Opinion ID: 677465
Heading Depth: 2
Heading Rank: 2

Heading: Kansas Property Law

Text: 13 In Cady v. Cady, 224 Kan. 339, 581 P.2d 358 (1978), the Kansas Supreme Court considered the effect that filing a petition for divorce has on the property interests of the parties. Prior to filing a divorce petition a spouse possesses only an inchoate interest in real estate held by the other spouse. Id. at 362 (citing McGill v. Kuhn, 186 Kan. 99, 348 P.2d 811 (1960)). The filing for divorce, however, has a substantial effect upon the property rights of the spouses. At that moment each spouse becomes the owner of a vested, but undetermined, interest in all the property individually or jointly held. Id. at 362-63 (emphasis added). The Cady court therefore held that the filing of a petition for divorce ... creates a species of common or co-ownership in one spouse in the jointly acquired property held by the other. Id. at 363. The extent of that interest is to be subsequently determined by the state trial court when dividing the property under the divorce decree pursuant to Kan.Stat.Ann. Sec. 60-1610(b) (Supp.1993). Id. 5 14 Ultimately, the Cady court held that such a property interest is sufficient to defeat a claim by the IRS that division of property pursuant to a divorce decree constitutes a taxable transfer of property. Id. at 360, 363. Instead, the court characterized it as a division of property between two co-owners, which is not a taxable transfer because the parties had an interest in the property prior to the division between them. 15 Nearly ten years later, the Kansas Supreme Court revisited the issue. In Smith v. AIFAM Enters., 241 Kan. 249, 737 P.2d 469 (1987), the court held that the filing of a petition of divorce creates a vested property interest in both spouses such that the property is not subject to a judgment creditor's lien or execution obtained against one of the spouses while the divorce action is pending. Id., 737 P.2d at 474. The court reasoned that allowing the judgment creditor to prevail on the basis of a lien arising after the divorce petition was filed would interfere with the ability of the trial court to divide the property on a fair and equitable basis as mandated by Section 60-1610(b). Id.