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Kentucky Property Division
Property Distribution Laws in Kentucky
In Kentucky the courts generally accept a fair and reasonable property division the parties agree to, but if the parties cannot agree, the property is divided by the Circuit Court within the Judgment of Divorce.
Kentucky is an equitable distribution state. Equitable does not mean equal, or even half, but rather what the Circuit Court considers fair.
The court shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors.
A Kentucky judge considers all relevant factors in deciding a fair property division, including:
Factors in Equitable Distribution
Kentucky law requires a division that is equitable; 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 settlement. Couples who dont manage to resolve property issues outside of court go to court.
Marital Property vs. Separate Property
The first step in the process of dividing property is determining whether property is marital or separate. Marital property includes most assets and debts a couple acquires during marriage. Property is separate if a spouse owned it before marriage or acquired it during marriage by gift or inheritance. Separate property also includes items purchased with or exchanged for separate property. Income from separate property, or an increase in the value of separate property, is also separate unless the income or increase in value was the result of significant activity by either spouse during the marriage. For example, significant gains posted to a stock account in the name of the wife but managed by the husband may be marital.
Sometimes spouses convert separate property into marital property, or vice versa. One way of doing this is through a prenuptial or premarital agreement that specifies whether certain property is separate or marital. A spouse can also change separate property into marital property by changing the title from individual to joint ownership. The court would generally presume that the spouse intended to make a gift of the property to the 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 arent 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.
Valuing and Dividing Property
The Circuit Court classifies property during discovery as either marital or separate. Next, the court assigns a monetary value on the marital property and debt. Finally, it distributes the marital assets between the two parties in an equitable fashion. Equitable does not mean equal, but rather what is deemed by the Circuit Court to be fair.
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 CPA or an actuary.
Spouses can divide assets 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. They 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 the spouses own investment property they think is likely to appreciate. Many couples do not like joint ownership because it means continuing contact.
The couple must also assign all debt accrued during the marriage, including mortgages, car loans and credit card debts, to one of the spouses.
The Marital Home
In Kentucky, as in many jurisdictions, the equity in the marital home is often one of the biggest assets the spouses divide. The equity is the market value of the house, less any debts or liens against it. Equity is established by determining what the current market value of the home is at the time of separation. Once the spouses agree to a current market value, any debts associated with the property (mortgage, taxes, home equity loans, etc.) from are deducted the market value to arrive at the equity to be divided. Normally, making this calculation requires a paid real estate appraisal or a real estate agent can prepare a market analysis for free.
From there, couples choose one of three options to divide the equity:
Pensions and Retirement Accounts
In Kentucky, vested pensions are marital property. A pension vests when all the requirements to receive the pension have been met. Unvested pensions are also marital property. Until the pension has vested, the person under whom the pension is maintained has only an expectancy of interest in the pension.
Several different methods of valuation are used in determining how much a marital asset is worth, depending upon the asset to be valued and the level of agreement between the parties. Courts generally accept the value when the spouses mutually agree on a value of a particular asset. Experts may be retained by the parties or by the courts to determine the value of marital assets if the parties cannot agree. Such experts may include accountants, real estate or business appraisers, or pension valuators. The use of experts adds to the cost of the divorce.
In Kentucky, the court may include the retirement benefits and plans earned by both spouses as marital assets available for division. Retirement benefits vary greatly but can generally be divided into two groups:
In Kentucky if spouses share in each others retirement or pension plan, a Qualified Domestic Relations Order must be completed. A QDRO is a written set of instructions that explains to a plan administrator that two parties are dividing pension benefits. The instructions set forth the terms and conditions of the distribution - how much of the benefits are to be paid to each party, when such benefits can be paid, how such benefits should be paid, etc.
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