Like many States, Maryland divorce laws distinguish “separate” property from “marital” property. This is important when a married couple gets divorced because ALL marital property is equitably divided between the spouses when they divorce. However, separate property is NOT divided. Rather, separate property remains owned by whichever spouse owned that property from before and during the marriage.

Often, Maryland divorce courts face the problem of untangling separate and marital property if the spouses have engaged in commingling. Generally, “commingling” means combining separate property with marital property. But, under Maryland divorce laws, it is a bit more complicated than that.

As an example from one Maryland divorce case, before marriage, the wife had a retirement account with a value of about $86,000. Under Maryland divorce laws, that account would be deemed separate property. Thus, that retirement account is the wife’s and NOT subject to equitable division. Now, after the couple was married, the wife had two new retirement accounts into which she made contributions. Because these new accounts were created after the marriage and because she used marital money to contribute to them, these were marital property subject to equitable division.

After a few years, the wife consolidated the retirement accounts and deposited the money from the two new accounts into the account which preexisted the marriage. This is commingling and presents several potential problems under Maryland divorce law. The first potential problem is that, by mixing marital property with separate property, a Maryland divorce court could deem ALL of the retirement account money as marital property. Thus, ALL of the monies would be subject to equitable division.

However, this problem can be resolved with good record-keeping. The commingling does not automatically convert the separate property into marital property as long as there is sufficient proof of what was separate and what was marital.

But, the commingling still creates problems. For example, if the retirement account is invested and the account appreciates in value, is the appreciation in value marital or separate? Under Maryland law, all of the appreciation in value is deemed “marital” property. This is because once commingled, it is impossible to say that the appreciation in value is directly traceable to the separate property or the marital property. The same applies to anything purchased with funds from a commingled retirement account like the one described. Say, the couple borrows from the account to buy a vehicle. The vehicle will be deemed marital property because there is no way to say that vehicle was purchased with ONLY separate property. The Maryland divorce courts have repeatedly rejected any sort of percentage rule. It is “all or nothing.”

The other problem with commingled accounts like this is, depending on the facts, Maryland divorce courts could deem the whole account marital (even if it can be shown that it started out as separate property). This depends on how the couple uses the account. If, for example, they borrow from it for marital use and use marital money to repay the borrowing. Eventually and over time, the account will cease to be separate property.

In summary, it is wise to be very careful to maintain the separateness of separate property if the spouses wish to avoid having that property equitably divided in the event of divorce.

Contact Waldorf, Maryland Family Law and Divorce Lawyer Robert Castro Today

This article has been provided by the Law Office of Robert Castro. For more information or questions, contact our office to speak to an experienced Maryland family law and divorce lawyer at (301) 870-1200. We are Waldorf, MD, Divorce lawyers. Our address is 2670 Crain Highway, Waldorf, MD, 20601.