When dealing with issues related to the division of property during a divorce, the court takes three steps, the second of which is the focus here:
- it determines what property is marital property;
- it determines the value of that marital property; and
- it determines whether to transfer ownership or use of the property or to grant a monetary award.
Maryland Code Ann., Family Law (“FL”) Article §§ 8–203–8–205.
The value of marital property in Maryland is calculated by subtracting marital debt from the property’s reported or assessed value. Marital debt is a debt which is directly traceable to the acquisition of marital property. Nonmarital debt, on the other hand, is a debt which is not directly traceable to the acquisition of marital property and may not serve to reduce the value of marital property.
Lawyers for the Division of Marital Property in Baltimore, MD
If you are considering a divorce, then talk with an experienced family law attorney in Baltimore, Maryland, to learn more about how the debts and assets earned in the marriage will be divided. We can help you decide what you need to do right now to protect your rights and put your family in the best financial position as you enter this next phase of your life.
Call an experienced divorce attorney in Baltimore, Maryland. Call 443-709-9999 today to discuss your case.
Who Gets to Live in the Family Home?
Although the decision whether to grant use and possession of the family home rests in the discretion of the trial court, there are certain factors the trial court must consider when awarding use and possession. FL § 8–208. The trial court must consider the following factors:
- the “best interests of any children;”
- the “interests of each of the parties” in continuing to use the property as a dwelling or for income; and
- “any hardship imposed” on the party who is not granted use and possession.
There are a few ways this can go in Maryland:
- Both spouses lose the home. The judge orders the sale of your home and the proceeds are divided based on principles of “equitable distribution,” or fairness.
- One spouse keeps the home. The judge transfers title from one spouse to the other (typically the custodial parent) but might also order a financial award to the spouse from which the title was taken.
- Both spouses keep the home. There’s nothing stopping you from making an agreement with your spouse regarding the use of the home, depending on the circumstances, which usually means both spouses keep an ownership interest (but not necessarily the right to live in it).
Tip: A “move-out agreement” can help to prevent disputes when it comes to leaving your home by specifying when and how you (or your spouse) will move out.
How are 401(k) Savings Accounts Divided?
In Maryland, the law requires “equitable distribution,” which means that retirement accounts will be divided based on a number of factors, including how long you were married and when the money was deposited into those accounts. If you’re worried about what will happen to your retirement account in divorce, keep reading to learn more.
What happens depends on the type of account and the language of any Qualified Domestic Relations Order (QDRO), which specifies how retirement accounts are divided.
- 401(k) savings accounts. These types of accounts are often split down the middle, but that’s not always the case. Because of equitable distribution, several factors come into play, including the length of the marriage, you and your spouse’s respective financial situation, your age and health, and the timing of contributions to the account.
- Government pensions. Your pension may come in the form of monthly payments once you retire. In those cases, your spouse may get a portion of your pension based on a formula which factors in the length of your marriage while you were employed and the total number of years worked. Your spouse, just like you, will not receive those monthly payments until you retire.
The “Source of Funds” Theory in Maryland
In determining marital and nonmarital property, Maryland follows the ‘source of funds’ theory. Under that theory, when property is acquired by an expenditure of both nonmarital and marital property, the property is characterized as part nonmarital and part marital. Thus, a spouse contributing nonmarital property is entitled to an interest in the property in the ratio of the nonmarital investment to the total nonmarital and marital investment in the property.
The remaining property is characterized as marital property and its value is subject to equal distribution. Thus, the spouse who contributed nonmarital funds, and the marital unit that contributed marital funds each receive a proportionate and fair return on their investment. If a property interest cannot be traced to a nonmarital source, it is considered marital property.
If a piece of real property is titled as “tenants by the entirety,” that property is automatically considered marital property. FL § 8–201(e)(2). When a party claims that nonmarital funds were used to buy a property titled as “tenants by the entirety,” that party must rebut the presumption that the property is marital property. To demonstrate that property acquired during the marriage is nonmarital, the party with this burden must directly trace the property to a nonmarital source.
Parties may exclude a piece of property acquired during the marriage from the marital property pool through a valid agreement. Under FL § 8–201(e)(2), the term “Marital property” includes any interest in real property held by the parties as tenants by the entirety unless the real property is excluded by valid agreement.”
The agreement must either specifically provide that the property is nonmarital or specifically exclude the property from the scope of the Marital Property Act. Findings of whether the property is marital or nonmarital are subject to review under the clearly erroneous standard set out in Md. Rule 8–131(c). On appeal, the decision will not be disturbed unless factual findings are clearly erroneous.
Pursuant to § 8–204(a) of the Family Law Article of the Maryland Code, a circuit court, in ruling on a divorce case, “shall determine the value of all marital property.” Md.Code (1984, 2012 Repl.Vol.), § 8–204(a) of the Family Law Article. For each identified item of marital property, the circuit court must determine the “fair market value, which is defined as “the amount at which property would change hands between a willing buyer and a willing seller ….“ Rosenberg v. Rosenberg, 64 Md.App. 487, 525–26, 497 A.2d 485 (1985) (citations omitted).
“In a divorce case, a party asserting a marital interest in the property has the burden of producing evidence as to the identity of the property and of its value.” Newborn v. Newborn, 133 Md.App. 64, 94, 754 A.2d 476 (2000). After the moving party satisfies this burden of production, the burden shifts to the non-moving party to produce contradictory evidence. Blake v. Blake, 81 Md.App. 712, 720, 569 A.2d 724 (1990).
The Monetary Award in Maryland
Trial courts are empowered to “balance the equities” between the parties in a divorce if division of the marital property by title is inequitable. After having determined what property is marital property, who holds that property, and the value of the property, the trial court totals the value of the marital property titled in each party’s name. Frequently one party will hold significantly more property than the other, the trial court may balance the equities by ordering one party to pay the other a monetary award.
In Maryland, monetary awards are made to balance what would otherwise be an inequitable “division of property by title.” When a party requests a monetary award, the trial court must follow a three-step process. First, the trial court must determine whether disputed property is martial or nonmarital. Then the trial court must value all of the marital property. Finally, the trial court weighs 11 factors to determine whether a monetary award is appropriate to rectify any inequity that might otherwise occur as a result of how the property is titled between the parties. 3 Md.Code Ann. (1984, 2012 Repl.Vol.), § 8–205 of the Family Law Article (F.L.); Flanagan, 181 Md.App. at 519–20; Brown v. Brown, 195 Md.App. 72, 109 (2010).
According to F.L. § 8–205(b), when a trial judge is considering whether and how to make a monetary award, he or she must consider all of the following factors:
- Contributions, monetary and nonmonetary, of each party to the well-being of the family;
- The value of all property interests of each party;
- The economic circumstances of each party at the time the award is to be made;
- The circumstances that contributed to the estrangement of the parties;
- The duration of the marriage;
- The age of each party;
- The physical and mental conditions of each party;
- How and when specific marital property or interest in property … was acquired, including the effort expended by each party in accumulating the marital property or the interest in property … or both;
- The contribution by either party of property described in § 8–201(e)(3) of this subtitle to the acquisition of real property held by the parties as tenants by the entirety;
- Any award of alimony and any award or other provision that the court has made with respect to family use personal property or the family home; and
- 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 property described in subsection (a)(2) of this section, or both.
Wrongful Dissipation of Marital Funds
In many divorce proceedings, one side will argue that the other side intentionally and wrongfully dissipating marital funds prior to and during the divorce proceedings so that the assets would not be split during the divorce. “Dissipation may be found where one spouse uses the 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.” Sharp v. Sharp, 58 Md.App. 386, 401, 473 A.2d 499 (1984).
Dissipation of marital property is, in general terms, the spending of money so that a soon-to-be-former spouse cannot have it. The courts have explained that the doctrine of dissipation is aimed at the nefarious purpose of one spouse’s spending for his or her own personal advantage so as to compromise the other spouse in terms of the ultimate distribution of marital assets.
The idea, for the dissipating spouse, is to expend money or assets because the property that is not in existence at the time of a divorce cannot be marital property and, therefore, is not part of the calculation for a monetary award. See Fader’s Family Law, 12–46.
If the trial court finds that a spouse has intentionally dissipated marital property to avoid its inclusion in the calculations that dissipation is considered “a fraud on marital rights.” Sharp v. Sharp, 58 Md.App. 386, 399 (1984). As a result, the property that is dissipated is included as extant marital property and is valued with the other existing marital property. Id. “The spouse alleging dissipation has the burden to prove dissipation and the value of the property.” Ross v. Ross, 90 Md.App. 176, 190, vacated on other grounds, 327 Md. 101 (1992).
Attorneys for the Division of Property in a Baltimore Divorce
Contact an experienced family law attorney in Baltimore, Maryland, to learn more about how assets and debts might be divided in your divorce. Call us to find out more about how your marital home, real estate investments, small business, 401K, retirement accounts, and debts might be divided by the judge in a divorce.
Call us at 443-709-9999 to discuss your case today.