Marital-Versus-Non-Marital Asset Division Decisions in Maryland… and How the ‘Source of Funds’ Theory Applies to Them

In Maryland, one of the most essential components of a divorce is the division of assets and the biggest asset most divorcing couples possess is their home. As a result, deciding whether the marital home is a marital asset, one spouse’s separate property, or a combination of the two can make a big difference in the final outcome the court reaches. When seeking a fair and just financial outcome in your divorce case, ensuring that the court has a clear and complete picture of your home – and how it is/was paid for – is vital. If you have questions about equitable distribution in a divorce, an experienced Maryland divorce lawyer can help you with knowledgeable answers about how the courts in this state make these determinations.

In 1978, the Maryland General Assembly passed the Marital Property Act. In 1982, the Maryland Supreme Court “traced the history of the act in-depth and divined the legislative intent.” In its ruling, the high court determined that, under the Marital Property Act, the correct method for determining whether an asset was marital or non-marital was to follow the “source of funds” theory, rather than using Maryland’s old “title system.”

Under the source of funds theory, marital-versus-non-marital decisions depend on “the source of the contributions as payments are made, rather than the time at which legal or equitable title to or possession of the property is obtained.” A recent divorce case from Prince George’s County is a good example of how the courts apply this theory.

The wife-to-be, P.F., closed on a home in Brandywine. Although the woman was engaged to be married, the home was titled in her name alone. Like many homebuyers, the couple structured it that way to obtain a better mortgage interest rate (as the fiancé had a low credit score.)

The source of the down payment on the home was a check drawn from a savings account that the couple owned jointly. In 2015, the couple, since married, opened a joint checking account. The spouses both made deposits into the joint account and used those funds for household expenses, including the monthly mortgage payment.

After roughly a decade of marriage, the couple separated and, in June 2023, the Circuit Court for Prince George’s County held a final hearing. The court determined that the husband was entitled to a monetary award equal to one-half of the equity in the residence.

The wife appealed arguing that the trial court wrongfully awarded the husband the monetary award. Specifically, she contended that the house was not marital property (as the trial judge ruled,) but was her separate non-marital property.

That argument probably would have succeeded under the old title system, but not under the source of funds theory.

The Sources Were Accounts into Which Both Partners Contributed

The sources of the funds used to acquire this couple’s house were marital. The down payment on the mortgage came from a joint savings account into which both spouses-to-be had contributed funds. The key here was the origin of the funds. (Had the down payment come from a joint savings account into which only the fiancée had deposited funds, then the corresponding fraction of the home would have been her separate property, not marital property.)

Additionally, the couple paid the mortgage payment each month from a joint checking account into which both spouses deposited funds. Like the savings account, the key is not that the account was titled jointly in the names of both spouses. The key was the source of money inside that account – namely, the deposits, which undisputedly came from both partners.

Proving these issues of where certain funds came from – and whether certain assets were marital or non-marital – can be complex, intricate, and require a strong body of evidence. Success often depends on having in-depth knowledge of the law and what proof the courts are looking for. The experienced Maryland family law attorneys at Anthony A. Fatemi, LLC are here to be the knowledgeable and diligent advocate you need to get a fair resolution to the division of your assets in a divorce. Contact us today at 301-519-2801 or via our online form to set up your consultation.

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