What is Considered Non-Marital Property in Maryland?

Frequently, people are upset to learn that individually titled property can be deemed marital and subject to division in divorce. One of the ways that a lawyer can guide you and mitigate your property exposure in divorce, is by helping you to identify and trace property that may be non-marital. In short marriages, second (or subsequent) marriages, and cases with prenuptial agreements, identifying each party’s non-marital property may be an important part of resolving a couple’s divorce. But what is considered non-marital property in Maryland? And how will the Maryland family courts treat non-marital property if your case goes to trial?

What is Non-Marital Property?

In Maryland, marital property includes “property, however titled, acquired by 1 or both parties during the marriage.” That includes land or real property held in either party’s name, gifts one spouse gave to the other, and anything either of you obtained after you separated, but before the divorce was final.

Maryland only recognizes 4 categories of non-marital property:

1. Property acquired before the marriage
2. Inheritances or gifts given to one spouse by someone other than the other spouse
3. Property explicitly excluded in a valid agreement (most commonly: prenuptial, postnuptial, or separation)
4. Anything that is directly traceable to one of the first three categories (for example, if you owned a car prior to your marriage and sold that car to buy a new one)

The last category is particularly dangerous, though. If marital assets (like your own income) is combined with non-marital property to supplement the cost of an asset, that asset could be sufficiently commingled that it would be deemed marital, rather than non-marital property.

How Do Prenuptial Agreements Affect Non-Marital Property?

One category of non-marital property would be items excluded in a prenuptial or other agreement. This contract, entered before the marriage, can explain specific property, or types of property, that each party will receive in divorce. This can convert items that would be deemed marital property by operation of law into non-marital property.

For example, it is common for a prenuptial agreement to say each party will keep his or her own retirement accounts no matter when they were created. Normally, retirement accounts opened, earned, or contributed to during the marriage are marital property (though any balance that existed at the time of the wedding would be non-marital, and sometimes appreciation on that balance). However, in the prenuptial agreement, each future-spouse agrees that he or she will instead treat retirement accounts as non-marital property.

You and your spouse can also protect property you want to keep separate by entering into a postnuptial agreement (signed after the marriage but before a complaint for divorce is filed, or contemplated), or a separation agreement (entered in anticipation of an upcoming divorce). Just like a prenup, these contracts can carve out property from the marital estate, by agreeing to treat it as non-marital.

Examples of Non-Marital Property

It can often be difficult to determine what is marital property and what is not. If you suspect property is yours alone, you should discuss that property with your divorce attorney to see if it qualifies. However, here are a few common examples:

• One spouse’s premarital home
• The portion of a retirement account that was invested before the marriage
• Family heirlooms inherited by one spouse during the marriage
• Ownership interest in one spouse’s family business
• Monetary gifts received by one spouse and held in a separate account from the family funds

Can You Turn Non-Marital Property into Marital Property?

Even if an asset would normally qualify as non-marital property, the way you and your spouse treated that property during the marriage can sometimes convert it into commingled, mixed, or marital property. Financial assets are most likely to become “commingled” when non-marital money is placed into marital accounts. This creates what lawyers call a “tracing” problem. It becomes hard to trace your separate money once it mixes with the marital assets.

Business interests can also become marital property if the non-owner spouse actively works to increase its value or operate the business. For example, if one spouse becomes an owner in the family business and her spouse begins working there as an accountant, the accountant-spouse may be entitled to some portion of the owner-spouse’s share of that business.

Physical objects can be converted into marital property, too. For example, assume one spouse owns a home. If the other spouse spends time building an addition, or the parties use their marital income to pay the mortgage, that home can become a mixed or marital asset.

How Maryland Treats Non-Marital Property in Divorce

If you and your divorce attorney are able to prove that an asset is non-marital property, you will be awarded that property without it counting against your share of the equitable distribution of marital property. If a piece of property is mixed, you will be entitled to the non-marital portion separately, and the marital portion will be divided equitably.

For example, a woman had a retirement account worth $20,000 at the time of the marriage. She continued to contribute to it throughout the marriage, and at the time of the divorce it was worth $200,000. Assuming she had proof of the initial value and no funds have been withdrawn or borrowed from the account, then Maryland family court may award her the first $20,000 as non-marital property (perhaps investment gains on the $20,000 too) and divide the remaining $180,000 equitably between the parties.

The key to protecting your claim to property is your ability to prove it remained separate. At the Law Office of Shelly M. Ingram, our divorce lawyers are well-versed in tracing non-marital assets. We can help you identify what property is marital and what is not and prove its value in the Maryland divorce courts. If you need help protecting your non-marital property, contact us today to schedule a confidential consultation with an attorney.