Laws governing division of marital property in divorce vary from state to state. Maryland law requires a division that is equitable, meaning that it's fair but not necessarily equal. Some couples are able to agree on how to divide everything on their own, and submit an agreement for court approval, while others seek the help of attorneys or a mediator to negotiate a settlement.
Marital Property and Separate Property
The first step in the division process is deciding whether property is marital or separate. Spouses who entered into a prenuptial agreement before marriage may have specified that certain property is marital or separate. If there is no agreement, then marital property includes all of the assets and debts the couple acquires during marriage. Property is separate if a spouse owned it before marriage or acquired it during marriage by gift or inheritance. Separate property also includes any property that one spouse can directly trace back to property that began as separate property. Real property held by the couple as "tenants by the entireties" is always marital property unless the couple has a valid agreement stating otherwise.
Marital and separate property can be mixed together—sometimes called "commingling." For example, both spouses may pay the mortgage on a house that one spouse owned separately before the marriage, or one spouse may deposit separate funds into a joint bank account. Separate funds commingled in joint accounts will remain separate property only if the owner is able to trace the separate funds through financial records. If marital funds are used to pay the mortgage or expenses on a separately owned home, or another separately owned asset that has appreciated in value, a court will apply the "source of funds" rule, which requires determining the value of the separate and marital property in proportion to the contributions. These situations can be very complicated and you're likely to need an attorney to help you figure out the separate/joint allocation. If spouses aren’t able to decide what belongs to whom, a judge will have to decide how to apportion the separate and marital interests.
After determining which property is marital property, the couple, or the court, will generally assign a monetary value to each item. Couples who need help determining values can hire professional appraisers. Some financial assets, such as retirement accounts, can be very difficult to evaluate and may require the assistance of a financial professional, such as a C.P.A. or an actuary.
Dividing the Property
Spouses can divide assets by assigning certain items to each spouse, possibly with an equalizing payment if one spouse gets substantially more than the other so that the division isn't equitable, or by selling property and dividing the proceeds. They can also agree to continue to own property together. While this isn’t a very attractive option for most people, as it requires an ongoing financial relationship, some couples agree to keep the family home until children are out of school. Couples who end up in court could find themselves in a similar situation. Maryland law provides that a court may award one spouse the temporary exclusive use not only of a family home, but also certain items of "family use personal property," such as a vehicle or home furnishings, for up to three years, or until the spouse with exclusive possession remarries.
The couple must also assign all debt accrued during the marriage, including mortgages, car loans, and credit card debts, to one of the spouses.
Couples who don’t manage to resolve property issues on their own will end up going to court to ask for a decision from an arbitrator or a judge. A Maryland court will consider all relevant factors in deciding what kind of property division is fair, including the following:
- the length of the marriage,
- each spouse's age, health, and physical and mental condition,
- whether a spouse is receiving maintenance (alimony), or has been awarded the use of a family home or other family use property,
- each spouse's contributions, monetary or nonmonetary, to the well-being of the family,
- each spouse's economic circumstances,
- either spouse's contribution of separate property to real property held by the couple as tenants by the entirety,
- how and when one or both spouse acquired specific property, and
- marital misconduct that contributed to the divorce.