Facts: After a 16-year relationship, Husband and Wife married when Husband was diagnosed with cancer. Two years later, Husband died. Prior to their marriage, Husband and Wife entered into a prenuptial agreement providing that each party’s income remained their separate property. Wife had relatively little income. In 2007, Husband and Wife filed a joint tax return. Husband died before the 2007 refund was received, and Wife deposited it into their joint account. After Husband’s death, the 2008 tax return was filed jointly. A $34,000 refund was received, all of which had been derived from Husband’s income. When Husband’s estate asked Wife to give the refund to the estate, Wife refused. The Estate sued. The trial court ruled that Wife was entitled to 45.2% of the refund with the remainder passing to the Estate. The Estate appealed.

On Appeal: The Court of Appeals reversed the trial court.

Tennessee public policy favors prenuptial agreements. Parties benefit from prenuptial agreements because such agreements define their marital rights in property. Where terms of the prenuptial agreement are clear and unambiguous, the courts must wholly ascertain the parties’ intent from the plain and ordinary meaning of those terms. Further, Tennessee Code Annotated § 36-3-501 provides:

[A]ny antenuptial or prenuptial agreement entered into by spouses concerning property owned by either spouse before the marriage that is the subject of such agreement shall be binding upon any court having jurisdiction over such spouses and/or such agreement if such agreement is determined, in the discretion of such court, to have been entered into by such spouses freely, knowledgeably and in good faith and without exertion of duress or undue influence upon either spouse. The terms of such agreement shall be enforceable by all remedies available for enforcement of contract terms.

The prenuptial agreement in this case provided, in relevant part:

All wages, earnings and accumulations resulting from personal services or any other source before and during the marriage shall remain the separate property of each party, except to any extent to which such amounts are placed by the party entitled to them in a joint account with the other party. . . .

All other property and interests in property acquired by either party before and during the marriage, by gift, inheritance, purchase or otherwise, together with all replacements to any separate property and all income, capital gains, and liquidating and extraordinary distributions from any such separate property, shall, except as may be otherwise provided in this Agreement, remain the separate property of the party acquiring such property or in whose name the property is placed.

Because there was no dispute that the 2008 refund came from what the prenuptial agreement defined to be Husband’s separate property, the question was whether the tax refunds were transmuted into marital property by virtue of the fact that the parties filed joint tax returns.

After reviewing state and federal case law, the Court concluded:

The majority of case law from our sister states holds that the filing of a joint tax return does not, ipso facto, result in transmutation of separate property into marital. . . . While filing a joint income tax return does create a joint and several liability for underpayment, there exists no concomitant joint and several right to the refund therefrom. . . . [T]he non-income producing spouse has no property interest in the income tax refund, even though same was filed jointly with the earning spouse. . . . Based upon the foregoing, we hold that the filing of joint income tax returns does not create any property right in the jointly filing spouse as a matter of law.

The trial court was reversed and the tax refunds were directed to be turned over to the Estate.

Estate of Hunt v. Hunt (Tennessee Court of Appeals, Eastern Section, March 15, 2012).

Information provided by K.O. Herston: Knoxville, Tennessee Matrimonial, Divorce and Family Law Attorney.