Facts: Husband and Wife, the parents of two children, divorced after 18 years of marriage. For most of the marriage, Wife was a stay-at-home parent and homemaker.

During the marriage, Husband’s father created a closely held limited partnership known as BCV. When it was created, Husband’s parents each owned 1% interests as general partners and the family trust owned the remaining 98%. Husband and his sister were the sole beneficiaries of the family trust.

Years later, Husband’s family cast aside the family trust and recognized Husband and his sister as limited partners, each directly owning a 49% interest in BCV.

Wife argued BCV was marital property because it was conveyed to Husband during the marriage. She also testified that for at least the last five years, she and Husband paid the personal income tax liability associated with retained earnings of BCV, as shown by their joint income tax returns.

Husband claimed his interest in BCV was separate property because he received it as a gift from his father. Husband testified he was unaware he had received the partnership interest, did not know when he acquired it, and was uncertain how he acquired it, stating, “I was never aware of that, so I guess it was a gift.”

The trial court found that Husband’s interest in BCV, valued at $915,000, was marital property. Husband conceded he had no documents, statements, tax returns, or other evidence supporting the existence of a gift. So, the trial court concluded that Husband did not rebut the presumption that his interest in BCV was marital property by presenting clear and convincing evidence that he had received it as a gift. Even if Husband had carried his burden, the trial court determined that the marital appreciation was marital property because both he and Wife made substantial direct and indirect contributions to its appreciation.

The trial court equally divided the marital estate, including Husband’s interest in BCV.

Husband appealed.

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

In Tennessee, property acquired by either spouse during the marriage is generally presumed to be marital property. However, a gift acquired at any time is separate property.

A party may rebut the presumption that property is marital by showing the property  was a gift to that spouse alone. The party asserting a gift must show, by clear and convincing evidence, the donor’s intention to make a present gift coupled with the delivery of the subject of the gift by which the donor surrenders complete dominion and control of the property. The totality of the circumstances is used to measure donative intent.

Because Husband became a limited partner in BCV, free of the family trust, during the parties’ marriage, the initial presumption is that Husband’s interest in the partnership is marital property.

A gift is simply a voluntary transfer of property to another made gratuitously and without consideration. The establishment of a gift requires proof of two elements:

1. the intent of the donor to make a present gift, and
2. the delivery of the property to the donee such that the donor has relinquished dominion and control over the property.

The Court concluded the trial court erred in classifying Husband’s interest in BCV as marital property:

There is no evidence that disputes the testimony of Husband’s father who testified that he formed BCV with his own assets and without any contribution from or participation by Husband….

BCV was formed by Husband’s father with no input from Husband….

There is no evidence in the case at bar that Husband participated in the funding of BCV or made a capital contribution in exchange for his 49% interest. All of the evidence indicates that BCV’s startup capital came from Husband’s father.

*     *     *     *     *

The party asserting a gift must demonstrate, by clear and convincing evidence, the intention by the donor to make a gift, coupled with delivery, by which complete dominion and control of the property is surrendered by the donor. Here, there is no dispute that Husband’s father surrendered control of the 98% limited partnership interest in BCV when that interest was delivered to the family trust. Thus, the issue at hand is that of donative intent.

We measure donative intent based on the totality of the circumstances. Having considered the relevant facts existing prior to the delivery of the gift, they being that Husband made no contributions to the capital of BCV, that he played no role in its formation, and that Husband and his sister received equal interests in BCV, we find that the totality of the circumstances clearly and convincingly establish that Husband’s interest in BCV was a gift from his father that constitutes his separate property. Thus, we hold that Husband has overcome the evidentiary presumption that it is marital property.

The Court then addressed whether Husband and Wife substantially contributed to the preservation and appreciation of BCV during the marriage to an extent that increased the value of Husband’s separate property and, if so, in what amount.

Tennessee law provides that marital property includes the appreciation of separate property if each party contributed to its preservation and appreciation. Both the “owning” spouse and the “non-owning” spouse must substantially contribute to the preservation and appreciation of the asset for its increase to become marital.

Although the spouses’ contributions may be direct or indirect, they must be substantial. Each spouse’s contributions must be real and significant. Additionally, each spouse must contribute to both preservation and appreciation. Mere preservation of the value of the asset is not enough. There must be some link between the marital efforts of each spouse and the preservation and appreciation of the separate property. Appreciation on separate property will not be classified as marital if it is entirely market-driven.

The Court found that Wife’s actions did not meet the criteria for substantial contribution:

Wife has failed to prove that she substantially contributed to the preservation and appreciation of BCV. The trial court’s only finding concerning Wife’s contribution to the appreciation of Husband’s interest in BCV was that of “performing the vast majority of homemaking and parenting, which allowed Husband the time and energy to actively manage partnership properties.” … In some instances, such indirect activities may serve as the basis for a finding of substantial contribution, providing there is a link between the nonowning spouse’s contributions and the increase in value….

Finding that Wife did not prove that both spouses substantially contributed to the preservation and appreciation of BCV, the Court reversed the trial court’s finding that the marital appreciation of BCV was marital property, instead holding it is Husband’s separate property.

Because of the reclassification of Husband’s interest in BCV, the case was remanded to the trial court to reconsider the equitable division of marital property and the alimony award to Wife.

Source: Robeson v. Robeson (Tennessee Court of Appeals, Middle Section, February 3, 2025).

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