November 2009 Archives

November 29, 2009

Maryland's Marital Property Issues Call For Early Consult With Divorce Lawyer

Anyone facing the possibility of a separation and divorce that involves significant assets should confer at an early stage with a Maryland Divorce Attorney. Such a conference should include an evaluation of all property disposition issues. The potential for disappearing or undisclosed assets are just a couple of issues that should be explored at an early phase of separating from a spouse.

In sitting down with a Family Law attorney, you need to understand the context in which property issues will arise. At the time of separation and divorce, a couple's financial affairs become subject to careful scrutiny. Title to property may have been set up in a way that would lead to a disproportionate benefit to one of the parties. In order to avoid an unjust result, Maryland's Marital Property Law empowers the judge at the time of divorce to balance the equities between the spouses. In a three step process, the court identifies marital property, values it and then makes a monetary award. The last step is a subjective decision that the judge makes based on the eleven factors set forth in section 8-205 of the family law article

Sometimes, a divorcing spouse attempts to obstruct this process. One form of obstruction is for marital property to "disappear". Such action can be considered a fraud on the marital rights of the other spouse. There must be evidence that the property was expended for the principle purpose of keeping the judge from considering its existence in making a monetary award. On the other hand the spouse who is charged with dissipation of property has the opportunity to prove that it was used for appropriate purposes, for example mortgage payments and other legitimate expenses.

Maryland's laws relating to property disposition in Divorce are not intuitively obvious to the layman. As discussed in a prior blog post, it is far too easy for a party to inadvertently prejudice their position. Even in separations that are expected to be amicable, careful analysis and understanding of your rights is recommended.

November 28, 2009

Abandoment Is Grounds For Divorce

Under Maryland Divorce law, what constitutes "abandonment" and when does it occur? This is a question recently posed on a public on-line forum by a wife who was upset when she found evidence that her husband have seen a divorce lawyer. Her response was to start spending nights at her mother's house. She was concerned that this might constitute grounds for her husband to obtain a divorce. The short answer is "no". However, it is important to understand the underlying principles involved.

One of the grounds for divorce under Maryland Law is desertion, also known as abandonment. This means the unjustified separation of one spouse from another with the intention to end the marriage. In order to constitute grounds for divorce it must continue for at least 12 months. If both parties agree to the separation, there can be no desertion. In the absence of an agreement to separate, there must be proof that the deserting spouse has acted with an intention of ending the marriage. This can be shown by the words used or conduct.

The fact that husband and wife have continued to have sexual relations, means that no desertion has occurred. On the other hand, if one party refuses to have sexual relations with the other, without justification, this may be sufficient evidence of desertion. However, refusal for 12 months does not constitute abandonment if there is justification, for example, mistreatment.

If a party finds him or herself in a situation like this, it would be a good idea to seek advice from a Maryland Divorce Lawyer. Seeking advice does not mean that you are planning a divorce. It only means that you are making plans to protect yourself.

November 20, 2009

Valuation of Closely Held Business

In my last blog, I gave an overview of how closely held businesses will be treated under Maryland's Marital Property Law. Most owners have poured their heart and soul into making their business a success. Therefore, it is not surprising that the combination ending a marriage and subjecting the business to judicial scrutiny, may create an emotionally charged atmosphere. In such instances, the experience and skill set that is needed is that of a Maryland divorce lawyer with business litigation experience. One of the most difficult aspects of such cases involves the valuation of the business.

Unless an owner can qualify as expert witness in valuing businesses, he or she cannot testify to the valuation. Instead both parties will have to hire expert witnesses. "There are probably few assets whose valuation imposes as difficult, intricate and sophisticated a task as interests in close corporations". Book value is usually to simplistic an approach. It fails to deal with goodwill, actual profits and discounting of minority interests.

Factors that an expert will consider include the nature and history of the business, the economic outlook in general and outlook of the specific industry, book value and financial condition of the business, its earning and dividend-paying capacity, any good will or other intangible value, prior sales of stock and market price of stock of similar businesses traded on a stock exchange or over the counter. This list is not all inclusive and there is no formula for determination of how they interact.

Once an expert has obtained the available information, there are three principle methods of evaluating a business: (1) capitalization of indicated earnings at a reasonable return on investment, after consideration of interest rates and risk, (2) comparing price to earnings ratios for comparable businesses that are publicly traded or (3) appraisal of individual assets both tangible and intangible.

November 16, 2009

Closely Held Businesses Treatment Under Maryland Marital Property Law

The Baltimore-Washington Corridor including Howard County, Anne Arundel County, Baltimore County, Harford County, Prince Georges County and Montgomery County is blessed with many successful privately held business that create a special issue for Maryland Divorce Lawyers. A closely held business is one that is privately owned as opposed to one whose stock is publicly traded. In Separation and Divorce, an interest in a closely held business can become quite contentious. In such cases, it is helpful to engage legal counsel who has experience not only in Maryland Divorce cases but also in Business and Business Litigation.

If legal formalities have been carefully followed in the establishment of the business, ownership of the business can be expeditiously established. The next issue is whether the business is marital property. A business that was started during the marriage is probably marital, unless an exception such as a valid Pre-Marital Agreement can be proven. Even if a spouse owned his or her business prior to the marriage or received an interest by gift or inheritance, it may become partially marital property due to efforts expended during the marriage to increase the value of the business.

Once a business is identified as Marital it needs to be valued as of the date of the divorce. If the business is partially Marital (e.g. owned prior to the marriage), the necessary valuation is the difference between the values of the business at the time of the Divorce and at the time of the marriage.

The value of Marital Property in the form of a closely held business is added to the value of other Marital Property. Considering the Marital Property in the possession each party, the Court will consider each of the factors set forth in Section 8-205 of the Family Law Article to determine the grant of a Monetary Award. Such an award it intended to correct any inequity created by the way in which property acquired during the marriage happened to be titled.



November 10, 2009

A Domestic Violence Case Can Move Quickly and Have Profound Consequences

As a Maryland lawyer experienced in Domestic Violence cases and a former member of the Maryland General Assembly, I have witnessed the strengthening of our state's Domestic Violence laws. The District Courts are open 24 hours a day to accept petitions for protective orders and conduct ex parte hearings.

At an ex parte hearing, if a court finds reasonable grounds to believe that abuse of a person eligible for relief under Section 4-501 Family Law Article has occurred, the Court may enter a temporary order for seven days that can be extended up to six months in those instances in which service of process on respondent is delayed. Such an order may prohibit the respondent from abusing, threatening to abuse, contacting, attempting to contact or harassing the petitioner; prohibit the defendant from entering the petitioner's residence and award custody of any minor children.This temporary order is intended to protect the petitioner until a hearing can be held on a final protective order.

At a hearing on the final protective order, both parties are allowed to present evidence. A permanent order can only be granted if there is clear and convincing evidence that abuse as defined by Section 4-501 Family Law Article has occurred. A permanent order in most instances is limited to one year. It can award the same relief enumerated above for the temporary order plus family maintenance that can be enforced by withholding of salary. The court can also make provisions for visitation subject to consideration of the welfare of the child and the safety of the protected party.

The outcome of a Domestic Violence proceeding can be profound. Every effort should be made to avoid being either a victim or an accused. While the parties may be represented by an attorney, no one is required to be represented in these cases. Pro bono assistance may be available. However, the outcome of such a dispute can have profound effects on enumerable matters between the parties. An experienced family law attorney can provide advice on the possible impact on other issues such as child custody, child or spousal support, possession of the family home or property, disposition of property and other matters that arise in a separation or divorce. Domestic Violence cases typically move quickly. Time is of the essence in conferring with a lawyer.

November 5, 2009

Can Alimony Be Modified In Hard Times?

The recent economic turmoil has had a devastating effect on the economic circumstances of many, even in prosperous and economically stable counties like Howard, Carroll, Baltimore and Anne Arundel. As a result, Maryland Divorce lawyers are fielding inquiries about whether alimony awarded in more prosperous times is subject to modification.Section 8-103 of the Family Law Article prohibits a court from modifying any agreement or settlement in which a spouse has expressly waived alimony or any provision for alimony that specifically states that it is not subject to court modification. Also under section section 11-107, temporary alimony can not be extended unless the recipient petitions the court before the period of the award has expired.

Absent such a prohibition, a court may modify alimony in appropriate cases. First of all there must be a change of circumstances that is material or substantial. The court will not allow either party to litigate an issue that was or could have been litigated at the time of the original award. section 11-107 provides that the court may extend the period for temporary alimony if circumstances arise during the period that would lead to a "harsh and inequitable result without an extension". Such modification could include making an award of indefinite duration. The same section of law also authorizes the court to modify the amount of alimony "on petition of either party....as circumstances and justice require."

Any individual hit by the economic downturn, who is the subject of a prior alimony award not subject to a prohibition against modification, may be well advised to review his or her economic situation with an experienced Maryland Divorce Lawyer.



section 11-107.pdf

November 2, 2009

Right Against Self Incrimination in Divorce Dispute Should Be Carefully Invoked

The fifth amendment to the U.S. Constitution gives every individual the right against self incrimination. While this right is typically invoked in criminal proceedings and Congressional hearings, it is also seen in civil cases including divorce proceedings. Maryland Divorce Lawyers know that the right to refuse to testify frequently arises in cases involving adultery. Pursuant to Section 10-501 of the Maryland Criminal Code, adultery is a misdemeanor punishable by a fine of up to $10. This ancient state law gives errant spouses an alternative to admitting adultery or committing perjury.

Unlike the criminal law arena, the court may draw an adverse inference from the invocation of the refusal to testify. This can be costly in a marital property dispute. In Turner vs. Turner, there was evidence that husband had used illegal drugs and was involved with another women during the marriage. He invoked the right not to answer questions relating to his withdrawal of funds from a joint bank account of husband and wife. Wife claimed that he had dissipated these funds. The trial court agreed and her award under the Marital Property Act was augmented as a result. This decision was upheld on appeal. In part the appellate court upheld the ruling on the grounds that it was appropriate to draw an adverse inference from husband's decision to plead the fifth.

The take away from this opinion is that murderers, rapists and other felons can invoke the privilege without consequence. Parties to divorce are well advised to think strategically. It may be a way of avoiding embarrassing testimony but can be costly.