## Facts

- Husband and wife married in 1986 and had two children; they later dissolved the marriage.
- Before marriage, husband inherited a life estate in a 215-acre farm and the parties executed a premarital agreement designating that life estate as husband’s nonmarital property.
- During the marriage, the parties lived on the farm; marital funds were used for substantial improvements (house renovations, garage, lake) costing about $67,000.
- The family court found the farm appreciated by about $67,000 and treated $45,000 of the increase in the value of the husband’s life estate as marital property.
- Disputed property also included future payments under the federal Tobacco Transition Payment Program (tobacco buyout), which provides both an “owner’s share” and a “grower’s share.”
- The family court largely treated tobacco buyout payments as marital in its division, stating the overall distribution was “fair and equitable” despite acknowledging a possible claim that the owner’s share should be nonmarital.
- Husband appealed post-decree orders resolving remaining property division issues and maintenance.

## Issues

1. Whether tobacco buyout payments, particularly the “owner’s share,” were nonmarital (tied to the husband’s premarital life estate/land interest) or marital property subject to division.
2. Whether the increase in value of the husband’s nonmarital life estate was properly classified and apportioned between marital and nonmarital components where marital funds improved the property.
3. Whether the family court abused its discretion by dividing property based on overall equity without first completing the required statutory sequence of classification, assignment, and division.

## Decision

- The Court of Appeals affirmed in part, reversed in part, and remanded.
- The court held the family court erred by relying on overall fairness without first correctly classifying the tobacco buyout payments as marital or nonmarital.
- The court required reclassification of tobacco buyout payments on remand, distinguishing land-based “owner’s share” interests from operation-based “grower’s share” interests.
- The court also required a proper apportionment of the appreciation in the husband’s life estate, separating marital-contribution appreciation from nonmarital market appreciation, rather than using a rough figure.
- Other aspects of the property division and maintenance not affected by these classification errors were affirmed.

## Legal Principles

- In dissolution proceedings, the court must: (1) classify property as marital or nonmarital, (2) assign each party’s nonmarital property, and (3) divide marital property in just proportions under KRS 403.190.
- A trial court’s discretion in dividing marital property is limited by the requirement of correct classification; “equitable” distribution cannot substitute for proper marital/nonmarital determinations.
- Property acquired by inheritance before marriage remains nonmarital, and a valid premarital agreement may confirm that status.
- Increases in value of nonmarital property attributable to marital funds or marital labor may be marital to the extent of the proven contribution; courts must trace and allocate between marital-contribution appreciation and passive market appreciation.
- Statutory payment rights (such as tobacco buyout proceeds) must be classified by the source of entitlement; payments tied to a nonmarital land interest may be nonmarital, while payments tied to marital labor or marital operations may be marital.

## Conclusion

The appellate court required the family court to follow KRS 403.190’s mandatory classify–assign–divide sequence by correctly classifying tobacco buyout payments and properly allocating appreciation of a premarital life estate between marital and nonmarital components, then redistributing marital property accordingly on remand.


Jones v. Jones, 245 S.W.3d 815 (Ky. Ct. App. 2008)