Under Maryland law, marital property is defined as “the property, however titled, acquired by one or both parties during a marriage.” Marital property can include, but is not limited to, the marital home, cars, home furnishings, retirement accounts and bank accounts. It is important to note that it does not matter whether the property is titled only to one spouse. If property meets the description above, it will be considered marital property.
There are two types of contributions to marital property the court will consider: monetary and non-monetary contributions. A monetary contribution to a marriage is a contribution of money or other financial resources. A non-monetary contribution to a marriage are those things that are intangible and do not have a monetary value per se. For example, cooking, cleaning and taking care of the children are non-monetary contributions to a marriage.
What is Not Marital Property
Marital property does not include any property that (1) was acquired before the marriage, (2) was acquired by inheritance or gift from a third party, (3) was excluded by a valid agreement (ante-nuptial or post-nuptial) or (4) directly traceable to any of these sources.
The Marital Property Process
The first step in the marital property process is to determine what constitutes marital property. Once the marital property has been determined, the court will value the marital property. Finally, the court can make a monetary award to one spouse to be paid by the other spouse or transfer interests in property to one spouse in order to adjust the inequities present. It is important to note the court must adhere to this three-step process.
The “Source of Funds” Theory
Once the three-step process has been completed, the court will apply the “source of funds” theory to the marital property. The goal of the “source of funds” theory is to determine what source of funds was used to pay for the marital property. For example, a married couple buys a car that is encumbered by a loan. The married couple uses their combined salaries to pay the car loan. The car will be considered marital property because payments were made from marital funds.
It is important to note that any real property titled as tenants by the entireties will be classified as marital property regardless of the source of funds.
Property That Is Both Marital and Non-Marital
Property can be both marital and non-marital at the same time. As mentioned above, the goal of the “source of funds” theory is to determine what source of funds was used to pay for the marital property.
Using the same example above, a married couple buys a car that is encumbered by a loan. However, payment of the car loan will come from two different sources of funds. Spouse A will pay half of the car loan from her salary and spouse B will pay the other half of the car loan from an inheritance he received. As previously mentioned, inheritances are not considered marital property. Therefore, the car will be considered fifty percent (50%) marital property and fifty percent (50%) non-marital property because payments were made from marital funds and non-marital funds in that respective percentage.
Marital Debt
Under Maryland law, marital debt is defined as “debt directly traceable to the acquisition of marital property.” For example, a married couple purchases a home that is encumbered by a mortgage of $100,000.00. That mortgage will be considered marital debt because it is a debt directly traceable to the acquisition of the marital home.
Marital debt is subtracted from the current value of the marital property in determining the value of the marital property. For example, the marital home in the example above is encumbered by a mortgage of $100,000.00. However, the marital home has a current value of $120,000.00. This means the marital home has a marital property value of $20,000.00.
It is important to note that marital property cannot have a negative value. In the example above, if the marital home has a current value of $90,000.00 the marital property value would be $0.00.
Factors Considered for Monetary Award
A monetary award is a tool used by the court to “adjust the inequities” between the parties at the time of the divorce. The monetary award is used to provide both spouses with a “fair and equitable” distribution of their marital property at the time of divorce. It is important to note that under Maryland law spouses are not entitled to a strict fifty percent (50%) distribution of the marital property. The standard under Maryland law is “fair and equitable” distribution of the marital property.
Under Maryland law, the court must consider the following factors when making a monetary award determination:
The contributions, monetary and non-monetary, of each party to the wellbeing 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 condition of each party,
How and when specific marital property or interests in property described in Maryland Annotated Code, Family Law Section 8-205(a)(2) was acquired, including the effort expended by each party in accumulating the marital property or the interest in property described in Maryland Annotated Code, Family Law Section 8-205(a)(2), or both,
The contribution of either party of property described in Maryland Annotated Code, Family Law Section 8-201(e)(3) to the acquisition of real property held by the parties as tenants by the entireties,
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 interest in property described in Maryland Annotated Code, Family Law Section 8-205(a)(2), or both.
It is important to note that spouses can always enter into a settlement agreement with each other to solve all issues of marital property.