wife owned an undivided one-half interest in the property, the entire home was marital property. Some practitioners warn that the decision in Lerch could lead to further erosion of the separate property distinction. Funds that are clearly separate property may become transformed into marital property if they are commingled even briefly with marital funds. In Lerch, the trial court could have reached the same result by treating the entire home as marital property and still, awarding the home in its entirety to Husband.
In Wood v. Wood, 283 Ga. 8 (2008), the Woods were divorced for a second time. A home that was determined to be the separate property of the Wife was an issue. The home in question was originally purchased by Wife. Subsequently, both the names of Husband and Wife were placed on the security deed. Prior to the second marriage between the parties, Wife requested that Husband quitclaim any interest in the property on the good advice of her attorney in order to ensure that the home did not become marital property. Husband agreed and signed the quitclaim deed. Husband argued the home should nonetheless be considered marital property because he performed upkeep to it during the second marriage. The Husband, however, also contributed significantly to the amount of debt secured by the property, ultimately diminishing its worth. The Supreme Court of Georgia concluded that under the circumstances, the trial court did not abuse its discretion in determining that the home was Wife’s separate property. Would the result have been different if both the names of Husband and Wife had remained on the security deed?
In Coe v. Coe, 285 Ga. 863 (2009), Husband and Wife purchased a home not long after they were married and title to the property was placed jointly in their names. Husband testified that he purchased the marital home with monies he received when he settled a personal injury claim and thus, the marital home was his separate property. Wife denied that the house was purchased with husband’s separate monies but, she argued, if it was, the monies were gifted to the marital unit. The trial court instructed the jury that
Gifts of property between a husband and a wife during the marriage do not vest title in the other spouse so as to exclude that property from being divided in an equitable division of property. And, in that regard, I will tell you that if the payer of consideration and transferee of the property are a husband and a wife, a gift shall be presumed, but this presumption may be rebutted.
The Supreme Court of Georgia found no error with the instruction recognizing that if the property is acquired by one spouse as the result of an interspousal gift of marital property, the property retains its status as marital property. The supreme court citing Lerch v. Lerch, 278 Ga. 885, noted that that 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.
In Miller v. Miller, 288 Ga. 274 (2010), the Husband argued that the trial court erroneously failed to find that the “source of funds” for acquiring the marital residence and an Amelia Island lot was his separate property. First, the supreme court recognized that whether an item of property is a marital or non-marital asset may be a question of fact for the trier of fact. The Husband contended that the source of funds was a prior residence purchased with premarital funds prior to the marriage. The court found important, however, the fact that the prior residence was deeded into both parties’ names after the marriage and the Wife’s testimony that the purpose thereof was to give her ownership because of her contributions to the household. For these reasons, the trial court was authorized to find that the prior residence was transformed into marital property.
In Shaw v. Shaw, 290 Ga. 354 (2012), the court followed Miller, Coe and Lerch. In Shaw, the Husband opened two Morgan Stanley accounts to receive assets he inherited from his mother. When he established the accounts, he did so in the name of him and his wife. The court affirmed the conclusion that the accounts were transformed into marital property when Husband gave Wife an ownership interest in the property. The court rejected the argument by the Husband that the Lerch principle should not apply because Wife never contributed to the accounts and the accounts were never commingled. The court reached a similar conclusion with regard to real property that the Husband inherited but the Husband had directed the property be deeded to him and his Wife as tenants in common. The supreme court cited Shaw in Steis v. Steis, 297 Ga. 483 (2015), finding the joint titling, of property claimed as separate, created an issue of whether there was intent to create marital property.
Conclusion
Generally, the fact that property is titled in the name of one party or in the name of both parties is not the determining factor of whether property is marital or non-marital. The fact that marital property is titled only in the name of one party does not change its status. As seen in the cases above however, when separate property titled only in the name of one party is re-titled into both names the court may find that an interspousal gift occurred and the separate property has become marital.
