In Maryland, a couple's property is to be divided equitably when they divorce. Equitable distribution means that each spouse leaves the marriage with his or her own separate property. The court divides the marital property on an equitable basis, not necessarily in half, but based on fairness, given the needs of each spouse.
This article covers some common marital property issues, including what happens when separate property and marital property are combined and how debts are divided. For information on other Maryland divorce topics, such as child custody, support, and much more, see our Maryland Divorce and Family Law page.
All property acquired during the marriage is presumed to be marital property, regardless of what it says on the title. For example, the portion of a pension acquired during a marriage is marital property. Businesses acquired during the marriage are marital property. Professional practices can be considered marital property, if the goodwill of the practice is an asset that has a value separate from the reputation of the professional. Personal injury awards made during the course of the marriage are separate property for purposes of compensating the victim spouse, but marital property to the extent that the award compensated for lack of consortium (marital relations), medical expenses paid by the marriage, and/or lost wages. Lottery winnings during marriage are marital property, but may not be if won after separation, depending on the specific facts of the case.
Property owned prior to marriage is nonmarital property, including the appreciation such property earned during the marriage. Other nonmarital assets include property, both real (land, homes) and personal (houses, boats, furnishings), that was acquired by only one spouse through gift, bequest, or devise.
There are a couple of exceptions, however: Appreciation of property due to the active intervention and management by either spouse during the marriage is marital property. (Appreciation by mere virtue of possession is non-marital property.) And, although gifts from an outside to either spouse are that spouse's separate property, gifts from one spouse to the other are marital property.
In many marriages, spouses buy property using both marital and nonmarital assets. In this case, the purchased property is deemed marital property, but the spouse who contributed nonmarital assets can be reimbursed through the source of funds rule. The source of funds rule states that property purchased with both marital and nonmarital funds or other assets is marital property except that percentage that can be traced to a nonmarital source.
A common example is the purchase of a house with a down payment from one spouse's inheritance plus standard mortgage payments made from a joint checking account. However, the source of funds rule does not apply to houses titled tenancy by the entireties. (Most houses held by married couples are held this way.) When a house is held tenancy by the entireties, the entire property is marital property unless the couple has a prior written agreement to treat it otherwise. The contribution of one spouse's nonmarital property will be considered by the court when determining whether to order one spouse to pay money to the other as part of the property settlement.
Debt arising out of the acquisition of marital property is considered marital debt to be deducted from the value of marital property. The value of marital property is determined on the date of divorce, not the date of separation.
Debts incurred for the payment of rent, food, and other expenses associated with daily living are not considered marital debt and cannot be apportioned between spouses.
Use and Possession
If the couple has a child or children together, the family home and other property may be awarded to the custodial spouse by a use and possession order. These orders state that the custodial parent shall have exclusive use of the property until the order expires. Use and possession orders can last up to three years. The court has the power to identify family use property and to make an award of that property for as long as three years regardless of how the property is titled. Although the award can be made regardless of title, the property must be considered family property before the award can be made.
A family home is a home that:
- is used as the principal residence of the family
- is leased or owned by one party at the time of the proceeding, and
- will be used as the principal residence of the custodial parent and child(ren).
A residence acquired before marriage by gift or inheritance from a third party cannot qualify as a family home, unless it is re-titled in both spouse's names (in other words, the owner spouse gives the other a gift of one half interest in the property).
Maryland judges do not have the power to transfer title to property from one spouse to another. Thus, a judge cannot order a spouse to sign over his or her interest in a house to the other. If the parties cannot agree on a fair distribution of jointly held property, a judge simply orders that the property be sold and the proceeds distributed as per the judge's order. As such, it is usually in the parties' best interest to negotiate jointly titled property without forcing a sale.
Monetary awards are the tools judges use to equitably distribute assets. In determining whether to make a monetary award (and how much to award), a judge will consider the following factors:
(1) contributions by the spouses during the marriage to the well-being of the family, both monetary and non-monetary
(2) the value of all property interests of each party
(3) the economic circumstances of each party
(4) the circumstances that contributed to the estrangement
(5) the duration of the marriage
(6) the age of the parties
(7) the physical and mental conditions of the parties
(8) how and when specific marital property was acquired
(9) the contribution by either party of separate property that is used to acquire real property held as tenancy by the entireties
(10) any award of alimony that a court has made, and
(11) any other factor that the court considers necessary.