Facts: Wife and Husband divorced after nearly seven years of marriage. They enjoyed a high standard of living and amassed a marital estate worth over $4.6 million. After Wife filed for divorce, the trial focused on how to divide the marital property, including the impact of Husband’s post-separation spending and an insurance settlement check.

Once the parties separated, Husband dramatically changed how he handled money. Before separation, both spouses’ incomes were deposited into joint accounts to pay marital expenses. After separation, Husband stopped consistent deposits and instead withdrew large sums for unexplained purposes. He wrote checks to himself totaling $507,031 that never went into any known account and served no marital purpose.

Husband claimed he gave nearly half a million dollars in cash to churches as tithes, but when those churches were subpoenaed, they had no record of donations, and Husband claimed no charitable deductions on the couple’s taxes. The trial court found Husband’s story “not credible,” given that the spouses had never tithed such large amounts during the marriage.

Husband’s credit card spending also skyrocketed after the separation. He spent over $27,000 on sports tickets (for NHL hockey and University of Tennessee college football games) and thousands more on dining and entertainment, some of which involved women he dated post-separation. Three of Husband’s post-separation romantic partners testified about expensive dates Husband took them on. The trial court found these expenditures had “no marital purpose.”

Combined, the trial court determined that Husband dissipated $512,171.03 in marital funds after separation through unexplained withdrawals and excessive personal spending. Because Husband failed to prove these expenditures were appropriate, the trial court counted the entire $512,171.03 as marital funds wasted by Husband.

Another dispute involved an insurance settlement check of roughly $40,000. During the divorce litigation, Husband’s pre-marital 2015 Ford F-350 truck was stolen. Husband used marital funds to buy a replacement truck. At trial, Wife proposed treating the pending $40,823 insurance payout for the stolen truck as Husband’s separate property (since the original truck was his pre-marital asset). However, the trial court classified the insurance settlement as marital property. It added the $40,823 to the marital estate and awarded that money (and the new 2023 Ford F-350 replacement truck) to Husband in the property division.

In the final divorce order, Wife was granted the divorce on grounds of Husband’s inappropriate marital conduct. To equitably divide the marital estate, the trial court assigned Husband the entire $512,171 dissipation. It accomplished this by giving Wife an extra $512,171 credit in the division of the marital residence’s equity. This resulted in a division of roughly 55% to Wife and 45% to Husband, which the trial found to be equitable.

Husband appealed, arguing the trial court erred by making him solely responsible for the entire $512,171 in dissipated marital funds. He claimed this gave Wife an unfair windfall because, in his view, both spouses still had an interest in those funds. Husband also argued the trial court misclassified the $40,000 insurance settlement from his stolen truck as marital property when it should have been his separate property.

On Appeal: The Court of Appeals affirmed in part and reversed in part.

Tennessee law requires an equitable—but not necessarily equal—division of marital property in a divorce. Trial courts consider many factors, including each spouse’s contribution to the dissipation of marital assets.

“Dissipation” generally refers to one spouse’s wasteful expenditure of marital funds for a purpose unrelated to the marriage, especially after the marriage is breaking down. Expenditures that constitute dissipation are so far removed from normal expenditures that they can be characterized as wasteful or self-serving. If a spouse is found to have dissipated marital funds or assets, the court may adjust the property division to account for that waste.

Some Tennessee appellate opinions have held that when marital assets are divided equally, a spouse cannot be charged with the entire amount dissipated because that spouse also technically owned half of those funds. However, courts have wide discretion to craft an equitable distribution that may allocate more than half of the wasted funds to the offending spouse if justified by the circumstances.

Here, the Court of Appeals affirmed the trial court’s handling of Husband’s dissipation. The Court agreed it was equitable to make Husband alone account for the $512,171 he dissipated, given that the overall distribution of the marital estate was not an exact 50/50 split:

In contrast, the trial court here did not divide the estate equally. Rather, the trial court awarded Wife “$512,171.03 in the form of an above-the-line adjustment to her share of the equity in the marital residence as a result of Husband’s dissipation of that amount of money from the marital estate.” This is a clear indication that the trial court intended to distribute the estate equitably rather than equally.

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The trial court’s division of the marital assets, including the assignment of the dissipation, is consistent with the factors in Tennessee Code Annotated section 36-4-121(c) and is supported by the preponderance of the evidence. The judgment of the trial court on this issue is, therefore, affirmed.

Regarding the insurance settlement check, Tennessee law presumes that property acquired during the marriage is marital, but property owned before marriage (and its proceeds) is separate unless it is transmuted into marital property by the spouses’ actions. An insurance payment that compensates for the loss of a separate property asset can remain separate property if the asset itself was never treated as marital. To decide this, courts look at factors like whether both spouses used or maintained the asset and if the non-owner spouse contributed to its preservation.

The Court of Appeals agreed with Husband that the $40,000 insurance payout for his stolen pre-marital truck should have stayed his separate property. The evidence showed the truck was purchased and insured by Husband (even though marital funds paid the insurance premiums), and there was no proof Wife contributed to or used that truck. Notably, Wife herself had listed the insurance proceeds as Husband’s separate property in her trial filings. The appellate court found the trial court failed to analyze whether any transmutation occurred and concluded it did not. It held that classifying the insurance check as marital property was error:

We agree with Husband that the insurance settlement should not have been classified as marital property. The judgment of the trial court is modified to reflect that the $40,000 insurance settlement is Husband’s separate property. This reclassification does not render the overall distribution of the marital estate—valued at over $4.6 million—inequitable as our modification represents less than one percent of [the] overall value of the estate. Accordingly, we do not disturb the trial court’s distribution of the marital estate in light of the reclassification.

The Court modified the judgment to reclassify the $40,000 insurance settlement as Husband’s separate property. With that small modification, the Court of Appeals affirmed the rest of the property division.

K.O.’s Comment: Compare this decision with a case like Holdsworth, where splitting the wasted money between spouses made sense because everything else was divided 50/50. Here, however, the trial court intentionally gave Wife a larger overall share to offset Husband’s misconduct. The Court of Appeals was OK with an unequal split because it was fair under the circumstances. Tennessee divorce lawyers should know that a spouse who squanders marital funds for non-marital purposes shouldn’t necessarily expect to keep benefiting from half of that money. As Husband learned here, the court can hold one party accountable for the entire loss.

Source: Ayers v. Ayers (Tennessee Court of Appeals, Middle Section, Dec. 22, 2025).

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