When people are married, they typically join their fortunes both literally, in the form of property and asset accumulation, and metaphorically in their joint efforts to improve their lives through creating a family, education, and career advancement. Divorce requires a couple to unwind and fairly divide these accumulated assets and benefits between them. Understanding the ways that the marital fortunes are divided through asset division and alimony can help clarify priorities and potential areas of dispute in a divorce.
Asset Division: The Fair Distribution of Property
Under Maryland law, without a prenuptial agreement, any assets and, to a lesser degree , debts accumulated by a couple during the course of their marriage are joint property – referred to as the “marital estate” – that both have equal rights to receive when they divorce. The exceptions to this rule are gifts and inheritances to only one of the spouses, along with any asset acquired in the individual name of one spouse with funds from separate (non-marital) property. Any property that each spouse had before getting married is called separate property, which is also not included in the marital estate.
Assets in a marital estate can include real estate, bank accounts, investment portfolios, retirement funds, intellectual property such as patents and copyrights, vehicles, business interests, and other personal property. When a marital estate is divided, the courts also consider debts like mortgages, education loans, and credit card balances.
The division of assets is not always a 50/50 split, particularly where the assets are difficult to divide in half. For example, a wholly owned business or a family home cannot simply be split, and the parties may not want to sell these assets to divide the proceeds. Instead, Maryland divorce law looks to a number of factors to determine how to allocate assets and debts fairly between the couple. These factors are not only about the nature and value of the asset or debt; courts also consider issues like the duration of the marriage, custody of minor children, the age of the parties, the reasons for the divorce, and the parties’ respective contributions to the marriage as a whole.
Notwithstanding all the elements that go into a court’s evaluation of the fair distribution of the marital assets, some additional factors, like the priorities and preferences of the parties, tax consequences, or the future plans of either spouse, can make it risky to rely on the court’s allocation. The more complex a marital estate, the more beneficial it is to come to a negotiated settlement that can include these additional considerations. Importantly, settlements allow for more flexible results because, while courts have some limitations to what they can order in a final judgment, they have more flexibility to approve a settlement reached by the parties.
Alimony: Supporting Financial Transitions
Alimony, also known as spousal support or maintenance, is a financial payment made by one spouse to another. There are three types of alimony: 1) Temporary, 2) Rehabilitative, and 3) Indefinite. These payments look to the needs, ability to pay, lifestyle, and expectations of the parties during their marriage. Temporary support is meant to even the playing field so both parties can afford to live and finance the cost of their divorce during the divorce process. Rehabilitative is paid for a finite period of time; it is designed to support the spouse while they seek education or training for employment and to become self-sufficient. Indefinite alimony can be awarded where the receiving spouse is able to demonstrate circumstances that would make it grossly unfair to the receiving party because, without it, the two parties’ standards of living would be “unconscionably disparate.”
The amount of spousal support is determined on a case-by-case basis. Again, the court considers the facts and circumstances of both parties. In each type of spousal support, where the situation changes for either spouse, it is possible to return to court to seek a revision of the terms of support.
Key Differences and Negotiable Issues
Alimony and asset division serve distinct purposes in divorce. Alimony is an ongoing financial obligation from one spouse to another that can continue past the divorce. Asset division is a definitive resolution of the ownership of property and liabilities between the spouses, finalized with the divorce decree.
Importantly, both alimony and asset division are negotiable issues. It is possible for the parties to come to an agreement that allocates marital assets and provides for alimony in a way that is particularly suited to their situation. For example, one spouse may prefer to keep a highly valued asset in exchange for paying alimony that might not otherwise be available to the other spouse. Family law attorneys can play a crucial role in advocating for their clients’ interests, identifying unique priorities, and crafting solutions that reflect each party’s needs and goals.
¹Maryland treats debts differently because a debt involves a contract between a party and a third party, typically a bank or credit card company, and only one spouse.