Marital Property

Published on: January 28, 2010

How Do Courts Divide a Marital Business in a Maryland Divorce

The short answer is, they do not. Martial property is defined as “the property, however titled, acquired by 1 or both parties during the marriage.” Maryland Code, Family Law § 8-201(3). This includes a marital business acquired by one or both of the parties during the marriage. For more information on marital property division during a divorce proceeding see our Marital Property Blog from August 19, 2009 . Many times the issue of how to solve the ‘division’ of a martial business in a divorce proceeding is a complicated one due to stock ownership, the value of the business, and consideration of employees of the business.

In accordance with Maryland Code, Family Law § 8-202 (b) when the court determines the ownership of personal or real property, the court may: (1) grant a decree that states what the ownership interest of each party is; and (2) as to any property owned by both of the parties, order a partition or a sale instead of partition and a division of the proceeds. A business is not real or personal property and due to how the stock of the company is held, a sale of the business may not always be a viable option. In the recent case of Turner v. Turner, 147 Md. App. 350 (2002) the Court of Special Appeals found that they could not order sale of the marital business or partition (divide) the marital business, awarding wife 50% of the business, because the husband owned 87% of the shares of stock in the company and Wife owned the remaining shares. The court does not have the authority to re-title stock and does not have the authority to sell it. Therefore in Turner, the court awarded the wife a larger percentage of the parties total value of marital property (a monetary award). What this means is that when a marital business is an issue and stock is held by both husband and wife, but titled individually, in addition to divorce proceedings, an action to dissolve the corporation may also be necessary if parties are unable or unwilling to continue to work/ run the business together.
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Published on: December 7, 2009

Retirement Accounts in a Maryland Divorce

By Monica Scherer

When disclosing or researching your marital property in a Maryland divorce action, it is important that clients are informed that any portion of a retirement account accrued during the marriage is marital property. For more information on marital property in Maryland, see Maryland Code, Family Law 8-203 and see August 19, 2009 blog. The courts in Maryland have the authority to transfer any percentage of the martial portion of the retirement account whether it be a pension, profit sharing plan, deferred compensation plan, thrift savings account, 401k or IRA from one spouse to the other, Maryland Code, Family Law §8-205. The court may apply one of several methods when valuing the marital portion of the retirement account, all of which an attorney would be able to advise you.

In order for a portion of the retirement benefit to be transferred a Qualified Domestic Relations Order, otherwise known as a QDRO, must be signed by a Judge and submitted to the plan administrator. The QDRO is an order by the court to modify the payee of all or a portion of the retirement plan. Each plan administrator may require a different type of QDRO and QDRO’s must comply with the ERISA (The Employee Retirement Income Security Act of 1974) laws, so it may be important to hire an attorney to assist you in this drafting process.

For more information, contact Monica Scherer, Esq. at 410-625-4740

Published on: August 19, 2009

Non-Marital Funds Used to Purchase the Marital Home: What Happens to Those Funds In a Maryland Divorce?

By Monica Scherer

With more and more Maryland couples coming to a marriage with substantial assets, those couples have property disposition issues at the time of divorce. For example, I am frequently asked what happens to the marital home that is titled as tenants by the entirety, but that one spouse contributed a substantial amount of non-marital money towards (for instance, one spouse sold a home that was acquired before the marriage and never lived in by the parties, and used those proceeds for part or all of the down payment on the marital home). Clients ask is this home then marital or non-marital, and can I get all of the non-marital money I back that I put into the home? The answer is it depends.

In accordance with Section 8-201 of the Family Law Article, Annotated Code of Maryland, “marital property includes any interest in real property held by the parties as tenants by the entirety unless the real property is excluded by valid agreement.” Therefore, even if non-martial funds are used to purchase the marital home, if it is titled as tenants by the entirety (T by E) both spouses are equal owners of the home and it is marital property. Under this scenario, Maryland case law precludes the court from employing a “source of funds” theory as it may with other types of marital property. However, the court may utilize Section 8-205 of the Family Law Article to “reimburse” a spouse by way of a monetary award. This is not an automatic refund to the contributing spouse and by current Maryland case law cannot be when non-marital funds are used to purchase a home titled as tenants by the entirety, but the court may use the monetary award to correct inequities in the way which martial property is titled.

A three-step analysis is to be used when determining a monetary award in a Maryland divorce proceeding: (1) the trial court must first determine whether each piece of property owned by the parties is marital or non-marital, (2) the court must then determine the value of all marital property, and (3) the court may then make a monetary award as an adjustment of the parties’ equities and rights in the marital property. Oftentimes the biggest dispute arises over whether property is marital or not and in some case, partial marital and partial non-marital. If the home is titled T by E it is marital property. However, I have had cases where the home was owned prior to marriage by one spouse, the deed was changed at some point during the marriage to reflect a T by E ownership interest, and the Court found it was partly marital and partly non-marital.

Once the court applies the three step analysis, it then needs to take into consideration a number of other factors. Specifically, Section 8-205 of the Family Law Article, states that the court shall determine the amount and the method of payment of a monetary award, after considering each of the following factors: (1) the contributions, monetary and non-monetary, of each party to the well-being of the family; (2) the value of all property interests of each party; (3) the economic circumstances of each party at the time the award is to be made; (4) the circumstances that contributed to the estrangement of the parties; (5) the duration of the marriage; (6) the age of each party; (7) the physical and mental condition of each party; (8) how and when specific marital property or interest in property was acquired, including the effort expended by each party in accumulating the marital property or the interest in property, or both; (9) the contribution by either party of property to the acquisition of real property held by the parties as tenants by the entirety; (10) 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 (11) 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 an interest in property, or both. What this means is that even if the court determines the home is marital, there is a non-marital monetary contribution by one spouse, a monetary award is still not automatic. While the court must apply and take into consideration the required factors, the Court has discretion when applying those factors as to whether or not a monetary award should in fact be granted.
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