Divorce and Appreciation of Separate Property In Maryland

Filing for divorce in Maryland and anticipating the division of marital property can be stressful. When a married couple gets divorced in Maryland, all property is classified either as marital or separate property. Under Maryland law, divorce courts in the state use a theory of equitable distribution to divide marital property in a manner that is equitable to both spouses. Usually, separate property is not divisible and will not be distributed in a divorce. Separate property typically includes property acquired before the date of the marriage, as well as inheritances or separate gifts acquired by only one spouse after the date of marriage. Property expressly excluded from distribution, or property that has been classified as separate through a prenuptial agreement will not be divided – if the prenuptial agreement is enforceable.

However, there are some exceptions. Most often, these exceptions concern the commingling of marital and separate property. For instance, a spouse might use separate assets to contribute to marital property. As an example, a spouse might use separate assets to pay off a marital debt or to put a down payment on a marital home. One situation we want to discuss today is the appreciation of separate property. When separate property appreciates, it may become a marital asset.

When Separate Property Appreciates During the Marriage and is Classified as Marital Property

In general, if separate property appreciates during the marriage without any actions by either spouse, the appreciated amount of separate property will remain separate property. For example, if one a spouse invested money prior to the marriage and left the funds in that investment without making any changes during the marriage, any amount the asset appreciated (or depreciated) may ultimately be classified as marital property. If separate property appreciates during the marriage as a result of actions taken during the marriage, the amount of appreciation may become classified as marital property and subject to division.

When might the appreciation of separate property become marital property? Imagine Party A purchased a vacation property prior to meeting Party B (the other spouse). Imagine Party A paid off the mortgage on the vacation home prior to marrying Party B and owned the vacation property outright. On the surface, when Party A and Party B get divorced, the vacation property looks like it will be classified as separate property. However, Party B might bring up the fact the property appreciated in value. If the property appreciated in value, the court may classify the amount of the appreciated value as marital property and will make that amount divisible between the parties.

Passive and Active Appreciation in Value

The question of whether a passive appreciation in value — in which neither party took any steps to lead to the appreciation in value — is separate or marital property may be up for discussion in a divorce proceeding. The appreciated value may remain as separate property. Yet active appreciation in value will nearly always be classified as marital property. For example, take the above scenario in which Party A purchased a vacation property prior to the marriage and owned it throughout the marriage. Now, let’s say Party B spent a significant amount of time making repairs to the vacation property, invested $20,000 in the property and it appreciated by nearly $200,000. That active appreciation in value due to Party B’s efforts will be classified as marital property and will be subject to division.

It is important to remember that just as the active appreciation in value of separate property during a marriage will be classified as a marital asset and subject to distribution, the active depreciation in value of separate property during the marriage can also be classified as marital debt and subject to division.

Frequently Asked Questions About Property Division In Maryland

What is the rule for property division in Maryland?

Maryland follows the equitable distribution rule, which means that marital property is divided in a fair and equitable manner, but not necessarily equally. The court considers various factors, such as the length of the marriage, each spouse’s economic circumstances, contributions to the marriage, and any marital misconduct.

What is considered marital property in Maryland?

Marital property includes assets and debts acquired during the marriage, regardless of whose name is on the title. This can include real estate, vehicles, retirement accounts, and personal property.

What is considered non-marital property in Maryland?

Non-marital property includes assets acquired before the marriage, inheritances, gifts, and property excluded by a valid prenuptial or postnuptial agreement. These assets are not subject to division during the divorce.

How is property division decided in Maryland?

The court considers factors such as the monetary and non-monetary contributions of each spouse, the economic circumstances of each spouse, the length of the marriage, and any marital misconduct. The goal is to achieve a fair distribution of property.

Can property division be modified after the divorce?

Generally, property division is final once the divorce is finalized. However, in some cases, modifications may be possible if there are significant changes in circumstances.

What happens if spouses can’t agree on property division?

If spouses can’t agree on property division, the court will make the decision based on the best interests of the parties involved. It’s often beneficial for spouses to try mediation or negotiation to reach an agreement.

Does marital misconduct affect property division in Maryland?

Marital misconduct, such as infidelity, typically does not affect property division in Maryland. The court focuses on equitable distribution rather than punishing misconduct.

How are debts divided in a Maryland divorce?

Debts acquired during the marriage are considered marital debts and are divided equitably, just like marital property. The court will consider factors such as who incurred the debt and for what purpose.

What role do prenuptial agreements play in property division?

Prenuptial agreements can specify how property will be divided in the event of a divorce. If the agreement is valid and enforceable, the court will generally follow its terms.

Can I keep the house in a divorce?

Whether you can keep the house depends on various factors, including your financial situation, the needs of the children, and the overall division of property. The court may award the house to one spouse or order it to be sold and the proceeds divided.

Learn More From Our Rockville Divorce Attorney

If you have questions about property division in Maryland or the division of separate property that appreciated in value during the marriage, a Maryland divorce lawyer at our firm can help. Contact the Law Offices of Sandra Guzman-Salvado for more information.

(Updated 1/22/2025)