My Spouse is Gone, But is the Debt? Re: Kentucky Estate Planning
After a divorce, the last thing one wants to consider is the debt that their former spouse may have left behind. In Kentucky, debt accumulated during the marriage is treated differently than property acquired during the marriage. Kentucky is a marital property state, meaning that property acquired during the marriage is subject to equitable distribution. On the other hand, according to the Kentucky Supreme Court, there is no statutory presumption that debts incurred during the marriage are marital or non-marital in nature.
Instead, the court examines the nature of the debt to determine whether it belongs to one party alone or to both spouses. Courts use a variety of factors in determining whether both spouses are responsible for a debt, including:
(1) Who received the benefits for which the debt was incurred;
(2) The extent of participation of each party in accruing the debt;
(3) Whether the debt was incurred to purchase assets that are designated as marital property;
(4) Whether the debt was necessary to provide for the maintenance and support of the family; and,
(5) The economic status of each party.
Mortgage debt on a marital residence, for example, would likely be attributed to both parties, whereas a loan taken out by one spouse for an expensive, solo vacation would be attributed to that spouse alone.
Divorce can throw a wrench into one's current financial well-being. The court will assign debt to the divorcing parties as it deems necessary and assets will be divided. A divorce decree will be entered and the parties may think of that as the last step to their marriage dissolution. However, it is important that parties revisit their estate plan, or make one for the first time, in the wake of a divorce. Just as divorce will cause a former couple to look at their current debt and assets in a different way, it should also make them look at their future assets in a new light.
An estate planning attorney can help you consider how an estate plan will change in the wake of divorce. Will you need to change a named beneficiary on a life insurance plan? Name someone else to inherit items in a Will? How will the guardianship of children change? Divorce can be a long, drawn- out process, but do not think that a decree is the end of the road. Consult an estate planning attorney to make sure your estate plan is not reflective of your past life, but instead meets your present-day wishes.