What is marital property in KY and what are the 5 major exceptions?
In Kentucky, marital property is governed by KRS 403.190. Kentucky law essentially provides and directs that in the broad sense, anything acquired by either spouse during the marriage is marital property. Kentucky starts with the presumption that everything you buy, accumulate, receive, acquire etc during the marriage dates (ranging from the actual date of marriage to a final decree of dissolution (KY calls a divorce a dissolution, but many people use the term interchangeably). The KY law on marital property begins by defining marital property:
“For the purpose of this chapter, “marital property” means all property acquired by either spouse subsequent to the marriage except:”
The law then goes on to specify those five areas of exception as follows:
(a) Property acquired by gift, bequest, devise, or descent during the marriage and the income derived therefrom unless there are significant activities of either spouse which contributed to the increase in value of said property and the income earned therefrom;
(b) Property acquired in exchange for property acquired before the marriage or in exchange for property acquired by gift, bequest, devise, or descent;
(c) Property acquired by a spouse after a decree of legal separation;
(d) Property excluded by valid agreement of the parties; and
(e) The increase in value of property acquired before the marriage to the extent that such increase did not result from the efforts of the parties during marriage.
The burden rests on the spouse claiming that any property is not marital property to convince a court that he or she should be awarded 100% of that particular property or money associated with that property.
There are countless examples addressing marital and non-marital property claims in Kentucky. Here are are few interesting samples:
- Retirement and Pension: Kentucky law provides that a spouse’s vested interest in a pension or retirement fund is marital property; vested does not refer to whether the fund is in “pay status,” but whether the owning party has a current right to the proceeds of the plan. Owens v. Owens, 672 S.W.2d 67, 1984 Ky. App. LEXIS 517 (Ky. Ct. App. 1984).
- Tracing strict compliance. Where a wife failed to trace the assets which she brought into the marriage into assets owned at the time of the separation, the trial court did not err in refusing to assign any amount to the wife as non-marital property. Brunson v. Brunson, 569 S.W.2d 173, 1978 Ky. App. LEXIS 554 (Ky. Ct. App. 1978).
- What about property acquired after separation but before a legal decree of divorce? Property acquired after actual separation but prior to a decree of legal separation is marital property within subsection (3) of this section. Culver v. Culver, 572 S.W.2d 617, 1978 Ky. App. LEXIS 603 (Ky. Ct. App. 1978).
- Business ownership and business property: Existing assets comprising the husband’s accounting practice — the cash in hand, the accounts receivable, and the depreciated equipment — constituted marital property; moreover the goodwill contained in the business was a factor to be considered in arriving at the value of the practice for the purpose of disposition of marital property. Heller v. Heller, 672 S.W.2d 945, 1984 Ky. App. LEXIS 542 (Ky. Ct. App. 1984).
- Non-working or homemaker spouse and business that started before the marriage. The fact that husband’s garage business was started before marriage does not render the entire growth of the business over the course of the parties’ 18-year marriage nonmarital; the business was the principal source of the marital funds and accordingly, the wife could contribute to the marital assets in her role as a homemaker. Consequently, the increase in value of the business during the marriage was marital property. Goderwis v. Goderwis, 780 S.W.2d 39, 1989 Ky. LEXIS 98 (Ky. 1989).
- Disability income discussion determining that disability allowances are nonmarital property. Definition of “disability allowances” in KRS 403.190(4) is limited by its own terms solely to subsection (4) and has no application to KRS 403.190(2); the more reasonable interpretation is that the general assembly, being mindful that “disability allowances” are properly classified as nonmarital property under KRS 403.190(2) and therefore exempt from division as marital property, provided the same protection to a spouse whose spouse was receiving disability benefits. Holman v. Holman, 84 S.W.3d 903, 2002 Ky. LEXIS 132 (Ky. 2002).
- Disability retirement benefits. Firefighter’s disability retirement benefits replaced the post-dissolution income he would have received, but for his disability, and were, therefore, properly classified as his separate property. Holman v. Holman, 84 S.W.3d 903, 2002 Ky. LEXIS 132 (Ky. 2002).
- Divorcing lawyer and anticipated settlement income. When distributing a divorcing attorney’s interest in a contingency-fee contract, trial courts were to apply the delayed-distribution method to determine the actual distribution of funds because (1) this afforded a non-attorney ex-spouse a rightfully obtained property interest created during the marriage while protecting an attorney from distributing anything until a case was won, since the attorney might ultimately prove to be unsuccessful in the case and receive nothing, and (2) the non-attorney ex-spouse was entitled only to a share of the contingent fee attributable to work done by the attorney spouse before the dissolution. Grasch v. Grasch, 536 S.W.3d 191, 2017 Ky. LEXIS 509 (Ky. 2017).
Every family has unique property interests, and the above examples further illustrate just how complicated and specific every case may be.
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