Fraley v. Maxey, NO. 2013-CA-001447-MR (Ky. App. 2014)
In Allocating the Marital Portions of 401(k) Accounts, the Non-Participant Spouse is Only Entitled to 1/2 of the Marital Contributions and Appreciation Thereon

Rendered: November 21, 2014
Not To Be Published
Opinion Affirming

Add another notch to my QDRO lipstick case. If you click on “TRACING” on the tag-cloud to the right of this post, you’ll see this is my fourth blog post highlighting this well-settled area of law:  traceable gains on pre-martial contributions are non-marital when the increase does not result from the efforts of either party. (See my blog posts dated June 12, 2014; July 1, 2014, and August 21, 2014).

In jurisdictions such as Kentucky and Ohio, tracing is utilized as an evidentiary vehicle to value and prove the passive increase of pre-marital contributions in a 401(k)-type plan during the period of marriage. [For citations to applicable Kentucky and Ohio statutory and case law, see my blog post dated August 21, 2014.]

Tracing allows one to make an accurate determination of the growth (or loss) on both the marital and non-marital contributions in the account by calculating the rate of return experienced on the account during the marriage. Take the following example from one of my own consulting cases (the story you are about to hear is true; only the names have been changed to protect the innocent), wherein I traced the passive growth of a pre-marital account balance over the span of a ten-year marriage:

The balance in Steven’s 401(k) on his date of marriage was $173,364. At the time of the divorce, the account had grown by $251,266 to $424,630. However, of this $251,266 increase, it was determined that only $144,290 was divisible due to contributions made during the marriage, and passive market growth thereon. Therefore, Steven retained $280,339, in addition to half of the divisible $144,290. 

Without competent evidence, a court may have instead found the full $424,630 divisible – netting $212,315 to each spouse. However, after my tracing of the marital contributions and growth thereon during the marriage, Steven ended up with $352,485, and his spouse with $72,145.  Wow!

What is interesting and notable about Fraley (even after multiple exhilarating blog posts on the subject), is that – unlike Steven’s marriage – the parties were only together three years. The trial court in Fraley initially found that Wife’s Fidelity and TIAA-CREF accounts had increased in value during the three-year marriage in the amount of $72,564.00. Thus, the trial court determined Husband’s share was ½ of that, or $36,282.00. 

However, Wife subsequently filed a motion to alter, amend, or vacate the trial court’s findings of fact. Wife’s motion pointed to competent evidence within the record that traced her pre-marital contributions and passive growth thereon during the marriage, proving the marital portion was only $3,127.00. In response, the trial court amended its findings, concluding that Wife met her burden, and that Husband was only entitled to $1,563.55 (½ of $3,127.00), instead of $36,282.00. Wow! The Court of Appeals, citing to KRS § 403.190(2)(e), affirmed, summarizing:

In allocating the marital and nonmarital portions, we agree with the family court that [Husband] was only entitled to one-half of the total marital contributions and any appreciation in value of the marital portion during the marriage. The nonmarital contributions and any increase in value of those contributions not attributable to the efforts of the parties during the marriage were correctly assigned to [Wife].

Today’s lesson? Don’t make the mistake of thinking a short-term marriage isn’t worth the effort to examine. 

The law holds no secret at this point as to the evidentiary burden itself. What may still be somewhat elusive is understanding how tracing works and identifying the most preferred (and court-approved) methods of tracing. At risk of self-aggrandizing my QDRO Blog (with an admitted readership consisting of only close family and a few other gluttons), I refer you to my previously mentioned three related posts. These posts thoroughly explore relevant state law in Kentucky and Ohio, evidentiary considerations, how-to’s, and even some tips for trial motions.


Deboer v. Deboer, NO. 2012-CA-000464-MR AND NO. 2012-CA-000514-MR (Ky. App. 2014)
Traceable 401(k) Gains On Pre-Martial Contributions Remain Non-Marital When the Increase Does Not Result From the Efforts of Either Party

Rendered: August 22, 2014
Not To Be Published
Opinion Affirming

I’ve written several recent blog posts providing ample citation to cases in both Kentucky and Ohio reciting the law concerning the evidentiary burden of proving non-marital amounts in retirement accounts.  Deboer raises the issue once again, with Wife claiming that the trial court erred in calculating Husband’s non-marital interest in his 401(k) by including a net increase in the value of his premarital contributions realized over the course of the marriage.

We know the question that is raised anytime passive growth accrues on pre-marital contributions made to a 401(k)-type plan during the marriage.  Who gets the money?  The answer has been made clear through the litany of repetitious cases presented to the Courts of Appeals in both Kentucky and Ohio.  When passive growth on pre-martial contributions occurs during the period of marriage, if it is traceable in such a manner that the party claiming the non-marital interest can meet their evidentiary burden, that party takes home the proverbial money bag.

This is a well-settled area of law that can’t seem to be set out to pasture:  traceable gains on pre-martial contributions are non-marital when the increase does not result from the efforts of either party.  As in Deboer, this includes when market forces - rather than efforts of the parties - generate the increase in value.

The trial court in Deboer did just as the Kentucky Court of Appeals has previously avowed – over and over again.  The trial court granted Husband an additional non-marital portion of his 401(k) that represented the gains attributable to his pre-marital contributions realized over the course of the marriage, but which did not result from any effort by Husband.  Why?  As the Court of Appeals found in affirming, there was ample evidence within the record tracing the growth upon the pre-marital funds.

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For an in-depth analysis of the issues relating to tracing and proving the evidentiary burden in both Kentucky and Ohio, see my blog post dated June 12, 2014.  For a practical tip to help ‘short-cut’ writing the supporting brief on this issue in Kentucky, see my blog post dated July 1, 2014.  


D’Eufemia v. D’Eufemia, NO. 2012-CA-002101-MR AND NO. 2012-CA-002141 (Ky. App. 2014)
Party Claiming Property Acquired During Marriage is Non-Marital Bears the Burden of Proof

Rendered: June 27, 2014
Not To Be Published
Opinion Affirming in Part, Reversing in Part, and Remanding

There is nothing to add here substantively speaking.  My previous blog post dated June 12, 2014 provided citations to cases in both Kentucky and Ohio fleshing out the rule of law concerning the evidentiary burden of proving non-marital amounts in retirement accounts.  This is but another case to add to your string citation in Kentucky.  Though D’Eufemia concerns a PNC Investment Account funded in part with non-marital inherited funds, versus a 401(k)-type retirement plan containing pre-marital salary contributions, the rule of law is directly on point (see pages 2-6 of the Opinion).

The D’Eufemia Court was faced with the task of paving yet again the well-traveled road.  You know the drill, KRS 403.190(1) provides that “the court shall assign each spouse's property to him...”. Kentucky courts interpret KRS 403.190(3) as creating a presumption that property acquired by either spouse after the marriage and before the decree is marital property.  This presumption may be overcome by showing that the property at issue was acquired in a method enumerated in KRS 403.190(2). 

In short (you're welcome), the Appeals Court in D’Eufemia relied upon Sexton v. Sexton, 125 S.W.3d 258 (Ky. 2004), a Supreme Court of Kentucky case that extensively addressed the classification and division of property in divorce.  With respect to tracing as it applies to the determination of whether property, or some portion of it, is marital or non-marital, the Court of Appeals deferred to the Sexton Court, which explained:

“Tracing” is defined as “[t]he process of tracking property's ownership or characteristics from the time of its origin to the present.” . . . . The concept of tracing is judicially created and arises from KRS 403.190(3)'s presumption that all property acquired after the marriage is marital property unless shown to come within one of KRS 403.190(2)'s exceptions. A party claiming that property, or an interest therein, acquired during the marriage is nonmarital bears the burden of proof.

Sexton, 125 S.W.3d at 266 (footnotes omitted).


Adopt the above citation from Sexton as your spring board, cut and paste from D’Eufemia (inserting KRS 403.190(2)(e), relating to passive growth, in the place of KRS 403.190 (2)(a), relating to inheritances), and you have already written your pre-trial memorandum if you are representing the alternate payee (non-employee spouse) of a defined contribution plan with untraced pre-marital contributions and/or passive growth thereon.  If you represent the plan participant (employee spouse), before the pens even hit the paper, make sure to read my previous post on how to meet your evidentiary burden.


Smith v. Smith, NO. 2011-CA-002306-MR (Ky. App. 2014)
Evidentiary Burden is on Employee to Prove Non-Marital Amounts to be Assigned as Separate Property Interest

Rendered: May 23, 2014
To Be Published
Opinion Affirming

Welcome readers.  This is the one-year anniversary of my inaugural blog post, and over this past year I am proud to say that I have picked up the unforced readership of at least one attorney.   You know who you are TM.  I won’t embarrass you.  But I truly thank you.

I have been otherwise blessed by the support of my family, friends, and colleagues, each of whom fight through their yawns and read this post with regularity because they know they will be tested at the next happy hour.  There are too many to count (friends, family, colleagues... and happy hours).  So you all will also escape the embarrassment of being named.  There are not words to express my appreciation for your patience and seemingly endless lists of suggested revisions (both solicited and unsolicited). 

Here’s to many more (blog posts... and happy hours).

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This blog post analyzes the evidentiary burden of proving a non-marital separate property interest in a commingled defined contribution retirement account under state domestic relations law in both Kentucky and Ohio.  First, the holding in Smith is examined; then this post provides family law practitioners on both sides of the river with applicable law specific to each jurisdiction, as well as some practical guidance. 

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