Property Issues

                       Property Division in a Maryland Divorce

A Three Step Process-An Overview. 

                                                                             

          Maryland Courts are required to follow a uniform procedure for trying to allocate the property interests of a divorcing couple.  Requiring each court to follow a uniform procedure, however, by no means assures the same result in similar cases decided by two different trial judges. However, it is an attempt to limit the consequences of the differences in attitudes and beliefs which are part of any decision-making system run by human beings – even if they do wear a robe. Trial courts are expected to follow a "Three-Step" process: (for you cynics, this is not just a shortened version of a Twelve Step Program!)

 

                         Step One:    Which property is "marital" property?

                                         

                         Step Two:    Value all of the "marital" property?

 

                         Step Three:   If the distribution of the value of marital property according to its titled

                                             ownership is "inequitable", the Court can require one spouse to pay money to the

                                             other spouse.  This payment is known as a "monetary award". 

 

                             Step One:  Identify Which Property Is "Marital" Property?

 

What is Considered “Property?”  "Property" includes “everything which has an exchangeable value or goes to make up a man’s wealth,”  “Property” includes “obligations, rights and other intangibles as well as physical things.” Some specific examples:

Compensation For Work Performed.

Bonuses.   A past due bonus is marital property to the extent it was earned during the marriage.

 

Future Earnings.  Future earnings are not marital property, even if covered by a contract entered

into during the marriage.

 

Illegal  Income.  Income received during marriage from an unlawful activity or enterprise is marital

property

 

Attorney’s Contingent Fees.  An attorney's contingent fee contract in a pending case acquired during

marriage is marital property to the extent its value is based on services  performed during the

marriage.

 

Insurance Agent Renewal Fees.  An insurance salesman's contractual right to commissions based upon

future renewal premiums is not marital property if his entitlement to the commission is contingent

upon services to be rendered by him in the future. 

 

Worker's Compensation Payments?  Worker's compensation payments arising from employment during the

marriage are marital property, except to the extent the award is to compensate for lost earnings or earning

capacity for a period of time after the divorce.

 

Disability Benefits.  If paid on an insurance policy owned by a party, they are marital property if the

premium establishing the right to the benefits was paid from marital funds.

 

Deferred Compensation.  Deferred compensation is marital property to the extent it was earned during the

marriage. 

 

Retirement Plans.  To the extent earned during the marriage, pension and retirement benefits, vested or

non vested, are marital property, regardless of how payments were made to the fund (i.e., by payroll

deductions and/or by employer contributions), regardless of whether or not they have matured, and

regardless of when and under what contingencies the benefits are payable.

 

Social Security and Railroad Retirement Benefits.  These are not marital property.

 

Annuities.  To the extent purchased with marital funds or otherwise earned during the marriage, an annuity

is marital property.

 

Keough Plans and IRA’s.  Money contributed to Keough, IRA or similar plans during the marriage, together

with interest and dividends earned, is marital property.

 

Stock Options.  Unexercised stock options acquired by virtue of employment during the marriage are marital

property.

 

Stock Dividends And Splits.  Shares of stock received as a result of a stock dividends or splits are marital or

non marital according to the status of the originally held shares.

 

Stock  Purchase Plan.  A party's interest or equity in shares of stock being acquire through his/her

employer's stock purchase plan is marital property to the extent it accrued during the marriage.

 

Investment Income.

 

Bank Accounts.  Interest earned on a bank account is marital or non- marital according to the status of the

underlying account.

 

Certificates Of Deposit.  Interest earned 0n a certificate of deposit is marital or non marital according to

the status of the underlying certificate.

 

Interest and/or Dividends.  Interest earned on a stocks or bonds is marital or non-marital according to the

status of the underlying stock or bond.

 

Inheritance And Expectancy.  An inheritance received during a marriage is not marital property unless it

becomes “co-mingled” with marital property. A “potential” inheritance (beneficiary in a will or trust of a

person not yet deceased) is not considered to be “property.

 

Insurance.   To the extent the premiums were paid during the marriage, a life insurance policy is marital

property.

 

Degree, License Or Permit.  A party's degree, license or permit to engage in a professional trade or

occupation, earned during the marriage, is not marital property.

 

Personal Injury Action And Award.    The portion of a personal injury award which compensates for pain

and suffering from an injury which occurred during the marriage is non-marital property.  The portion

reimbursing for medical expenses, loss of services and lost earnings during the marriage is marital property. 

The portion reimbursing for future (after divorce) disability is not marital property.

 

Partnership Interests.   Income and other tax benefits to a general or limited partner are marital or non

marital according to the status of the funds invested.

 

Professional Practice.   A lawyer's, doctor's or accountant's physical assets, accounts receivable and good

will are marital property to the extent they were acquired during the marriage.

 

Good Will.  The good will component of a party's business or profession can be marital property.

 

Wedding Gifts.  Wedding gifts are the separate property of one party or the other, or are marital property,

depending upon the intent of the donor as indicated by all the circumstance. A gift specifically and

unequivocally designated as being to one party is the separate property of that party. A gift of property

commonly intended for general use in the household is marital property.

 

Engagement Ring.  A party's engagement ring is not marital property if received prior to marriage.

 

When Is Property Considered “Marital”?  Property acquired during a marriage is “marital” titled in the name of Husband, in the name of Wife or in their joint names. Property can be in part marital and in part non marital.  Designating property as “marital” does not mean it is to be automatically divided equally. The value of all “marital” property is merely the “fund” of dollar value with which a Court can make a “monetary award” i.e. require one spouse to pay to the other spouse a sum of money which will make the situation “fair” or “equitable”, as those terms are understood by the Judge making the decision.

 

Philosophy and Purpose of The Concepts of “Marital” And “Non Marital” Property. The concept of “marital” property was conceived as a means of giving life to the philosophy that marriage is a voluntary association of two persons whose contributions to the “enterprise” take differing forms but are of equivalent value. The “value” of caring for children, maintaining the household, planning a social life, hanging out at the country club and all of the other functions historically undertaken by women is to be determined in the larger context of the entire joint “enterprise”. In that larger framework, they were to be viewed as “capital contributions” to the “family enterprise”. These “non-monetary” contributions to the enterprise by one spouse often enabled the other spouse to produce what we call a “career”. The career, however, is no longer the product of the efforts of a single spouse. It is instead viewed as the product of a joint effort which has produced, among other things, both career and family. If one spouse ignored family to pursue career, then the efforts of the other spouse in maintaining family ought to be given due credit for their contribution to the “marital enterprise” and both marital partners should be entitled to share in the “work product” of the enterprise. The career spouse, by law and by common sense, is entitled to participate fully in the lives of the children. Conversely and equitably, the spouse who performed most of the day to day “maintenance” of the children is entitled to share in that which his or her efforts on behalf of the enterprise made possible ie. career and the accumulation of wealth.  On the other hand, property which comes to either party for reasons unrelated to the “marital” endeavor, such as the receipt of an inheritance, is not intended to be shared. Remember, except for retirement benefits and certain personal property, a Maryland court cannot require the titled owner of an asset to transfer his or her ownership of that asset to the other spouse.  The only power a Maryland court is given is to require one party to transfer money to the other party to achieve what that court determines to be reasonable and fair under all of the circumstances which have been presented in the evidence. 

 

Property May Be “Marital” Regardless Of Its Title.  The concepts of “marital” or “non-marital” have nothing to do with ownership. The sole purpose of determining whether property is “marital” or “non-marital” is to enable a divorce court to by award one party or the other a sum of money if a division of property according to ownership would be inequitable. "Marital" property is property acquired during the marriage, whether  titled in husband's name, wife's name or in their joint names,  and whether purchased with Husband’s earnings or Wife’s earnings. These details do not matter (To the court!)

 

"Acquired During the Marriage".  It bears repeating that the word "acquired" refers to value, not title.  For example, one or both spouses may own a closely held businesses or a professional practice prior to marriage.  If the spouse continues to work

in the business or professional practice after the marriage, to what extent can it be said that the value of that spouse's interest in the business or professional practice at the time of divorce is attributable to that spouse's work efforts during the marriage?  To the extent the value is attributable to work efforts during the marriage, a portion of the value at the time of divorce may be marital property.  Quite frankly, if you face this issue, on either side of the debate, it is time to consult a specialist. Marital input increasing the value of non-marital property is judged as follows:

 

“We define the value of the [nonmarital] property as the value that the

 property [acquired before the marriage], or such value [nonmarital] property

is increased by the expenditure of marital funds for its upkeep and/or 

development, the amount of such increase or accretion is marital, and therefore

is to be included  in the monetary award.”

 

Marital Property is Identified as of the Date of Divorce.  “During the marriage” means just what it says. You are not divorced until you are divorced. (It’s not over til it’s over?) Property acquired after your separation, but before your divorce, will be “marital”. To repeat myself, however, the fact that it is marital will increase the size of the “marital pot” from which the court can, if it so chooses, make a monetary    

award to one of the spouses. You will be free to argue, and a court will be free to agree     or disagree, that property acquired during separation should not accrue to the benefit      of the other spouse. For example, just such an argument prevailed in  

 

What About Money Spent During Our Separation?  Dissapation” Of Property.   The only way that marital property which has been used up, consumed or disposed of, (Notice, I did not say hidden) during the period of separation can be considered to be a part of the “marital pot”  is if the Court finds it to have been "dissipated." For example, Henry takes $25,000 of the couple's $30,000 joint savings account and pays off credit cards in his sole name which were used for family purposes. He then takes the other $5,000 to take a vacation to Cancun. He then uses his next paycheck to purchase airline tickets, lodging and ground transportation for Ginger, his new love, to accompany him to Cancun. Neither the $30,000 joint account, nor the proceeds from Henry's paycheck, exist at the time of his divorce trial with an embittered Wanda. If a Court finds Henry's expenditures to have been "intentionally made to avoid equitable distribution", the Court will add the amount spent back into the "marital pot."  If the Court were inclined to equally divide the marital assets, one-half of the "dissipated" funds would be credited against the share Henry would otherwise receive. Dissipation may be found where one spouse uses marital property for his or her own benefit for a purpose unrelated to the marriage at a time where the marriage is undergoing an irreconcilable breakdown.

 


            Some examples of payment FOUND TO BE DISSAPATION:

 

               Husband buys girlfriend a home or other lavish gifts.

Interest free loan to a close relative-interest can be imputed and added

            back into the "marital pot".

 A "gift" of an asset to a close relative while a divorce proceeding is pending,

            or at a time when the marriage is undergoing an irretrievable

            breakdown.

 

            Some examples of payments NOT FOUND TO BE DISSAPATION:

                 

Funds taken from a joint account to pay joint debts, for self-support or for

            other family-related expenses (wedding, college, trip etc.).

 

Funds taken from joint account to pay temporary alimony or child support

            to the other spouse.

 

                  Funds used for gambling trips to Atlantic City.

 

Caveat:  In each of the above examples, the result could have been different if additional facts existed.  Do not take the examples as gospel.  If Henry went to Atlantic City with Ginger?

 

What Property Is Considered “Non-Marital? Non-marital property is property

acquired by either spouse prior to marriage, acquired by inheritance or gift from a third party, excluded by "valid agreement” between the parties or property directly traceable to (1), (2) or (3) above.

 

Acquired By Either Spouse Prior To Marriage.  This category includes all property which either party "acquired" before the marriage commenced. This is property which is in existence at the time of the divorce but was acquired prior to the marriage. The term "acquired" is a term of art under the Marital Property Act.  Essentially, it refers to the value of the property, not to its title.  For instance, if Henry owned a $100,000 house subject to a $50,000 mortgage prior to his marriage to Wanda, and during his marriage to Wanda, the principal on the mortgage was reduced by monthly payments made during the marriage from Henry's earnings, then some of the value of the house was "acquired" during the marriage, and the house is part marital and part non-marital.  The same would be true if Henry owned an automobile titled in his name prior to the marriage and made payments on the automobile loan during the marriage which increased the value of the automobile.  If Henry and Wanda invested money which had been earned during the marriage into Henry's house, and the investment increased the value of the house, then the increase in value is "marital" because it is attributable to the marital funds which were used to make the improvements.

 

Acquired By Inheritance Or Gift From A Third Party.  Gifts are "non-marital" only if they are received from a "third party".  Gifts from one spouse to the other made during the marriage are "marital property", because spouses are not "third parties".  So when Henry and Wanda exchange jewelry at Christmas during the better days of their marriage, during their divorce each must account for the value of the

jewelry in their possession!  As an aside, the engagement ring which Henry gave to Wanda prior to the marriage is "non-marital" property because it was "acquired" by Wanda prior to the marriage as per (1) above!

 

Excluded By "Valid Agreement" Between The Parties.   Spouses can, prior to the marriage, during the marriage or after a separation, agree that any specified property is to be categorized as "non-marital".  For example if Henry and Wanda decide to separate, to sell their jointly title home and to then equally divide the proceeds, and if Henry and Wanda each then invest their one-half of the net sale proceeds in stock titled in their individual names, the stock which each acquires will have been "acquired during the marriage" as per (1) above.  If Wanda then invests her proceeds wisely and her stock doubles in value by the time of the divorce proceeding, and if Henry invests wildly, and his stock is worthless, Wanda faces a possibility that Henry will assert a claim to one-half of the value of her stock.  To avoid that possibility, if assets are divided by parties during the separation, they should "by valid agreement" make it clear that each is entitled to deal with the property which they receive as they may wish, and that anything they thereafter purchase or invest with their share is to be designated "non-marital".  To re-emphasize an important point, Maryland Courts identify and value marital property as of the date of divorce, not separation.  If Henry were to win the lotto four days after his separation from Wanda, the winnings are "marital property".

 

Property Directly Traceable To The Above.  If either spouse has non-marital property as per the above, and they thereafter sell, trade-in or exchange that asset for another asset, the newly acquired asset will be non-marital only if it is "directly traceable" to the original non-marital property.  What does this mean?  If the non-marital asset is "co-mingled" with marital property, there is a risk that the combined asset will be treated totally as marital.  For instance, if Henry has a $10,000.00 bank account titled in his sole name when he marries Wanda, it is clearly non-marital.  However, if Henry then deposits his $2000.00 paycheck into this account during his marriage to Wanda, the $12,000.00 account may no longer be "directly traceable" to the original $10,000.00 account.  If Henry wants to be sure that his $10,000.00 account is preserved as non-marital, he is much wiser to place it in a separate account, titled in his own name. During his marriage to Wanda, he should add nothing to it except the interest and earnings which might accrue on the account which he has created.  Another example:  If Henry's mother gives Henry $10,000.00 so Henry can purchase a house after he has married Wanda, Henry has a choice.  First, he could take a check from his mother and put it into the joint account which he and Wanda have maintained during their marriage.  When they arrive at settlement, Henry and Wanda would then write a check for the $10,000.00 down payment.  Assume their joint account had a $5,000.00 balance when Henry deposited the $10,000.00 check from his mother.  It is then impossible to say whether the $10,000.00 down payment came from the $5,000.00 of

joint marital funds or from the $10,000.00 gift from Henry's mother.  The funds have been "co-mingled", and there is no way to say that the house is "directly traceable" to the non-marital funds.  Henry would have been much wiser to have his mother write a check directly to the seller of the house, and to have his mother note on the check "gift to Henry" (so Wanda cannot thereafter claim that it was a gift to "us").  If Henry is really sharp, he will make certain that the house is titled in his name alone.

 

Increases In The Value Of Non-marital Property.  Care must be taken to distinguish between income from non-marital property which is attributable to inflation or to a change in market conditions and income which accrues by reason of the expenditure of marital funds or as a result of work furnished by either or both parties during the marriage. The increase in the value attributable to the former will not be considered marital. The increase in the value attributable to the latter may be categorized as marital. An increase in the value of a business attributable to the efforts of one of the parties is not marital property if that party was duly compensated for his/her services by way of salary or wages.

 

Remember, if the non-marital property is “co-mingled” with marital property, it may be converted into “marital” property”.  If a spouse wishes to protect the character of non-marital property, the non marital should be placed in a separate account and at no time should the recipient deposit into that account any of his or her earnings accumulated during the marriage, or any other funds or investments which have been accumulated during the marriage. 

 

                                 Step Two-Valuing the Marital Property.

 

Having identified which property is "marital", a Maryland Court is then obligated to establish the value of that property.

 

Fair Market Value-Not Original Cost. The “value” of any item of property is the price which a willing buyer would pay a willing seller for the property in a transaction where neither party is under any compulsion to buy or sell and both have reasonable knowledge of the relevant facts.  It is not the price which was paid to purchase the property originally. It is not what it would cost to replace the property. It is the price which would be paid in an “arm's length” sale. The easiest example is the living room couch.  It cost $600.  It would cost $800 to replace it in today's market.  However, the couch is 4 years old and could probably be sold for $50.  The "value" for the Court's purposes is $50.  When an item of property does not have a definite market value, the cost of acquisition can be used to determine its value.

 

Neither the costs which are likely to be incurred to sell a property (sales commissions, brokerage fees, anticipated finance charges, settlement costs) nor the tax consequences which would result from a sale or transfer of the property, are taken into account by the Court at the “valuation” stage of the analysis. Even if property is going to be sold by the parties, the "net value" will not be used by the court for the purpose of valuation.   

 

By Agreement.  On occasion, it is possible for divorcing spouses to agree upon the value of some or all marital assets, notwithstanding the intensity of their other disputes. If, for example, a jointly titled marital home is to be placed on the market and sold, the market itself will ultimately determine its value, and it is pointless for the parties to hire experts or to otherwise waste time and money arguing about the true value of the house. If parties can reach a mutually acceptable physical division of the tangible personal property, the necessity for paying the cost of an appraisal can be avoided. When parties agree to exchange properties in a settlement, or to divide the amount realized in a sale of the property, the “costs of sale ought to be taken into account. For example, if one spouse’s interest in the marital home is to be transferred to the other spouse, the recipient is going to contend that the value they have received is the “fair market” value of the house minus the cost which is likely to be incurred when the house is later sold. If I am keeping $200,000 in cash and transferring a house with a fair market value of $200,000 to you, you are going to feel short-changed.  Converting the asset into cash will cost you money. So you want to say it is worth $200,000 less the approximate 8% which is typically paid in commissions and settlement costs in Maryland.

 

By Appraisal.  If husband and wife cannot agree upon, or do not know, the value of any or all of the assets, it is still possible for them to mutually agree upon an "expert" in whom they both share confidence and who can give them a binding opinion regarding the value of any or all of the assets. For example, if the value of antiques, jewelry or other tangible personal property is an issue, there are reputable appraisers who can be jointly selected (with costs to be shared as appropriate) and whose opinion can be relied upon with a mutual sense of fairness.  This "jointly selected" expert approach can also be utilized with more complex assets, such as business interests, stock options, limited partnership interests etc. For example, a broker who originally sold the parties their marital residence may have their mutual respect and can be used to establish its current value for purposes of their divorce.

 

Market Resource Materials.  The parties can agree to go to the Internet, or to the "Blue Book" to establish the value of the automobiles. 

 

Burden Of Proving Value.  The law places the burden of proving the value of the marital property on the spouse who is seeking a monetary award.  For example, if husband is the owner of a closely held business, and it is the major asset which has been accumulated during the marriage, the law places the burden upon the unfortunate stay-at-home mother (who probably has no access to financial resources) to undertake the expensive task of establishing the value of that business. 

 

Marital Property Is Valued On The Date of Divorce-Not Separation.

"Planning" for divorce starts when at least one spouse decides to terminate the marriage.  That point in time is seldom the same for both parties. An ambivalent, fearful, guilty or unwilling spouse is often loathe to consider divorce as a possibility, and that spouse is not emotionally ready to begin "planning". It runs counter to their primary agenda, i.e., reconciliation or repair of their damaged relationship. The spouse "planning" for divorce should be aware of this very important principle. Property which exists when a spouse (or both spouses) decide to end a marriage can be spent, used to pay bills, invested or used in any other way  prior to the date of divorce. If it does not exist as of the date of the divorce, it is not considered in fashioning a "monetary award." Why not? Because “marital property” is identified and valued as of the date of divorce, and not the date of

separation. You are not divorced until you are divorced. Notwithstanding this principle, the circumstances of a particular case may make a date prior to the date of divorce more equitable as a valuation date.  If so, parties are free to agree to their own “valuation date”. A “de facto termination” takes place when the parties have ceased to function as a partnership. If the parties have separated, the de facto termination will be on or prior to the separation date. By agreement, division of marital property can  be made as of any mutually agreeable date.  If such an agreement is made,  any increase or decrease in the value of property after that date will accrue to the party to whom the property is allocated, as will any subsequent income or expense attributable to the property.

 

Valuation Of Specific Property

Art And Antiques. Art and antiques which possibly may be of substantial worth should not be valued without assistance from an expert. Dealers, auction houses and certified appraisers (American Association of Appraisers) are available for this purpose.

 

Automobiles. The market for automobiles, other than antique, classicand exotic cars, is standardized and accessible that reference to the "Blue Book" or other similar reputable publications. The Internet has several reliable sources from which these values which can be established.

Close Corporations. Shares in a closely held corporation cannot be reliably valued without the services of an independent auditor and an experienced broker or appraiser specializing in corporate acquisitions and mergers.

Household Furnishings And Personal Effects. A simple and fair method of division by lot involves alternative choices from an agreed list of property, the first choice being awarded by the flip of a coin.It is common practice, though not always equitable, to ignore personal effects or, in the alternative, to award them as separate property and thereby escape the problem of their valuation

Life Insurance Policies. The fair market value of a life insurance policy is equivalent to its cash surrender value, if any.

Pensions. There are at least four ways in which the value of a pensioncan be resolved.  Which is most appropriate depends upon the circumstances of the case, the status of the parties and the reasonableness of the result. 

1.  The present value of the future benefits as computed from interest and actuarial tables. This method involves some uncertainty, is difficult and will not be undertaken without the services of an expert actuary

 

2. The present cash value of the employee's interest in the fund, if the terms of the pension agreement permit current withdrawal.

 

3.  The theoretical liquidation value of the employee spouse's interest as shown by the records of the fund. Some funds, regularly report this to employees. In substance, this amounts to the employee’s contribution plus interest earned on those contributions.

 

4.      Determine an equitable dollar amount or percentage of any

future benefits the employee spouse may receive under the plan, payable

to the other spouse if, as and when the pension matures. Though not a "valuation," this method is accurate and avoids speculation.

 

Professional Good Will. The two accepted methods for ascertaining the value of professional good will are (1) by comparison with other sales and (2) by the use of generally accepted accounting formulas. The service of an expert knowledgeable about the particular profession is indispensable. Even generally accepted accounting formulas, of which there are several, have their deficiencies and require the exercise of expert judgment in their application to a specific case.

                                                 Step Three- Monetary Award.

 

Required Considerations.  In deciding what would be an “equitable” monetary award result in any particular case, the Court must consider all of the factors deemed to be of significance by the legislature when it enacted MD. CODE Fam. Law Art. § 8-205 (b).  Although consideration of the listed factors is mandatory, a trial judge is not required to set out a detailed checklist specifically referring to each factor. The listed factors are:

           (1)       the contributions, monetary and non-monetary, of each party to the well-being of the family.

           (2)       the value of all property interests of each party.

           (3)       the economic circumstances of each party at the time the award is made.

           (4)       the circumstances that contributed to the estrange­ment of the parties.

           (5)       the duration of the marriage.

           (6)       the age of each party.

           (7)       the physical and mental condition of each party.

           (8)       when specific marital property or interest in the pension, retirement, profit sharing, or deferred compensation plan, was acquired, including the effort expended by each party in accumulating the marital property or the interest in the pen­sion, retirement, profit sharing, or deferred comp­ensation plan, or both.

           (9)       any award of alimony.

          (10)     any other factor that the court considers necessary or appropriate to consider in order to arrive at a fair and equitable monetary award or transfer of an interest in the pension, retirement, profit sharing, or deferred compensation plan, both.

 

 Revisiting  The Significance Of Property Being  “Marital.  The value of marital property creates a dollar amount from which  a Court can make a “monetary award” from one spouse to the other to achieve what the Court deems to be an equitable result. The maximum amount of a monetary award a Court can make is up to the total value of the marital property. No more.

The value of non-marital property will not be included in the total amount of "marital" wealth from which a court may fashion a "monetary award".  Some Judges believe that a spouse's non-marital property belongs to that spouse, and that it has no bearing whatsoever upon the manner in which the “marital” wealth should be allocated.  If Henry had $ 300,000.00 in non-marital assets prior to his marriage to Wanda, and Wanda had none, a Judge deciding their divorce proceeding can legitimately conclude that the marital property should be divided equally. This result would leave Henry with his original $ 300,000.00 "advantage" over Wanda.  Another Judge, facing the same situation, may decide that Henry's additional $ 300,000.00 would justify awarding monay in excess of 50% of the value of the marital property.  Unfortunately, as in many areas, there is no "answer" which this book, or any lawyer, can give to you.  The magical word is "equitable".  The value of non marital property is not included in the fund, although its value can be taken into account in deciding what is an “equitable” when dividing the value of the marital property between divorcing spouses.

Consider the following financial situation as an example:

 

Marital Asset         Title         Value         Held by Husband             Held by Wife

 

Residence               Husband   $ 100,000      $  100,000

Automobile             Husband   $   15,000      $   15,000

Bank Account           Joint       $    8,000      $     4,000                        $    4,000

 

Marital Property                     $ 123,000      $ 119,000                          $   4,000

 

In this example, if a Court decided it would be “equitable” for the divorcing spouses to have an equal amount of the marital property each party should end up with one-half of $123,000, or $ 61,500. To accomplish this result, Husband would be ordered to pay to Wife a “Monetary Award” of $57,500. Why?

                                                                             

            The Court cannot transfer title to any asset from one spouse to the other.

 

            Husband is the owner of the house and car.

 

            The bank account must be divided equally.

  

            The only mechanism a Maryland Court has to accomplish the result it has decided is reasonable or “equitable” is a “monetary award”.

 

            If Husband pays Wife $57,500, equality will have been achieved.

 

            Having a “Marital Property Interest” is not the equivalent of ownership.

 

            An owner of property can sell the property or borrow against the property without the  permission, or even the knowledge, of the non-Owner spouse, even though the non-owner spouse has who has a “Marital Property Interest” in the event of a divorce.

 

 

Limited Court Power To Transfer Title To Assets.   For Maryland couples, it bears repeating that a  Court’s does not have the power to transfer title to an asset from one divorcing spouse to the other. In your particular situation, it may be practical, reasonable and fair to “trade assets” ie. one spouse should have title to the jointly titled marital home, and the other spouse should retain their entire pension. The trial judge may be in complete agreement. However, the trial judge cannot do it, unless the parties agree. The judge has only those powers which have been enacted into Maryland’s statutes. So if one spouse chooses to be “unreasonable” in this respect, they

can do so. All of the “it’s unfair” and “please say it isn’t so’” cannot change that basic

fact. This limit on the powers of a Maryland divorce court empowers a spouse who wants to stubbornly refuse to leave the house at the most difficult of time in most divorces. One has to wonder whether the deadlock created by this gaping hole in the power of the courts does not contribute to the volatile emotional climate which is present in so many domestic violence proceedings. It is why a Maryland lawyer must tell their client “The court can’t force him/her out of the house, unless there is a domestic violence proceeding and an ex parte restraining order is issued by the Court”. It is why a Maryland lawyer who must give this advice always wonders whether he or she has been the unwilling source of a domestic violence proceeding which follows shortly after “educating” the client about one of the “benefits” to be gained from obtaining an ex parte restraining order.

 

Marital Property/Burden of Proof/Non-Marital Claims.  The person who asserts a claim that property acquired during the marriage is non-marital has the burden of “tracing” that property to a non-marital source. That typically means showing all of the documents relating to the acquisition of the asset (bill of sale, cancelled check, Estate Probate Accounting etc.), and all documents showing what became of the asset after it was acquired.

 

Unmarried Couples. The concepts of “marital” property and “Monetary Award” do

not apply to couples who never marry. Property acquired when parties live together before marriage, even if it is acquired in contemplation of marriage (like an engagement ring, season tickets to the Ravens and Oriole games, etc.) is not marital property. A “living together” relationship never formalized by a marriage ceremony furnishes no basis for a finding that property is “marital”. Property of unmarried cohabitants, no matter when, how or where it is acquired, is not subject to the same rules at the end of the relationship as would be applied if the parties had married.

 

Random Thoughts.

 

1.  During the marriage, protect your non marital property (acquired by inheritance, by gift or was owned by you prior to the marriage) by keeping it totally separate from your marital property. If you sell non marital property, put the funds in a separate account—call it a non marital property account. If you buy something (or invest) with those funds, keep records and keep the investment separate and distinct from marital monies.

 

2.  If you are paying debts during your separation, use marital assets to do so.

 

3.  If you own your own business, consider making capital expenditures you might otherwise defer.

 

4.  Don’t be afraid to purchase a car. The $20,000 bank account in your name is marital property. If you use it to purchase a $20,000 car, the car is marital property. The car, however, may be worth only $15,000 when you drive it off the lot.

 

5.   If your asset structure is the least bit complicated, at least consult with an accountant.

 

6.   If debts (credit cards, mortgages, personal loans etc. are in your name alone, consider paying the debt with marital property titled in your name to avoid the risk of sacrificing one-half of the value on the property but getting no contribution from your spouse toward the repayment of the debt.

 

7.   To prepare for divorce, in addition to acquiring necessary documentation, you may wish to photograph

      or videotape your furnishings, personal property and real estate. By photographing the contents of your

      home, you will create a comprehensive log of your possessions and the condition of your home. It may  

      be difficult at a later date to recall all items or necessary repairs.

 

 

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