A guide to the perplexed

When couples get divorced they are required to identify marital property and non-marital property. Many individuals don’t know what makes property marital and therefore, how they may unintentionally make a non-marital asset marital.

Maryland defines marital property as any property – no matter how titled – acquired by one or both parties during the marriage. Individuals mistakenly believe that if the property, personal or real estate, is in their sole name it means that it is not marital – not true. By virtue of being married, what’s theirs is yours and what’s yours is theirs.

Non-marital property is any property which was acquired prior to marriage. There are also some ways to acquire non-marital property during your marriage. These include an inheritance, a gift from a third person, an agreement between you and your spouse stating what is or is not marital, or any monies which were received through any of the above means. For example, if your parent passes and leaves you $10,000, you can put that money into a bank account in your sole name and still have that remain non-marital property.

How does non-marital property then become marital property? When you comingle the property. Take the example of receiving a $10,000 inheritance described above. Say you decide to transfer your inheritance into the joint account. Many would think that $10,000 of the balance of their joint account would remain non-marital since it was clearly from their inheritance. Wrong. The moment those monies were comingled, all of that money became marital property.

Why is this important? Because when parties get divorced the issues of what is and what isn’t marital property becomes inflamed. The person who received the inheritance in the above example would argue that the inheritance was intended for them. The person who shares the account with their spouse who just received a big inheritance will argue that the money is now marital.

So, what do you do? One of two things: 1) keep non-marital property separate or 2) enter into a prenuptial or postnuptial agreement and define what each of you will maintain as non-marital property. The former option is simple – don’t comingle. In practice, however, you may find yourself accidentally mixing these monies. The second option is far more efficient.

There is a misconceived notion that asking for a prenuptial agreement or discussing it in some way implies distrust or concern over your relationship. This isn’t true! There are a significant number of benefits to obtaining a prenuptial agreement, or postnuptial agreement if you’re already married. You and your spouse can enter an agreement and list what property will be marital and what will not. In either case, the agreement may identify what is and is not marital property, each parties’ rights in the event of death or divorce, predetermine rights and obligations for spousal support, inheritance, and more. In addition, the agreement will have a complete financial disclosure including each spouses’ assets, liabilities, and income.