Written by Rachel Aliza Elovitz
In Georgia, property division in divorce is subject to certain rules – traditional principles out of which the Georgia Supreme Court has carved multiple exceptions.
Property division, first and foremost, must be “equitable.” Equity seeks to do that which is fair, and what is fair is not necessarily equal – not in Georgia. In community property states, the presumption may be that a 50/50 split is fair. In Georgia, the Court is charged with considering various factors in determining what would constitute an “equitable” distribution of the parties’ assets. Those factors include the duration of the parties’ marriage, any prior marriages of the parties, each parties’ age, general health, occupation, vocational skills, employability, contributions to the family, sources of income, estate, debts, liabilities, needs, debts against any real or personal property, whether any apportionment is in lieu of or in addition to permanent alimony, and the opportunity of each spouse to acquire assets or income after the divorce.
One of the central principles of property division is that only the real and personal property and assets acquired by the parties during their marriage are subject to equitable division. However, if a party receives a third-party gift or an inheritance during the marriage, then he (or she) gets to keep that property. If, on the other hand, the gift is an interspousal one (given by one spouse to the other), then it constitutes marital property and is subject to equitable division. So, if a husband gives his wife a $3,000.00 necklace on their 18th Anniversary, the necklace is marital property – and can be awarded to either party or ordered sold and the proceeds divided in a manner that the Court deems – you guessed it, equitable.
Another general principle surrounding the division of real and personal property and assets in divorce is that parties retain their separate property interest in premarital assets. It is a principle that was codified in 1979, when the Georgia General Assembly, consistent with the U.S. Supreme Court’s decision in Orr v. Orr, acknowledged each spouse’s right to retain property that he or she brought into the marriage. A year later (in 1980), the Georgia Supreme Court decided a landmark case, Stokes v Stokes, confirming the Orr decision and the amendment to the Georgia Code and establishing guidelines for the division of assets.
The Stokes Court outlined the three steps a judge or jury must take when determining to whom property should be awarded in divorce. First, the court or jury must assign to each spouse the real and personal property and assets with which he or she came into the marriage, as well as any assets he or she inherited during the marriage. Second, the judge or jury must equitably apportion between the parties the real and personal property and assets acquired during the marriage, irrespective of in whose name the property is titled.
The third step in dividing assets requires, when the judge or jury deems such an award appropriate, an award of alimony – in accordance with the needs of the party to whom the award is made and the ability of the other party to pay, either from future earnings or the corpus of the paying party’s estate, whether that estate was acquired before or during the marriage. In making a determination of alimony, the court or jury must consider the condition of both parties, their separate estates, earning capacities, needs and fixed liabilities.
In the decades following the Stokes decision, the Georgia Supreme Court repeatedly recognized that real and personal property and assets brought into the marriage, having not been generated by the marriage, are not subject to equitable division, while real and personal and assets acquired during the marriage are subject to equitable property division. The Supreme Court similarly reaffirmed that property acquired by either party during the marriage through third-party gift or inheritance remains the separate property of that party. However, those general principles have slowly but surely been whittled away.
In a 2004 case, Hipps v Hipps, a husband sought discretionary appeal of an award to wife from his premarital retirement and survivor benefits. The Supreme Court held that husband’s premarital contributions to his military retirement account were not subject to equitable division, but said that the trial court had not granted them to Wife, rather awarded her periodic alimony of $1000 a month out of the corpus of the husband’s separate estate and a survivor’s benefit in the form of an annuity, contingent upon husband predeceasing wife. A court order requiring a party to designate a former spouse as a plan beneficiary, the Supreme Court held, does not constitute a transfer of property. The Georgia Supreme Court held similarly in Smelser v Smelser, in which a trial court’s decision to award part of a husband’s premarital home to wife as alimony was upheld.
A couple of years later, Georgia’s separate property distinction was eroded further. Since 1989, the Source of Funds Rule had guided domestic litigators in deciphering separate and marital property components of assets. The rule was intended to provide a mechanism through which the spouse who contributes separate funds and the marital unit that contributes marital funds to the same piece of property can each receive a proportionate return on their investment. But from that general principal another exception was carved – in Lerch v Lerch.
In Lerch, five years after marrying his wife, a husband executed and recorded a gift deed transferring ownership in his premarital home to the parties 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 martial property and the other half, husband’s separate property. The court then awarded the entire home to Husband, giving him both his separate property interest in the home and the entire marital interest in the home as part of equitable division of property. Wife appealed. The Supreme Court held that the husband transformed his separate property into martial property by deeding it to himself and his wife. He was no longer entitled to a proportionate return on his premarital investment.
The following year (2007), the Georgia Supreme Court was faced with a similar situation in Bloomfield v. Bloomfield, wherein a husband argued that a gift of $10,000 to his wife from her father, which would otherwise have constituted her separate property, was transmuted into marital property when placed into the parties’ joint account. The trial court found, however, that at the time that the wife received the gift, the husband would not allow her to maintain an individual account, whereby she had no choice but to comingle funds. The Supreme Court agreed. The Supreme Court upheld the trial court’s decision.
In Campbell v. Campbell, the Supreme Court carved out another exception to the rule that funds acquired during the marriage are marital property and subject to equitable division. Specifically, the Supreme Court held that to the extent a personal injury settlement represents compensation for pain and suffering and loss of capacity, it is particularly personal to the compensated party and should be excluded from the marital estate.
Just last year, in 2010, the Supreme Court of Georgia in Miller v Miller, considered husband’s contention that the trial court erred in failing to consider that the marital home and a lot on Amelia Island were purchased with premarital funds. The Supreme Court upheld the trial court’s decision, however, since the husband deeded the home into the parties’ joint names after they married and since the evidence showed that the parties borrowed against the equity in the marital residence to purchase the Amelia Island lot.
People expect the law to be black and white, but there are many shades of gray. It is an ever-changing jurisprudential rainbow, one soaked in purpose and perched on a cloud of equity.
Avera v. Avera, 268 Ga. 4(1), 485 S.E.2d 731 (1997). McArthur v. McArthur, 256 Ga. 762, 763-764, 353 S.E.2d 486 (1987). Orr v Orr, 440 U.S. 268 (1979) Stokes v. Stokes, 246 Ga. 765, 768, 273 S.E.2d 169, 171 (1980). Lerch v Lerch, 278 Ga. 885, 885, 608 S.E.2d 223, 224 (2005). Bloomfield v Bloomfield, No. S07F0096, 2007 WL 1582225, at *2 (Ga. June 4, 2007). Coe v. Coe, 684 S.E.2d 598, 285 Ga. 863 (Ga., 2009) Miller v. Miller (Ga., 2010) Thomas v. Thomas, 259 Ga. 73, 377 S.E.2d 666 (Ga., 1989)
Rachel A. Elovitz is a domestic litigator who regularly serves as a guardian ad litem, representing the interests of children in custody, abuse, and neglect cases in Georgia’s Superior and Juvenile Courts. She is a regular contributor to the DeKalb Bar News.