KRS 403.190 Disposition of property

                       Dissolution Statutes Annotated   




Brandenburg v. Brandenburg, 617 S.W.2d 871 (Ky.App. 06/05/1981) LEADING KY. CASE ON MARTIAL PROPERTY DISTRIBUTION



KRS 403.190 Disposition of property.
(1) In a proceeding for dissolution of the marriage or for legal separation, or in a proceeding for disposition of property following dissolution of the marriage by a court which lacked personal jurisdiction over the absent spouse or lacked jurisdiction to dispose of the property, the court shall assign each spouse’s property to him. It also shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors including:
(a) Contribution of each spouse to acquisition of the marital property, including contribution of a spouse as homemaker;
(b) Value of the property set apart to each spouse;
(c) Duration of the marriage; and
(d) Economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children.
(2) For the purpose of this chapter, "marital property" means all property acquired by either spouse subsequent to the marriage except:
(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.
(3) All property acquired by either spouse after the marriage and before a decree of legal separation is presumed to be marital property, regardless of whether title is held individually or by the spouses in some form of co-ownership such as joint tenancy, tenancy in common, tenancy by the entirety, and community property. The presumption of marital property is overcome by a showing that the property was acquired by a method listed in subsection (2) of this section.
(4) If the retirement benefits of one spouse are excepted from classification as marital property, or not considered as an economic circumstance during the division of marital property, then the retirement benefits of the other spouse shall also be excepted, or not considered, as the case may be. However, the level of exception provided to the spouse with the greater retirement benefit shall not exceed the level of exception provided to the other spouse. Retirement benefits, for the purposes of this subsection shall include retirement or disability allowances, accumulated contributions, or any other benefit of a retirement system or plan regulated by the Employees Retirement Income Security Act of 1974, or of a public retirement system administered by an agency of a state or local government, including deferred compensation plans created pursuant to KRS 18A.230 to 18A.275 or defined contribution or money purchase plans qualified under Section 401(a) of the Internal Revenue Code of 1954, as amended.
Effective: July 15, 1996
History: Amended 1996 Ky. Acts ch. 328, secs. 1 and 2, effective July 15, 1996. – Amended 1986 Ky. Acts ch. 441, sec. 1, effective July 15, 1986. — Created 1972 Ky. Acts ch. 182, sec. 9. Legislative Research Commission Note (7/15/96). This section was amended by 1996 Ky. Acts ch. 328, secs. 1 and 2 which do not appear to be in conflict and have been codified together.
Allison v. Allison, 246 S.W.3d 898 (Ky. App., 2008)
    To summarize, on remand the court must first determine the interest that John had in ABS prior to the redemption agreement and whether that interest was marital or nonmarital. If that interest is determined to be martial, then any increase in its value must necessarily also be marital. If that interest is determined to be nonmarital, then the court must determine whether the increase in its value during the marriage is marital or nonmarital. In making this determination, if the value of the interest increased due to general economic conditions, then the increase is John’s nonmarital property. See Goderwis, 780 S.W.2d at 40. If the value of the interest increased due to the joint efforts of the parties, then the increase is marital property.12 Id. Because KRS 403.190(3) creates a presumption that the increase is marital property, the burden is on John to prove that the increase in value is nonmarital. [246 S.W.3d 907] See Travis, 59 S.W.3d at 910. If he fails to prove that the increase in value of his nonmarital interest (if he had a nonmarital interest) was his nonmarital property, then he should be awarded only the value of the nonmarital interest at the time he acquired it or at the date of marriage, whichever date is later, as his nonmarital property.
Zink v. Zink, No. 2007-CA-000419-MR (Ky. App. 2/27/2009) (Ky. App., 2009)
 When disposing of property in a dissolution of marriage action, the trial court is required by KRS 403.190 to follow a three-step process: (1) the trial court first characterizes each item of property as marital or nonmarital; (2) the trial court then assigns each party’s nonmarital property to that party; and (3) finally, the trial court equitably divides the marital property between the parties. See Travis v. Travis, 59 S.W.3d 904, 908-09 (Ky. 2001) (citations and footnotes omitted).
        KRS 403.190(3) creates a presumption that all property acquired after the marriage is marital property. See Sexton v. Sexton, 125 S.W.3d 258, 266 (Ky. 2004) (citations and quotation marks omitted). "A party claiming that property acquired during the marriage is other than marital property, bears the burden of proof." Terwilliger v. Terwilliger, 64 S.W.3d 816, 820 (Ky. 2002). Although Stephen has argued that this burden of proof is governed by a "preponderance of the evidence" rather than a "clear and convincing" standard, based on Underwood v. Underwood, 836 S.W.2d 439, 442 (Ky. App. 1992), overruled in part on other grounds by Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001); Travis, 59 S.W.3d at 912-13; Hunter v. Hunter, 127 S.W.3d 656, 660 (Ky. App. 2004), there has been no definitive renunciation of the "clear and convincing" standard by the Kentucky Supreme Court. Moreover, in an opinion which was issued after those cited by Stephen, the Supreme Court applied the "clear and convincing" standard. See Sexton, 125 S.W.3d at 268, n. 31.
        The orders of November 14, 2007, and November 21, 2007, denying Stephen’s motion to terminate maintenance and to modify child support and denying his motion to reconsider are hereby affirmed.
Arthur v. Arthur, No. 2007-CA-001442-MR (Ky. App. 1/23/2009) (Ky. App., 2009)
      David further notes that the entirety of Lori’s $100,900.00 retirement account was accumulated during the marriage. Thus, he argues that the trial court was without discretion to award Lori all of her retirement simply because "she earned it through her work." David asserts that the trial court should have allocated the marital property in "just proportions" pursuant to KRS 403.190, and this would include equally dividing the respective retirement accounts of the parties insofar as the amounts which were accumulated during marriage are concerned. Thus, David argues that he should be entitled to his portion of Lori’s retirement after offsetting the marital interest in his Kentucky Teachers’ Retirement System account.
    We note that there may certainly have been a number of reasons, fact-specific to this case, which may have influenced the trial court’s decision to award each party their respective retirement. Regardless, the law requires the trial court consider the statutory factors and make specific findings. Therefore, we believe it appropriate to remand to the trial court such that this matter can be reviewed, and findings can be made to indicate that the trial court has considered KRS 403.190 in conjunction with KRS 161.700(2).
Harstad v. Harstad, No. 2007-CA-001211-MR (Ky. App. 6/20/2008) (Ky. App., 2008)
 Our review of the record supports Bonnie’s argument that the family court properly followed the three-step process set out in KRS 403.190 by first characterizing and assigning the non-marital property, and then equitably dividing the remaining marital property between Bonnie and Michael. This is clear from the spreadsheet the family court attached to its final judgment, in which it set forth the assets, along with each asset’s value, net equity, any non-marital interests, marital equity, and the ultimate division. As we stated earlier, the family court was not precluded from relying upon the findings from the January 2006 hearing to support its ultimate decision.
Webster v. Webster, No. 2007-CA-002311-MR (Ky. App. 1/16/2009) (Ky. App., 2009)
  The court designated Vindell’s KERS military credits as marital property. Vindell argues that, because he served in the military long before he married Margaret, the court should have classified the military credits as his non-marital property.
        Pursuant to KRS 403.190(2), most property acquired by either spouse after the marriage is presumed to be "marital property." To overcome the presumption that property is marital, a spouse must show that the alleged non-marital property was acquired pursuant to one of the exceptions in KRS 403.190(2). KRS 403.190(3).
        Overstreet v. Overstreet, 144 S.W.3d 834, 837 (Ky. App. 2003), this Court noted that we review a trial court’s designation of marital and non-marital property de novo. In Overstreet, the husband had a dormant KERS account with a zero balance at the time of the marriage. Id. at 835-36. During the course of the marriage, he purchased service credits from KERS based on his prior employment as a police dispatcher and reactivated his account. Id. at 836. In the dissolution action, the trial court designated the KERS account as marital property. Id. at 836-37. On appeal, a panel of this Court reversed that determination:
        We agree with [husband]’s contention that his KERS account should have been classified as non-marital property since his legal rights in the account were acquired prior to his marriage to [wife]. * * * [Husband]’s right to purchase service credit with the KERS arose out of his employment as a dispatcher with the Kentucky State Police from November 1, 1973, until May 31, 1975, before the marriage. Although [husband] withdrew the funds he initially accumulated in his KERS account prior to his marriage to [wife], his right to participate in the retirement system was not terminated as a result of this transaction.        Id. at 837 (internal citation omitted).
    The trial court correctly concluded the facts herein are distinguishable from Overstreet, supra. The account in Overstreet, though inactive, existed in the husband’s name prior to the marriage. In contrast, Vindell’s past military service had no value before he purchased the credits from KERS. Although Vindell’s military service ended many years before his marriage to Margaret, he had no legal right to retirement benefits related to his military service. Vindell’s legal right to purchase military service credits from KERS arose during the marriage, and he used marital funds to complete the transaction. Vindell wholly relies on Overstreet, supra, and offers no argument pursuant to KRS 403.190(2) regarding the alleged non-marital character of the credits. Consequently, we conclude Vindell failed to overcome the statutory presumption that his KERS military credits were marital property. KRS 403.190(3).
Fehr v. Fehr, No. 2007-CA-001495-MR (Ky. App. 10/3/2008) (Ky. App., 2008)
We conclude that the family court’s findings of fact are not clearly erroneous and accept those findings as conclusive. However, because the family court did not apply the formula set forth in KRS 403.190 when dividing the parties’ marital and nonmarital interests in the St. Maarten villa, we conclude that it erred as a matter of law.
  Although the family court’s decision was clearly thoughtfully reasoned, it is nevertheless flawed because it is inconsistent with KRS 403.190 and the three-step process required to be applied.
        As was emphasized by the Court in Sexton, the first step in the three-step process is the characterization of the particular property as marital or nonmarital. The parties are then awarded their nonmarital interests without deference to other considerations. The court has no discretion to divide nonmarital property but only to restore the property to the contributing party. In this case, the family court ignored the dictates of KRS 403.190 when it awarded the villa to Maren.
    Because the family court found that Ralph and Maren made nonmarital contributions to the purchase of the villa, the court was required to award each their respective nonmarital interests in the property. Indeed, it is our deference to the family court’s findings of fact that requires the parties be awarded their respective nonmarital interests. On remand, the Court is directed to apply the formula set forth in Brandenburg to the division of the St Maarten villa. Only after it has restored each party their nonmarital interest are the factors delineated in KRS 403.200 and an award of maintenance, if any, appropriate. The court is not permitted to usurp the dictates of the General Assembly mandated by KRS 403.190 in lieu of a maintenance award.
Rabe v. Rabe, No. 2007-CA-001594-ME (Ky. App. 11/26/2008) (Ky. App., 2008)
    The Kentucky Supreme Court has recently defined tracing as "[t]he process of tracking property’s ownership or characteristics from the time of its origin to the present." Sexton v. Sexton, 125 S.W.3d 258, 266 (Ky. 2004)(citing BLACK’S LAW DICTIONARY 1499 (7thed. 1999)). It has been observed that tracing is a judicially created concept arising from the marital property presumption of KRS 403.190(3). Id. To successfully rebut the marital property presumption and trace a nonmarital property interest, a party must: (1) identify the property acquired during marriage in which he/she asserts a nonmarital interest, and (2) trace or track the nonmarital interest back to a specific nonmarital asset
   In sum, we are of the opinion that the payments of $221,902 and $167,391 made during the marriage for the benefit of the Prestwick Drive and Woodlyn Hills properties constituted payments from marital property, and not nonmarital contributions as erroneously concluded by the circuit court. On remand, the circuit court shall divide the marital property pursuant to KRS 403.190, in light of our ruling on the payments made for the benefits of the Prestwick Drive and Woodlyn Hills properties during the marriage.
Jones v. Jones, 245 S.W.3d 815 (Ky. App., 2008)
     In this case, the life estate in the farm was acquired by Ricky before the parties’ marriage. Under KRS 403.190(2)(e), any increase in value of property acquired before marriage is nonmarital unless the increase in value is attributed to "the efforts of the parties during marriage." The family court found that marital assets were expended to improve the farm during the marriage. To the extent that marital assets increased the value of the life estate in the farm, such increase in value must be classified as marital under KRS 403.190(2)(e). The more troublesome question presented is the proper valuation of such marital increase in value of the life estate in the farm.
        The family court essentially equated actual cost of improvements to the life estate in the farm with increase in value to the life estate in the farm. We view this as clear error. KRS 403.190(2)(e) plainly speaks in terms of "increase in value." To properly calculate the increase in value attributed to marital improvements upon property acquired before marriage, the court must subtract the fair market value of the property at the time of dissolution without marital improvements from the fair market value of the property at the time of dissolution with marital improvements. See 41 Am.Jur. 2D Improvements § 27 (1995).3 The difference between such fair market values yields the increase in value attributed to marital improvements upon the property. See id. As to a life estate acquired before marriage, a party may be compensated for the increased value attributed to marital improvements thereon, "not to exceed the value of the improvements." Walters v. Walters, 782 S.W.2d 607, 608 (Ky.1989).
   In the case sub judice, the court determined there was an imbalance in the parties’ respective financial resources. Specifically, the court pointed out that Ricky continued to live "rent free" on the farm and retained his nonmarital interest in the livestock and farm gate inventory. The court further noted that Lynn was leaving the marriage with only "a small home which is fully encumbered," a vehicle, a one-half interest of the couples’ retirement account, and a portion of the TTPP payments.5 As such, the family court awarded Lynn $5,000.00 in attorney fees. Based upon the apparent imbalance of financial resources between the parties, we are unable to conclude that the family court abused its discretion in awarding Lynn a portion of her attorney fees.
        For the foregoing reasons, the orders of the Henry Family Court are affirmed in part, reversed in part, and remanded for proceedings consistent with this opinion.
Sheene v. Sheene, No. 2007-CA-002147-ME (Ky. App. 4/17/2009) (Ky. App., 2009)
   KRS 403.190(1)(d) provides that marital property be divided in just proportions. In making a division, the court is to consider all relevant factors including the "[e]conomic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children." Traditionally, an award of the exclusive possession and use of the marital residence to the custodial parent has been approved on the basis of the desirability of preserving the marital residence for the children until all are emancipated. Straney v. Straney, 481 S.W.2d 292, 294 (Ky. 1972); Gibson v. Gibson, 597 S.W.2d 622, 623 (Ky. App. 1980). We believe that the trial court properly considered the provisions of KRS 403.190 when it awarded the use of the marital residence to Melinda, subject to certain contingencies, and that its award was supported by ample case authority. Spratling v. Spratling, 720 S.W.2d 936 (Ky. App. 1986).
        Furthermore, we disagree with Robert’s assertion that the trial court’s order constitutes a quasi-maintenance award. We also reject Robert’s contention that his mortgage obligation can only be justified if the trial court makes appropriate findings allowing a deviation from the child support guidelines. The trial court determined that the mortgage incurred against the marital residence was entirely a marital debt, a finding that neither party contests. The trial court’s authority for assigning debts in an action for dissolution of marriage is thoroughly addressed by the Supreme Court of Kentucky in Neidlinger v. Neidlinger, S.W.3d 513 (Ky. 2001). Here, the trial court clearly gave proper consideration to the economic circumstances of each party when ordering that each be responsible for one-half of the monthly mortgage payment.
   Shown v. Shown, 233 S.W.3d 718 (Ky., 2007)  
 The Ohio Circuit Court determined, among other things, that Appellee, Robert Todd Shown, was permitted to exclude the full amount of his Kentucky Teachers’ Retirement System (KTRS) account from classification and division as marital property pursuant to KRS 161.700(2). Appellant argues that both the trial court and the Court of Appeals erred in failing to give effect to the provisions set forth in KRS 403.190(4).      Appellee argued that his KTRS account was exempt from classification and division as marital property under KRS 161.700(2), while Appellant argued her SEP-IRA qualified as a retirement account and therefore KRS 403.190(4) overrode KRS 161.700(2) and operated to limit the amount of the KTRS funds which Appellee could claim as exempt.      The Court of Appeals affirmed the trial court, holding that KRS 403.190(4) and KRS 161.700(2) were in conflict, and thus, pursuant to principles of statutory construction, the exemption provisions set forth in KRS 161.700(2) would control over the provisions set forth in KRS 403.190(4). In the alternative, the Court of Appeals held that KRS 403.190(4) is inapplicable unless both spouses have an account that qualifies as a "retirement-benefit" as is defined in KRS 403.190(4), holding that Appellee’s SEP-IRA was not such a "retirement benefit" as defined thereunder.     Having heard arguments of the parties, we reverse the trial court’s judgment and the opinion of the Court of Appeals on the basis that there is no conflict between KRS 403.190(4) and KRS 167.700(2) and a SEP-IRA does fall within the definition of a "retirement account" as specifically defined by the Legislature in KRS 403.190(4).
Travis v. Travis, 59 S.W.3d 904 (Ky., 2001)    
 Previous attempts by Kentucky’s appellate courts to define "property" may have contributed to the want of consistent guidelines for determining the marital and nonmarital interests in property. See Robinson v. Robinson, Ky. App., 569 S.W.2d 178, 181 (1978) (overruled on other grounds by Brandenburg v. Brandenburg, supra note 2) ("As used in KRS 403.190 in referring to restoration of the property of each spouse, the word `properly’ means equity." Id. (emphasis added)); Newman v. Newman, Ky., 597 S.W.2d 137, 138 (1980) ("We hasten at this point to add, however, that as used in KRS 403.190 the word property’ includes equity in property." Id. (emphasis added)). KRS Chapter 403 does not separately define "property" and we can find no basis for defining "property" as used in KRS 403.190 as anything other than its ordinary meaning.
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