The link between property division and the comingling of funds

Maryland is recognized as “equitable distribution” state. That means that Maryland courts will presume that the distribution of a divorcing couple’s marital estate should be fairly equal unless there is some other justification for an uneven split. A couple’s marital estate consists of just about every asset and piece of property they acquired together while married. However, there are some important exclusions that a court will consider as separate property:

— Property and assets specified as your personal belongings in your prenuptial agreement will remain separate property under Maryland law.

— Property and assets you owned prior to the marriage are separate property.

— Items you inherited and were bequeathed solely to you are also separate property.

— Items given solely to you as a gift from a third party during your marriage are separate property.

Despite these clear demarcations of ownership, problems can nevertheless arise when spouses get into the habit of commingling their separate assets with marital assets. This process is known as transmutation, and it can muddy the lines when divorcing couples try their hands at property division without an attorney.

A good example of transmutation might involve a spouse inheriting a family business from their parents. Under normal circumstances, that business would likely have its own long-established connections with banks and perhaps even lines of credit with separate financial institutions. Unfortunately, life is unpredictable. Unexpected expenses or a downturn in business may have required you to divert funds from a checking account you also shared with your spouse to help cover a large business expenditure. Depending on how long that commingling of funds occurred, your spouse may argue that the business should be considered as part of the marital estate. That could place a business that has been in your family for generations in jeopardy of equitable distribution.

It’s important for you to know that retaining a Maryland family law attorney can benefit you tremendously in situations where marital funds have been comingled. An attorney experienced in these types of cases can bring in forensic accountants and other experts to help uncover property and assets that are rightfully yours. An attorney can also help you negotiate with your soon-to-be ex-spouse to draft a post-marital agreement. This type of document would allow you and your spouse to have a much greater input on how your marital property is divided.

Source: The People’s Law Library of Maryland, “Marital and Non-Marital Property,” accessed Aug. 13, 2015