Is Kentucky a Community Property State?

Ending a marriage is complex, and the process may be mentally, emotionally, and financially taxing. Next to child custody, the division of marital assets is among the primary concerns for many couples facing a Kentucky divorce. A state’s laws determine how a couple splits their property in a divorce. Whether that state is a community property or a separate property state is also important. So, is Kentucky a community property state?

The attorneys at O’Bryan Law Offices know Kentucky’s divorce and marital asset division laws. Our compassionate marital property attorneys understand that you are enduring one of the most challenging times of your life. Dividing assets and debts take a financial toll on both members of a divorcing couple. Our legal team helps lessen the impact of your ongoing financial entanglement with your former spouse. Please call our office at 502-339-0222 when you and your spouse are working on your property settlement. 

What Is Community Property?

Community property refers to the property or assets acquired during the existence of the marriage that belongs to both individuals. These assets or debts accrued during the marriage, regardless of which spouse bought them or took on the debt. States that follow community property law evenly split these assets and debts when couples divorce. 

Are Marital Assets Separate or Community Property in Kentucky?

Kentucky follows the separate property statute. While state courts equitably divide a divorcing couple’s marital assets, they don’t always split everything down the middle. 

Does Kentucky Recognize Community Property?

Although Kentucky is an equitable distribution state, the Community Property Trust Act, enacted in July 2020, allows married couples to designate all or part of their property as community property. This property is placed in a community property trust.  

In addition, Kentucky enacted the Uniform Disposition of Community Property Rights at Death Act. Under this act, if a couple married in a community property state and then moved to a separate property state, they are able to retain their pre-existing property rights. This act protects widowed spouses, as it applies to the surviving spouse and the disposition of the couple’s personal and real property.

Kentucky Community Property Trust

In Kentucky, a married couple is able to opt in to community property treatment by creating a valid trust. Spouses must ensure the following under this legislation to build a valid community property trust:

• One or both spouses must transfer the assets to the trust.
• Verbiage within the trust document must state that it acts as a Kentucky community property trust.
• The trust must also contain a capitalized warning stating the far-reaching legal ramifications of the trust, as well as the potential impact on spousal rights.
• Both spouses must sign the trust document.
• One or both spouses may be trustees; however, at least one trustee must be a Kentucky resident. A trustee may also be a bank or trust company.

What Is Considered Marital Property in Kentucky?  

Dividing up property during a divorce can easily become a major point of contention. Before the court can proceed with dividing the property, it must first determine whether the couple’s property is owned separately (acquired pre-maritally by one spouse) or jointly (acquired during the course of the marriage.) From here, the court equitably divides the remaining property between the spouses. 

Marital Property

Any property that was not secured by one spouse prior to marriage, or separate, is considered marital property. Kentucky divides this property equitably. Marital property includes:

• Money, retirement accounts, real estate, and other non-separate property acquired by either spouse during the marriage. 
• Property co-owned by spouses or comingled and acquired before the marriage, such as real estate.
• Assets such as a separate business or home that’s value appreciated during the marriage because of marital contributions. For example, a rental house that increased in value after the marriage because of improvements made by the spouses. 

Separate Property

Non-marital or separate property is not divided when a couple divorces and often becomes a source of disagreement. This often includes property:

• acquired before the marriage
• that a spouse inherited during the marriage
• that was given by a third party to one spouse
• gained during the marriage by selling or exchanging separate property
• set aside as separate by a premarital agreement

Under Kentucky’s community property laws, separate property may lose its status as “separate” if a spouse comingles or mixes the property acquired separately with marital property. For example, if a spouse inherits money and then deposits that money into the couple’s joint bank account, the inheritance is no longer considered separate property. This also applies to one spouse’s premarital bank accounts, if the other spouse makes deposits in the account.

Additionally, a spouse may convert separate property to marital property by changing a title from individual to joint ownership. If this occurs, the court presumes the spouse gifted the property to the marriage. 

Determining the Value of the Marital Property

When the court decides which property is marital, they assign each item a monetary value. A property valuation helps a judge distribute the property equitably in the divorce. 

How Does Property Get Divided in Kentucky?

Property division for divorces includes more than simply dividing real estate and cars. The courts must also equitably divide all cash, bank accounts, retirement accounts, and debts.

Spouses have a few options for dividing their property in Kentucky. They may determine a settlement outside of court. The court still reviews the agreement and usually approves all written agreements in which both spouses received legal counsel. A judge makes decisions for a married couple if they can’t reach a property agreement independently.

Kentucky law splits property equitably, or fairly, but not always equally. One spouse may receive a higher share of the marital property after a judge considers relevant factors such as:

• Marriage length
• Property value awarded to each spouse
• Each spouse’s contribution to obtaining marital property, including those of a stay-at-home spouse
• A spouse’s economic circumstances and needs, including considerations for having a custodial parent reside in the family home with the children

How Does Kentucky Divide Debts?

The state looks at several factors when dividing debts. These factors include:

• Each spouse’s debts and liabilities
• The economic standing of each spouse
• The reason for the debt (Did a spouse’s reckless behavior rack up gambling debt?)   

Should the court fully assign a debt to one spouse, creditors may still pursue the other spouse for payment. In such a situation, you may be able to use the court order to remove your name from the account. 

O’Bryan Law Offices has helped clients resolve their debt for nearly 30 years. Please contact our marital property attorneys today with questions about Kentucky property division, debt, and Kentucky divorce laws.

Does the Spouse Have to Be on the Title in Kentucky?   

Since the state of Kentucky considers anything acquired during the course of a marriage to be marital property, your spouse automatically has an ownership interest in any property purchased during this time. The names on a deed do not determine ownership. Instead, the names plus the marital status determine who owns a property. 

How Long Do You Have to Live Together to Be Common Law Married in Kentucky?  

Common-law marriage, or de facto marriage, happens when a couple agrees to marry and act as a married couple within the community. However, they do not participate in a legally binding marriage. Kentucky does not recognize unmarried cohabitation. 

The state does, however, recognize common-law marriages established in states that permit it. 

Kentucky law focuses on the marital state and the steps taken when a relationship ends. A divorce decree helps settle one of the main issues in a divorce – marital property division. Under state laws, unmarried relationships do not enjoy the same property rights granted to married couples. Unlike in a divorce, couples don’t divide jointly-owned property when the relationship ends.

The Experienced Marital Property Attorneys at O’Bryan Law Offices Can Help

The legal team at O’Bryan Law Offices understands the two property regimes that factor into divorces and property division. Choosing divorce and enduring the process of divvying your property is emotionally and financially draining. Our trusted and compassionate marital property lawyers are here to help you through this difficult time.

Splitting assets with your spouse not only impacts your finances, but it also assigns you a portion of their debt. This can have long-lasting implications for you. A Chapter 7 bankruptcy or Chapter 13 bankruptcy may be the solution if you leave a marriage with unmanageable debt. 

Please call us at (502) 400-4020 for a free initial consultation about your legal situation. O’Bryan Law Offices helps our clients find hope in their financial journey and start anew. We also represent clients in Kentucky uncontested divorce, Kentucky divorce-related bankruptcy, protecting assets in bankruptcy Kentucky, and more.