Snodgrass v. Snodgrass, 295 S.W.3d 240 (Tenn. 2009).

Premarital Balances, However Not Features, in Retirement Accounts Had been Separate Property

On this 2009 case, the Tennessee Supreme Court docket tried to make clear and distinguish its choice in Langschmidt v. Langschmidt, 81 S.W.3d 741 (Tenn. 2002). As soon as salaried workers with Alcoa, Mr. and Mrs. Snodgrass have been married for about 23 years.  Each participated in employer-provided 401(ok) plans. Earlier than their wedding ceremony day, his 401(ok) was valued at $54,000.00; hers was valued at $17,000.00. The spouses stipulated that an equitable division of their marital property could be an equal one. Retired once they divorced, his 401(ok) was valued at $2,301,000.00; hers at $691,000.00.

The trial courtroom awarded every partner the premarital stability of his and her 401(ok) as separate property. It categorized all positive aspects accrued through the marriage as marital property and divided it as marital deferred compensation. Mr. Snodgrass appealed.

The Court docket of Appeals held the trial courtroom erred in ruling that every one marital development on the plans was divisible marital deferred compensation). The Supreme Court docket affirmed the trial courtroom and reversed the appeals courtroom, holding the account values on the time of the marriage have been separate property. Internet positive aspects on each 401(ok)s through the marriage have been marital property.

The Supreme Court docket honed in on the primary and second clause of T.C.A. § 36-4-121(b)(1)(B). The Snodgrass evaluation went one thing like this: Was a fringe profit, inventory choice, pension, or retirement plan associated to employment through the marriage? If “No” as in Langschmidt (IRAs funded in particular person capability totally with premarital funds earlier than the wedding), then apply the primary clause. If “Sure” as in Snodgrass (employer-employee 401(ok)s funded earlier than and after marriage), then apply the second clause to all post-marital positive aspects. When funded through the marriage by means of employment, the online elevated worth of the 401(ok) that accrued through the marriage is marital property. The statute at the moment didn’t distinguish between worth added passively and worth added by direct or oblique further contributions through the marriage.

Right here’s how the Tennessee Supreme Court docket summed it up:

We make clear at the moment that 401(ok) accounts held by means of a partner’s employer are ‘retirement or different fringe profit rights regarding employment.’ Accordingly, internet positive aspects from any supply accruing in such accounts throughout a wedding are all marital property inside the that means of the second clause of § 36-4-121(b)(1)(B), and it isn’t vital to contemplate the relative contributions of the events to the rise in worth. Additionally, we agree with the events that the balances that existed in every of their 401(ok) accounts as of the date of their marriage stay their separate property.  Id. at 255.

The holding in Snodgrass was successfully overruled by the legislature in 2015 when T.C.A. § 36-4-121(b)(1)(B) was amended.   Separate property now contains any “account stability, accrued profit, or different worth of vested and unvested pension advantages, … inventory choices rights, retirement, and different fringe advantages” that accrued earlier than the wedding together with any “appreciation of worth” on that profit. The exception being if every partner considerably contributed to the retirement’s or fringe profit’s preservation and appreciation through the marriage (rendering appreciation a divisible marital asset).

This publish is a part of a collection, Appreciation of Separate Property: The Forensic Accountant’s Full Employment Act.

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