Assets and Liabilities
Maryland is an equitable distribution state which means that the court will equitably divide and distribute the marital property and liabilities in a divorce action. Equitable means “fair”; it does not always require a 50/50 split.
Nevertheless, the presumption is that the distribution should be equal unless there is a justification for an unequal distribution. The court will analyze a number of statutory factors to determine if an unequal distribution of assets and/or liabilities is justified. Marital fault is only one of many considerations that a Judge will look at if s/he decides to unequally distribute the marital assets.
What to do it your spouse is spending the assets against your wishes? This situation occurs frequently in divorce litigation and there are a few different mechanisms to stop this spending up front or to account for the spending later at the divorce hearing. If you or your spouse intentionally dissipated, wasted, depleted, or destroyed marital assets than the Court can consider that property as if it still existed and put those values into the equation in order to give you more of what is left. Judges consider all the contributions of both spouses to the marriage, the length of the marriage, the circumstances that gave rise to the end of the marriage, all the financial resources of each party (incl. individual debts, inheritance, pre-marital assets, etc.), age, physical and mental health of each spouse, earning capacity, education, and other relevant factors.
How to divide assets equally. Equally dividing assets sounds easy, but it can be complicated at times. First, you need to determine what the marital assets and liabilities actually are, as the court cannot distribute non-marital assets. To aid the Court, both sides must complete a Court form called a Joint Statement of Marital Property so that both sides can discuss equitable division of all the assets. Parties will not always agree as to whether certain assets are marital or not and the form allows for disagreement between spouses but ultimately, unless the parties settle, the Court will dish out the assets and liabilities.
In order to ascertain the value of property, experts are typically retained. However, good lawyers look for ways to help the spouses agree on values so they can save the cost of experts. These include real estate appraisers, actuaries, business valuators and other individuals with specialized knowledge in determining the market value of various assets. These experts can be retained by one or both of the parties.
The attorneys at the Mulinazzi Law Office are highly skilled at educating clients on the differences between marital and non-marital property and now the Court may divide these assets. This is a great benefit to the client because the sooner the client knows the facts, the law, and the probable outcomes, the sooner the spouses and attorney can focus on the task of fairly dividing the assets in a manner that helps both sides. In turn this reduces litigation costs and leaves more assets to be divided within the family as opposed to more of the money going to the lawyers, experts, etc.
Marital assets and liabilities include:
• Those assets or liabilities acquired or incurred either by one spouse or both during the marriage. These include any assets or liabilities that one spouse may have been unaware of during the marriage but which came to light during the divorce process. This could include a hidden credit card that one spouse was using that the other didn’t know about.
• Inter-spousal gifts during the marriage. For example, putting your spouse’s name on a premarital house is considered an inter-spousal gift and is no longer considered non-marital.
• All vested and non-vested benefits or funds either spouse acquired, contributed, or accrued during the marriage, such as 401(k) plans, IRA’s, pensions, profit sharing, annuities, deferred compensation, and/or insurance plans. Any portion of a retirement account that was started prior to the marriage is considered non-marital but any contributions made after the marriage, since they were made with marital funds, is considered marital.
• Property held by the parties in tenancy by the entirety, such as the marital home titled in both spouses’ names, regardless of whether the home was purchased before or during the marriage.
• Property acquired prior to the marriage that has been comingled with marital property. For example, if one spouse received a lump sum payment from injuries sustained during an auto accident PRIOR to the marriage and deposited those funds into a savings account in which deposits and withdrawals were made AFTER the marriage, that account is marital property. The Court will not try to parse out which portion of that is non-marital because it’s impossible to do so.
• The enhancement in value of a premarital asset resulting from the efforts of either spouse during the marriage. For instance, you had a premarital home and during the marriage the house was renovated and upgraded with marital funds and labor. The premarital home is now considered marital property subject to distribution.
Non-marital assets and liabilities include:
• Those acquired or incurred by either spouse prior to the marriage and which remained separated during the marriage and were not “co-mingled.”
• Assets acquired separately by either party by gift to only one spouse such as an inheritance.
• All income derived from non-marital assets during the marriage, unless the income is used or relied upon by you and your spouse during the marriage or co-mingled. A pre-marital fund that remained in your name without contribution during the marriage may be preserved as a non-marital asset.
• Asset and liabilities excluded based on a valid written agreement between the parties, such as a prenuptial agreement.
• Liabilities incurred by one spouse as a result of the other’s forgery or unauthorized signature of that spouse’s name.
Determining assets and liabilities and their respective values can be a very effective tool in getting both sides to settle since after the parties has determined marital versus non-marital debt, it’s easier to come to terms with dividing up the property.