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Divorce is a challenging process that involves the division of marital assets, which can be particularly complex when it comes to inherited wealth and gifts. For individuals who have received significant inheritances or gifts, protecting these assets during a divorce is a top priority. In Maryland, the distinction between marital and non-marital property is crucial in determining how assets are divided.
This blog will explore how Maryland law treats inherited assets and gifts in divorce proceedings and provide some possible strategies for safeguarding your wealth.
Understanding Marital vs. Non-Marital Property in Maryland
In Maryland, property acquired during marriage is generally considered marital property and is subject to division upon divorce. However, there are exceptions, particularly when it comes to assets acquired by inheritance or gift.
- Marital Property: Marital property includes any assets or income acquired by either spouse during the marriage, with a few exceptions. This can include real estate, bank accounts, investments, retirement accounts, and personal property.
- Non-Marital Property: Non-marital property, also known as separate property, includes assets that were acquired before the marriage, as well as inheritances or gifts received by one spouse during the marriage. These assets are generally not subject to division in a divorce, provided they have been kept separate from marital property.
Understanding the distinction between marital and non-marital property is the first step in protecting your inherited wealth and gifts during a divorce.
How Maryland Law Treats Inherited Wealth and Gifts
In Maryland, inherited wealth and gifts are typically classified as non-marital property. This means that if you received an inheritance or a gift during your marriage, it is generally considered your separate property and is not subject to division in a divorce. However, there are important considerations to keep in mind:
- Keeping Inherited Wealth Separate: To ensure that your inheritance remains non-marital property, it is essential to keep it separate from marital assets. Commingling—such as depositing inherited funds into a joint account or using inherited money to purchase jointly owned property—can lead to the inheritance being considered marital property.
- Gifts Between Spouses: While inheritances from third parties are typically non-marital property, gifts exchanged between spouses are considered marital property. For example, if you use your inheritance to purchase a gift for your spouse, that gift may be considered marital property.
- Documentation: Proper documentation is crucial in proving that an inheritance or gift is non-marital property. Keeping records, such as wills, trust documents, and gift letters, can help establish the nature of the asset.
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Strategies for Protecting Inherited Wealth and Gifts in a Maryland Divorce
If you are concerned about protecting your inherited wealth or gifts during a divorce, there are several strategies you can employ to safeguard these assets:
Prenuptial or Postnuptial Agreements
One of the most effective ways to protect inherited wealth and gifts is through a prenuptial or postnuptial agreement. These agreements can clearly define which assets are considered non-marital property and ensure that your inheritance remains separate in the event of a divorce.
- Prenuptial Agreement: A prenuptial agreement is a legal contract entered into before marriage that outlines the division of assets and debts in the event of a divorce. It can specify that any inheritances or gifts received by either spouse remain separate property.
- Postnuptial Agreement: If you are already married, a postnuptial agreement can serve a similar purpose. This agreement is signed after marriage and can protect your inheritance by defining it as non-marital property.
Maintain Separate Accounts
To prevent commingling, it is essential to keep inherited funds in a separate account. By maintaining a clear distinction between marital and non-marital funds, you can protect your inheritance from being considered marital property.
- Separate Bank Accounts: Open a separate bank account in your name only to hold any inherited funds. Avoid using this account for joint expenses or transferring money to joint accounts.
- Separate Investments: If you receive inherited stocks, bonds, or other investments, keep them in a separate investment account. Do not use inherited funds to purchase jointly owned assets, such as real estate or vehicles.
Avoid Using Inherited Funds for Joint Purchases
Using inherited funds for joint purchases can inadvertently convert non-marital property into marital property. If you want to protect your inheritance, avoid using it to buy assets that will be jointly owned with your spouse.
- Real Estate: If you use inherited money to purchase a home, consider keeping the property in your name only. If the property is jointly titled, it may be considered marital property in a divorce.
- Major Purchases: Be cautious about using inherited funds for significant purchases like cars, boats, or luxury items that will be used by both spouses.
Document the Source of Funds
In the event of a divorce, it may be necessary to prove that certain assets are non-marital property. Proper documentation can be critical in establishing the origin of the funds and ensuring that your inheritance is protected.
- Wills and Trusts: Keep copies of wills, trust documents, and other legal paperwork that demonstrates the inheritance was intended for you alone.
- Gift Letters: If you received a significant gift from a third party, obtain a gift letter that specifies the gift was intended for you and not for both spouses.
Consult with an Experienced Family Law Attorney
Navigating the complexities of divorce and protecting your assets requires the expertise of an experienced family law attorney. A knowledgeable Maryland divorce attorney can help you implement strategies to safeguard your inherited wealth and gifts, as well as guide you through the divorce process.
- Legal Advice: Your attorney can provide tailored advice based on your unique circumstances and help you understand how Maryland law applies to your situation.
- Representation: If your divorce goes to court, having a skilled attorney by your side can make a significant difference in the outcome.
Conclusion
Protecting inherited wealth and gifts in a Maryland divorce requires careful planning and a thorough understanding of the law. By keeping inherited assets separate, documenting their origin, and considering prenuptial or postnuptial agreements, you can safeguard your financial future. Working with an experienced family law attorney is essential in ensuring that your interests are protected throughout the divorce process.
If you are concerned about protecting your assets during a divorce, our team of experienced family law attorneys is here to help. Contact us today to schedule a consultation and learn more about how we can assist you.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as legal advice. It is always recommended to consult with a qualified attorney for personalized guidance and representation in legal matters.
About the Author
Harry Baumohl is one of Maryland’s foremost family law practitioners. His areas of focus include but are certainly not limited to the following:
1. Experienced Family Law Attorney, dealing with Divorce, Child Custody, and High Net Worth Divorce Litigation - with over Four Decades of an amazing track record and quality expertise.
2. Focused on representing clients – for wives, husbands and same-sex couples, alike – typically with high family income, net worth and substantial and/or complicated asset scenarios. Expertly untangling complicated household monetary and family asset situations.
3. Expertise in high conflict and ongoing parenting disputes.
4. Prenuptial Agreements as a planning tool.
5. Mediation and Collaborative Family Law.
Harry is a Founder of Baumohl Hamburg LLC, situated in Pikesville, Maryland, Baltimore County, conveniently located right off of the Baltimore Beltway. Significant representation and court appearances in surrounding areas including but not limited to – Baltimore County, Baltimore City, Carroll County, Harford County, Howard County, and Anne Arundel County.
