Sep 8

DIVIDING PROPERTY IN DIVORCE – SPECIFICALLY REAL ESTATE

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The first step in dividing marital property and real estate is to return the non-marital property to the respective spouse. Non-marital property generally falls into three categories: 1) property acquired before the date of marriage, 2) property acquired by gift, and 3) property acquired by inheritance. Once the non-marital property has been restored to the appropriate party, the remainder of the property (the marital portion) is divided equitably between the spouses.

KRS 403.190 requires the court to “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.” However, in practice, the courts tend to divide the marital property close to even in most cases.

A common mistake is mis-categorizing property as non-marital simply because it is in one spouses name or only one spouse pays for it. For example, a bank account in one person’s name or a home with only one person on the deed, will generally still be marital property, unless it falls into one of the three non-marital categories discussed above. Another common mistake is not identifying mixed property. For example, a home (or retirement account) that one person owned before the marriage would have a non-marital portion, but if principal was paid on the home (or added to the retirement account) during the marriage there would also be a marital portion. There are specific laws that dictate how each portion is determined and how any interest or appreciation is applied to the marital and non-marital portions.

In Kentucky, the formula for dividing appreciation in real estate between the marital and non-marital contributions is found in a case called Brandenburg v. Brandenburg, 617 S.W.2d 871 (Ky. Ct. App. 1981). The Brandenburg Court stated that “the interests of the parties were the same percentages as their respective contributions to the total equity in the property.” The first step is to determine the total contribution to the property. This is the sum of nonmarital and marital contributions (down payment, principal payments, renovations, etc.) Divide the marital contribution by the total contribution to get the percentage of the marital contribution. Then multiply this percentage by the total equity to get the total marital equity. Next divide the non-marital contribution by the total contribution to get the non-marital contribution. Multiply this number by the total equity to get the non-marital equity. The non-marital equity and marital equity should equal the total equity in the property.