Maryland Divorce Attorney Blog

In previous a Maryland Divorce Lawyer post, I have offered a menu of issues that need to be resolved in order to successfully negotiate a Separation Agreement. This is the key to minimizing legal expenses in your divorce. In situations involving a pension plan that is part of the Marital Property, the right of survivorship and who bears the cost of electing the right of survivorship needs to be considered.

Many defined benefit pension plans allow the participant to take a reduced monthly benefit in exchange for providing continued benefits to a spouse following the death of the participant. Known as the right of survivorship, this is typical of many pension plans including federal, state and local government plans. Because so many residents in the Howard County, Anne Arundel County, and Baltimore County area are government employees, this is an important issue frequently encountered by central Maryland Divorce Lawyers. The parties can share the reduction in the benefits pro rata or have the spouse who will benefit bear the full reduction in monthly benefits. It is usually advisable to resolve the issue in a clear and unambiguous fashion.

In the absence of a Separation Agreement by the parties, this is one of many issues that are left to the discretion of the judge based on all the facts and circumstances of the case. Ordinarily if you enter into a Separation Agreement you are compromising important issues in order to avoid litigation. It is not usually a preferred result to enter into a Separation Agreement that is unclear on this or any other point and end up in litigation over what the parties intended.

The blizzard of media covering the transgressions of Tiger Woods inspired the Divorce Lawyer in me to review a 2005 opinion, Woodson vs Saldana. Wife's appeal raised an imaginative claim arising from husband's infidelity. She argued that husband's expenditure of over $42,000 in taking two different women on "vacations" during the time the marriage was breaking up constituted a dissipation of marital property. Her argument was grounded on the principle that "Dissipation may be found where one spouse uses marital property for his or her own benefit for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown."Wife's claim on appeal was denied because she had not properly raised the issue before the trial judge. Nevertheless, it is an intriguing argument. In the words of a recent country and western song, a divorcing spouse is often inclined to "let herself [or himself] go" and sometimes that can lead to extravagance. In appropriate circumstances, such extravagances might be considered dissipation of marital property.

The issue of dissipation arises in connection with the Court's applying the Maryland Marital Property Act. This is a three step process in which the court identifies marital property, values it and then may make a monetary award after considering the eleven factors set forth in Section 8-205 of the Family Law Article. Ordinarily the court can only consider property in existence, unless the court finds that there has been dissipation. This is considered a fraud on marital rights. The dissipated property will be treated as if it existed and in the possession of the party who committed the fraud. This has the effect of increasing the monetary award to the other party. There are two prior postings, November 29 and September 8, 2009 , related to this issue that you may want to review.

You and your spouse have discussed divorce and want to make it as amicable as possible. There are better things to do with your money than pay it to lawyers. When you hire a lawyer, you expect value for what you pay. Where do you begin? An initial meeting with a Maryland Divorce Attorney will allow you to develop a successful negotiating strategy.

As the client, you are entitled to control how negotiations are approached. However, your lawyer needs to educate you on how Maryland Divorce law, will influence each of the issues that applies to you, your spouse and your family. The following is an overview of issues to consider:

Children: Who will have legal custody? Who will have physical custody? What is the schedule for each parent to spend time with the children?

Child Support: Who will provide health care for the children? What extraordinary expenses do the children have, such as orthodontic bills, therapy, medical care and education? The latter may include private school K-12 and/or college expenses. Child support will be determined based on Maryland child support guidelines. The schedule in the Maryland Family Law Article only covers combined incomes of $120,000.00. Many families in high income regions such as Howard County, Anne Arundel County, Baltimore County, and Carroll County exceed this amount. Your attorney can help you anticipate how the Court is likely to use the guidelines to extrapolate an appropriate amount for higher income families. My prior posting discusses the fact that the Maryland General Assembly will be considering legislation to modify the state's child support guidelines.

Family Home: What will become of the family home? I have previously posted comments about how the upside down real estate market has made decisions more difficult for divorcing couples.

Alimony: Is this a case for temporary or indefinite alimony? In the absence of alimony, what will the income of each party be and how will their standard of living compare?

Property Disposition: What property including retirement assets is owned by the parties? How is the property titled? Why was it titled in that manner? You might want to review my prior posting on Marital Property. Identify the property that is Marital Property. What is the value of the Marital Property? How is the Marital Property titled?

Closely Held Businesses: This is a special subset of Property Disposition issues. Often, valuation is the biggest challenge. You may refer to my previous post on this issue.

Pensions: Is either of the parties entitled to a pension? How will these pension benefits be allocated? This is another subset of Property Disposition issues; military, federal, state and local government pensions are included.

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.

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.

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.

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.

A Court of Special Appeals decision in De Ariz vs. Klinger De Ariz reveals the potential treachery that can occur in litigation. The decision is a reminder that the courts were long ago instituted as the preferred alternative to dueling, murder and mayhem. Why am I, seasoned Maryland Divorce Lawyers being so dramatic? Consider how a wife's award under the Maryland Marital Property Act was eviscerated by the conduct of her ex-husband, his attorneys and a decision of Court of Special Appeals.

The Circuit Court for Montgomery County, after protracted and bitter litigation, granted wife a monetary award under the Marital Property Act of $110,000 saying the award would be payable when the family home was sold. The judge specifically said that she was not entering a judgment against husband at the time of her decision to shield him from interest that would accrue prior to the sale of the house.
He and his lawyers responded to this misguided act of concern for husband's welfare by entering into a series of agreements pursuant to which they received two liens on his interest in the home in order to pay off unpaid legal fees. When the amount of these liens was added to a judgment against husband for unpaid legal fees, the total exceeded the amount to which he was entitled for his interest from sale of the home. Because the trial judge had delayed entering a judgment against husband, these other liens stood ahead of wife's claim. If the trial judge had entered a judgment against husband at the time of her decision, wife's award would have been first in line to be paid. Instead the lawyers received the money. Wife was left with no obvious mechanism to collect her monetary award.

Wife rushed back to the Circuit Court judge who felt betrayed by husband and his attorneys. She entered an "emergency order" entering a judgment in the amount of $110,000 in wife's favor against husband's lawyer. However on appeal, this emergency order was ruled erroneous. The appeals court was apparently embarrassed by this result. It commented: "no good deed goes unpunished", a glib reference to the trial judge's decision not to enter an immediate judgment to shield husband from accruing interest charges prior to the sale of the house. This was clearly not the proudest moment for Anglo-American jurisprudence.

A recent decision by the Maryland Court of Special Appeals establishes a new precedent useful to Maryland Divorce Attorneys in effectively representing clients in the disposition of real property. In Triantis vs. Triantis, the parties separated after being married for 29 years. They owned real estate, some titled jointly, some separately and some with a third party. The stipulated in their separation agreement that all real estate was to be considered jointly owned, regardless of what was shown on the documents in the land records. They also agreed to reasonable efforts to sell the properties.

One of the parcels was 40 acres that Husband owned jointly with a third party. Four years after the separation agreement was recorded in the land records, the parcel remained unsold. Wife filed a lawsuit in the Circuit for Montgomery County, requesting that the land be sold "in lieu of partition". The Circuit Court judge rejected her petition without even allowing her a trial on the grounds that she did not have legal title to the land, meaning that her former Husband and third party, not Wife were on the deed.
On appeal, the decision was reversed. The Court of Special Appeals ruled that if wife held a concurrent equitable interest in the land that was fully vested she would be entitled to an order of sale pursuant to section 14-107 of the Real Property Article. The Court sent the case back to the trial judge to determine if wife's equitable interest was fully vested.

This opinion illustrates how complex property disposition can become in divorce. It requires a three step analysis in cases involving property owned by one spouse with a third party: (1) if spouse does not hold record title, does that spouse hold a concurrent equitable interest, (2) is that equitable interest of a type that authorizes an order of partition under section 14-107 and (3) is that equitable interest fully vested? If so, spouse is entitled to an order of sale.
If the three part test is not met, the spouse who is not record owner may be entitled to other relief under the Marital Property Act but would not be entitled to force the sale of the property.

Whether a spouse has dissipated marital assets can be a pivotal issue in disputes under the Maryland Marital Property Act. This act requires the court to (1) determine all marital property (property no matter how titled acquired by one or both parties during the marriage and all property owned as tenants by the entireties, except property excluded by valid agreement) and (2) value all marital property owned by each of the parties. In step 3, the Court may grant a monetary award based upon the eleven factors set forth in section 8-205 of the family law article. The monetary award may be made only from marital property and only up to the value of marital property owned by the spouse that has to pay.

This process can become even more complex when property that once existed is no longer in existence, often under suspicious circumstances. If the court finds that property was intentionally dissipated in order to avoid inclusion of that property from consideration of a monetary award, it will be considered a fraud on marital rights. As such, the court will declare the missing property to be "extant". Even if it cannot be located or has been dissipated, the court will treat it as existing and in the possession of the fraudulent party. This usually has the effect of increasing the monetary award to the defrauded party.

Heger vs. Heger is a 2009 decision that involved husband, a disabled Anne Arundel police officer, who had drawn down the equity of a home held in his name alone. The court held that dissipation had not been proven. Husband had used the money to pay credit cards, car loans, maintenance on the home and purchase furniture to replace what wife had taken. Other factors that the court considered were the prior practice of the parties in using equity credit lines. The court ruled that wife had not met her burden of proving that husband's principle purpose was to reduce funds available for distribution.

As a Maryland divorce lawyer who has assisted clients in prevailing on this issue, it is important to remember the importance of preventing dissipation before it occurs. Once dissipation has taken place, the victim of the fraud needs to assemble the evidence to prove both what has occurred and wrongful intent.

As a Maryland Divorce Attorney, a recent news article on underwater mortgages has me thinking about how much the current economic downturn has created a new set of issues that is challenging divorcing couples. A Deutsche Bank Report last week predicts that 48% of homeowners will owe more than their homes are worth before the recession ends. The home may no longer be a major plus in the overall disposition of assets. Today, it is often a potential liability that requires nimble market savvy.

Many of us who live in the relatively prosperous of Howard, Anne Arundel, Baltimore and other affluent counties in the Baltimore-Washington Corridor are probably looking at a more promising picture. Even if you are one of the more fortunate homeowners that still have equity in your home the downturn can have important consequences. Taking out a second mortgage, a cash-out refinancing or equity line of credit can have important consequences under the Maryland Marital Property Act. If divorce might be in your future, consider consulting an attorney on how any of these transactions could affect you in the ultimate property disposition.

In general the Maryland Marital Property Act recognizes marriage as a partnership and is designed to give a court power to "balance the equities" between the parties as it relates to property acquired by either party during the course of the marriage. Once a divorce appears on the horizon, it is never too early to confer with an experienced divorce attorney to understand how your rights under this complex statute might be affected by actions that you or your spouse may be planning.