Real Property, Divorce, and the Law of Equitable Distribution in Maryland

The joke about lawyers and math not mixing is an old one, going back at least as far as a 1976 Saturday Night Live skit regarding President Gerald Ford and a debate question about the federal budget. In the real world, many areas of the law are quite math-intensive, not the least of which is equitable distribution in a divorce. Just like all areas of math, equitable distribution math requires not just understanding how to perform calculations, but also choosing the correct formula. In-depth knowledge of these elements can be crucial to getting a genuinely fair outcome from your divorce, which is why advice and counsel from an experienced Maryland divorce lawyer is essential to success.

A recent divorce case originating in Carroll County is a good example of this. The spouses, W.M. and T.M., married in 2014. Sometime before that, they jointly purchased a lot in Westminster where they eventually built their marital home. During the marriage, the couple purchased a vacation home in Ocean City.

4½ years into the marriage, the husband filed for divorce. At the trial’s conclusion, in addition to resolving child custody and child support issues, the court ordered the sale of both homes, with the husband receiving the proceeds of the marital residence’s sale. (The order split the proceeds of the vacation home’s sale between the spouses.)

The wife appealed and the Appellate Court reversed several components of the trial judge’s order on the division of the two homes.

Maryland law has a clear formula for calculating non-marital and marital interests in real estate assets. Specifically, the Maryland Supreme Court said in 1984 that courts should analyze the non-marital-versus-marital percentages as of the time of purchase and then apply those percentages to the fair market value of the property at the time of the divorce. For instance, consider a couple who purchased a $400,000 home with a $120,000 down payment (taken from an inheritance the husband had received before the marriage) and a $280,000 mortgage in both spouses’ names. In this hypothetical purchase, the residence is 70% marital property and 30% the husband’s non-marital property. If the house is worth $700,000 when the couple divorces, the husband’s non-marital interest is still 30%, which is now $210,000. The couple’s marital portion is 70% of $700,000, or $490,000, less the outstanding mortgage balance.

In the Westminster couple’s case, the purchase price of their primary residence was $671,600. Of that, $477,200 came from the husband’s non-marital assets. Performing the required calculation, the trial court deduced that 71% of the home was the husband’s non-marital asset. When the couple divorced, the marital home was worth $885,000. The husband’s non-marital portion was worth $629,000 (71% of $885,000.) The marital portion was 29% of $885,000, or $256,000, less the $232,400 outstanding mortgage balance, meaning $23,600.

These calculations were correct, according to the Appellate Court.

Awarding One Spouse 100% of the Proceeds of a Residence Sale Isn’t Allowed

What wasn’t correct was the trial court’s award of 100% of the proceeds from the sale of the marital residence to the husband. Maryland law strictly forbids courts from transferring “ownership of personal or real property from one party to the other.” According to established Appellate Court precedent, a “trial judge may either grant a monetary award to adjust the equities of the parties, or, in the case of property owned by both of them, order that the property be sold and the proceeds divided equally.”

There’s a lot that goes into equitable distribution as part of a divorce. There’s the law, the facts, the math, and potentially more. When you’re going through a divorce, rely on the knowledgeable Maryland family law attorneys at Anthony A. Fatemi, LLC to provide experience-driven advocacy and effective strategies to best represent your interests. Contact us today at 301-519-2801 or via our online form to set up your consultation.

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