Kentucky Divorce: Dividing Property

Is Kentucky a Community Property State?

No, Kentucky is among the majority of states that follow an equitable distribution approach. A handful of states adhere to community property principles, but Kentucky is not one of them.

Kentucky Divorce Laws

The laws governing division of marital property in divorce vary from state to state. Kentucky law requires a division that is equitable, meaning that it must be fair even if it's not equal.

Some couples are able to agree on how to divide everything, while others seek the help of attorneys or a mediator to help them to negotiate a property settlement. Couples who can't resolve property issues on their own will end up going to court to ask a judge to decide for them. Courts in Kentucky will consider all relevant factors in deciding what kind of property division is fair, including:

• the length of the marriage
• the value of property awarded to each spouse
• contributions to the acquisition of marital property, including contributions as a homemaker, and
• economic circumstances of each spouse, including the desirability of awarding the family home, or the right to live in it for a reasonable period of time, to the party who has physical custody of children the majority of the time. See Ky. Rev. Stat. § 403.190 (2020).

Property Division in Kentucky

The first step in the process of dividing property is determining whether property is marital or separate. The distinction is important because only marital property is divided during a divorce. Generally, spouses get to keep their separate property following a divorce.

What Is Separate Property?

Separate property includes property owned by one spouse owned before the marriage, property acquired by gift or inheritance during the marriage, or property covered by a valid prenuptial agreement.

Income from separate property, or an increase in the value of separate property, will also remain the separate property of one spouse unless the income or increase in value was the result of significant activity by either spouse during the marriage (for example, if your spouse spent a lot of time trading stocks in an account that was only in your name, resulting in significant gains, those gains would likely be marital property).

If a spouse mixes (or "commingles") separate property with marital property, the separate property may lose its special status as separate. For example, if a spouse owned a rental property before marriage, but used income during the marriage to remodel the house, make mortgage payments, and cover utilities, the rental house would no longer be wholly separate property.

A spouse can also change separate property into marital property by changing title from individual to joint ownership, in which case a court would generally presume that the spouse intended to make a gift of the property to the marriage.

What Is Marital Property?

Marital property includes most assets and debts a couple acquires during marriage. Marital and separate property can also be mixed together—sometimes called "commingling." Some couples combine their separate assets intentionally; others do so simply by being careless.

A premarital bank account belonging to one spouse can become marital property if the other spouse makes deposits to it—a house owned by one spouse alone can become marital property if both spouses pay the mortgage and other expenses.

If the spouses aren't able to decide what belongs to whom, the judge will have to decide whether any or all of the commingled property was a gift to the marriage or whether the original owner should be reimbursed in whole or in part. These situations can be very complicated and you may need a lawyer's help in untangling things if you have a commingling issue.

Assessing Value

After determining which property is marital property, the couple, or the court, will assign a monetary value to each item. An accurate property valuation will help a judge create an equitable property award.

Couples who need help determining values can hire professional appraisers. Some financial assets, such as retirement accounts, can be very difficult to evaluate and may require the assistance of a financial professional, such as a C.P.A. or an actuary.

Dividing the Property Through a Settlement Agreement

Spouses can divide assets outside of the courtroom, whether on their own or with the help of a mediator. A settlement agreement must resolve all issues in a couple's divorce. A couple can divide property in a divorce settlement agreement by assigning certain items to each spouse, possibly with an equalizing payment if one spouse gets substantially more than the other, or by selling property and dividing the proceeds.

Couples can also agree to continue to own property together, for example if the children are about to graduate from high school in a few years, and it makes sense to keep the family home until then, or if you have investment property that you don't want to sell because you think it will increase in value. For most people, this isn't an appealing choice because of the ongoing financial entanglement, but some couples choose to keep holding property together for a specific amount of time.

The couple must also assign all debt accrued during the marriage, including mortgages, car loans, and credit card debts, to one of the spouses.

How Are Debts Divided in Kentucky?

A judge will divide any marital debts based on an equitable distribution approach by considering several factors, including:

• the debts and liabilities of each spouse
• the economic circumstances of each spouse, and
• the underlying reasons for the debt (whether debt was incurred recklessly by one spouse, such as with a gambling debt).

While a judge will attempt to divide a couple's debts equitably, this won't always result in an equal award. For example, if one spouse has a six-figure income while the other spouse is scraping by on minimum wage, the higher earning spouse will likely be awarded most of the couple's debts.

Resources

To learn more about how property is divided after a divorce, please see our section on Property & Divorce. For more information on issues surrounding divorce in Arizona, see Kentucky Divorce and Family Laws.