Marital Award/Equitable Distribution
Equitable distribution is the process by which a court will look at all property owned by each party, regardless of how it is titled, then determine what is marital and what is non-marital property. The court will then determine whether distribution of this property by title is equitable, and if not, how to achieve equitable distribution through monetary award or transfer in title.
There is a three step process in determining whether the court should consider making an award to achieve equitable distribution.
I. Identify and value the marital property.
Marital property means the property, however titled, acquired by one or both parties during the marriage. Marital property does not include property:
- acquired before the marriage;
- acquired by inheritance or gift from a third party;
- excluded by valid agreement; or
- directly traceable to any of these sources.
The major exception to the above definition of marital property is jointly titled real property. Marital property includes any interest in real property held by the parties as tenants by the entirety (husband and wife) unless the real property is excluded by valid agreement. Since this exception can convert property that would normally be non-marital, the court can examine the source of funds for the martial home in order to help fashion an equitable result.
II. Determine the result if property is distributed by title.
This is best illustrated by example. Suppose that one spouse maintained their own bank account, titled in their name, throughout the course of the marriage. This bank account, containing only marital funds, was worth $300,000 at the time of the divorce. If this were the only asset of the marriage, the distribution by title would allow one spouse to keep $300,000 and the other spouse to get nothing. This is obviously not a desired result if you are interested in fair play.
III. Fashion a monetary award.
In the example above, in order to correct the inequity that distribution by title would have, the court could order that the party with the entire asset pay $150,000 to the party without the asset in order to balance the equities.As of October 2006 Maryland law allows the court, under certain conditions, to transfer title to the property. Whether equitable distribution is achieved by marital award or transfer of title, the goal is the same.
