Understanding Asset Division in a Maryland Divorce

Getting divorced means more than deciding who keeps the house or moves out. You may also have bank accounts, retirement savings, vehicles, investments, and other property to sort through. Many people assume divorce means splitting everything 50/50. That isn't necessarily how it works. Asset division in Maryland depends on more than who purchased an asset or whose name appears on the title.

Key Takeaways

• Maryland courts take an equitable - that means fair - approach to the division of property.
• Property acquired during the marriage or commingled with marital property is considered marital property.
• Assets acquired before the marriage, inherited, or as a gift are considered non-marital property.
• Spouses can make their own agreement outside of the court.

Marital Property in Maryland

Throughout a marriage, a couple acquires property and grows their financial assets as they build their lives together. When they decide to divorce, that property must be separated, with each spouse leaving the marriage with a portion of those assets. However, not everything the spouses own is considered marital property.

Under Maryland law, property acquired during the marriage is generally presumed to be marital property unless it falls within a statutory exception. Marital property could be a physical object, financial account, or anything else that has value. Common marital property includes but is not limited to:

• Real estate
• Vehicles
• Bank accounts
• Retirements accounts
• Investment accounts
• personal property
• Business ownership interests

Title alone does not necessarily determine whether property is marital property. An asset could have only one spouse’s name on the title and still be considered marital property.

Non-Marital Property

Not every asset is automatically included as marital property. If the asset is titled to only one spouse and qualifies under one of the following categories, it is treated as property of the individual spouse:

• Assets acquired before the marriage
• Property acquired by inheritance
• Assets received as a gift from a third party
• Property excluded through a valid prenuptial or postnuptial agreement
• Assets that are directly traceable to non-marital property

Spouses should be careful with how they treat their nonmarital property. If not handled correctly, they can inadvertently turn it into marital property. If the non-marital property is commingled with marital property, it could then be treated as marital property in divorce. A common example is an inheritance that is deposited into a joint account. Another example is one spouse buying a home before the marriage, but then using both spouses’ income to pay the mortgage from a joint account.

Maryland Uses Equitable Distribution

There is a common misconception that marital property is divided in half, with each spouse getting 50% of the assets. However, this is not always the case. Instead, the court takes an equitable distribution approach. The goal is fair, not equal. With that said, for practical reasons, equal distribution is often the starting point.

Maryland courts first identify and value marital property before determining whether a monetary award - an order for one spouse to pay money to the other to make things fair - is appropriate. Depending on the circumstances, one spouse may keep certain property while the court uses a monetary award to achieve an equitable adjustment.

What Factors Do Maryland Courts Consider When Dividing Assets?

Dividing marital property equitably is about more than simply putting everything into two lists. Courts go through an analysis of factors to determine the best approach to division. Due to the personal nature of divorce, this analysis is fact-specific for each divorce. How the court divided assets in one case may not be how it’s done in another. The goal isn’t to punish or reward spousal behavior. Rather, it is to divide the assets in a logical way that creates an equitable division of property. The court may consider several factors:

• Whether one spouse has significant non-marital assets
• Health conditions that affect a spouse’s ability to work
• Financial needs after the divorce
• Each spouse’s contributions to the marriage (financial and non-financial)

As important as it is to understand what courts consider, it’s also important to know what they don’t take into consideration. Divorce is often emotional for the people involved, especially when one spouse has done something that hurts the other. However, issues like infidelity do not generally control how marital assets are divided. There are exceptions, such as when one spouse uses a significant amount of the marital financial assets to carry out an extramarital affair or otherwise spends significant marital assets on non-marriage related activities, such as gambling or addiction, or gives assets away to family or others to avoid sharing with the spouse upon divorce.

Property Distribution by Settlement Agreement

Maryland Courts specifically state that spouses can reach an agreement to divide marital property. A settlement does not necessarily have to mirror the result a judge might have reached after applying Maryland's equitable-distribution factors. They can use the Marital Settlement Agreement form that allows spouses to identify how they have agreed to divide their property.

The agreement does need to be legally valid and properly incorporated into the divorce proceedings. Maryland courts generally treat a marital settlement agreement as an enforceable contract. A court can refuse to enforce or set aside an agreement if it is unconscionable, or if it resulted from problems such as fraud, duress, mistake, or undue influence. In addition, certain technical rules can apply to a Marital Settlement Agreement, including related to real estate transfers and alimony provisions.

Prenuptial and Postnuptial Agreements

Maryland law treats prenuptial agreements as contracts. The court will apply contract principles and case law when evaluating them. The court may consider the presence of fraud, duress, coercion, undue influence, mistake, and unconscionability when determining the agreement’s enforceability. Both can establish how certain property and financial rights will be handled if the marriage ends. If a valid agreement addresses a particular asset, the agreement may control rather than leaving that issue entirely to Maryland's courts and the ordinary equitable-distribution process.