The Role of Financial Planning In Preparing For Divorce In Maryland

As an experienced divorce attorney in Maryland, I must emphasize the critical importance of understanding the financial implications involved in a divorce. Below, I will outline the key considerations and legal standards that spouses need to be aware of when managing their finances throughout the divorce process.

Understanding Equitable Distribution In Maryland

Equitable, under Maryland law, means a division that is not necessarily equal but fair based on a number of factors. In pertinent words, the factors to be considered include the duration of the marriage, each party’s contributions to the well-being of the family, the economic circumstances of each party at the time the division of property is to become effective, and the circumstances that contributed to the estrangement of the marriage.

Financial planning ahead of divorce filing facilitates a better understanding of the financial realities of both parties and helps them project future needs. This planning becomes instrumental in pragmatically setting expectations of how assets will be divided, how much alimony or child support will be, and what each party needs personally to maintain financial stability post-divorce.

Inventory Assets and Liabilities

Next, make a detailed inventory of all assets and liabilities, whether marital or nonmarital. Real estate, bank accounts, retirement accounts, and personal property are what should be inventoried. The liabilities, such as mortgages, loans, and credit card debts, have to be listed. This step is going to be taken as preliminary work to prepare for the division of assets.

Understand What Is Coming In And Going Out

Write down all current income sources and monthly expenses. This is required for a post-divorce budget and even more crucial if alimony or child support will probably be part of your settlement.

Strategic Steps To Financial Planning

Make A Post-Divorce Budget

Being able to approximate how much you are likely to earn and what your potential expenses could be might prove quite crucial in making the right decisions during the negotiations. This could involve factors such as housing, health insurance, living expenses, and so on.

Financial Consultation

Since you will be dealing with rather complex assets, such as businesses or investments, it is important that you consult a professional financial expert who could consider the legal and tax ramifications of divorce.

Consider Long-Term Financial Goals

Besides the immediate implications of divorce, one needs to plan for long-term goals, retirement perhaps being one of the most common ones. This may mean insisting upon keeping retirement accounts or other investments that can grow throughout the years.

Maryland Divorce Frequently Asked Questions (FAQs)

What Is Considered Marital Property In Maryland?

According to Maryland law, marital property is defined as all of the property acquired by either spouse during the marriage, regardless of whose name the title is in, excluding those from inheritances, gifts by third parties, anything acquired before the marriage, or anything in a written agreement.

How Is The Debt Divided In A Maryland Divorce?

The Maryland Marital Property Act governs how property is divided during a divorce, emphasizing the principle of “equitable distribution.” Here’s a breakdown of the key points of the Act:

Definition of Marital Property:

Under the Act, marital property includes all assets acquired by either spouse during the marriage, regardless of how it is titled. This includes items such as real estate, bank accounts, retirement benefits, vehicles, and personal property acquired from the date of marriage up to the divorce filing, unless specifically excluded by a valid agreement.

Non-Marital Property:

Certain assets are considered non-marital and are excluded from division. These include:

  • Property acquired before the marriage
  • Inheritances received by one spouse during the marriage
  • Gifts received by one spouse from a third party
  • Assets specifically excluded by a prenuptial or postnuptial agreement

Equitable Distribution:

Maryland follows the principle of equitable distribution, meaning that marital property is divided fairly but not necessarily equally. The court considers factors such as:

  • The length of the marriage
  • The contributions of each spouse (both monetary and non-monetary)
  • The age, health, and economic circumstances of each spouse
  • The circumstances surrounding the acquisition of property
  • The value of all property interests of each spouse

The court has broad discretion to determine what is equitable, but it doesn’t always result in a 50/50 split.

Monetary Award:

Instead of directly transferring ownership of assets, Maryland courts may issue a monetary award. This is a payment from one spouse to the other to achieve fairness in the division of property, especially when transferring the actual assets isn’t feasible.

Pensions and Retirement Benefits:

Pensions and retirement benefits accrued during the marriage are treated as marital property. Courts can issue a Qualified Domestic Relations Order (QDRO) to divide these benefits fairly between spouses.

Use and Possession of Family Home:

In cases involving children, the court may grant one spouse temporary use and possession of the family home, furniture, and other property for up to three years after the divorce to maintain stability for the children.

The Maryland Marital Property Act’s primary goal is to ensure a fair and just division of assets based on each spouse’s contributions and needs, not merely an equal split.

What Do I Do If My Spouse Controls All Our Finances?

If one spouse has handled all financial dealings, a great deal of effort needs to be put into acquainting yourself with all finances as soon as possible. This should be done by gathering all financial documentation.

How Do I Protect My Credit In A Divorce?

Immediately re-establish credit in your name and separate all joint accounts. Obtain a copy of your credit report to see if there are any unauthorized activities going on and that all joint debts are being handled appropriately. If you have ongoing debt for which you both make payments, communicate openly with your ex-spouse about those debts.

What If I Think My Spouse Is Hiding Assets?

If you suspect that your spouse is hiding their assets, you should tell your attorney. You could be facing the need to retain an accountant who is a forensic specialist and who is experienced at locating lost or hidden assets. Maryland law provides for complete disclosure of all assets, and there are actual legal consequences against a party that does not provide full disclosure.

How Does Alimony Affect Financial Planning In A Maryland Divorce?

Alimony is of much consequence in financial planning, either on the giver or recipient of alimony. It is necessary to have an idea of the amount and length of time for which the alimony is payable so that at the end of the divorce, both parties would be able to plan their finances accordingly. The quantum of alimony that is payable and the duration it becomes payable will be influenced by the length of the marriage, the standard of living during of the parties, and the financial needs and capabilities of each spouse.

How Do I Deal With Joint Investments In A Divorce Situation?

Deciding on joint investments while divorcing involves:

  • selling and dividing the proceeds
  • buying out the interest of the other party
  • continuing to cooperate ownership of the investment

Each of these options has different tax consequences and future growth and liability potentials. Careful consideration of these, in the face of your overall financial goals and divorce settlement, needs to be carefully focused on.

Are There Any Financial Advantages To Legal Separation Over Divorce?

There may be times when a legal separation instead of divorce offers financial advantages. Some examples include remaining eligible, alone, for a spouse’s benefits, such as health insurance or Social Security, which may require the marriage to last at least ten years or longer. In this instance, a legal separation would allow protection regarding finances and assets without the complete dissolution of the marriage.

How Does One Budget For Expenses Post-Divorce?

The best way to budget for post-divorce expenses is first to understand what your new income and expenses are. Make a comprehensive list of your anticipated monthly expenses. These should include but not be limited to: housing, utilities, transportation, groceries, and any alimony or child support. Include costs of unexpected or irregular expenses, such as home repairs, medical emergencies, and activities that may involve children. It is highly advisable to set up an emergency fund.

Contact Our Maryland Divorce Lawyer For Your Free Consultation

Divorce cases can be grueling, and having a strategic financial plan is essential. At Shah & Kishore, we understand that the right financial approach can make a significant difference in the outcome of your divorce case. Attorney Kishore brings a unique advantage to your case with his undergraduate degree in Finance and Economics and a Master’s in Business Administration (M.B.A.). His in-depth financial experience ensures that your assets, income, and future financial interests are carefully safeguarded.

If you are considering divorce and need comprehensive advice tailored to your financial situation, contact our Maryland divorce attorney at (301) 315-0001 to receive your free consultation. We proudly serve Rockville and all of Montgomery County, Maryland, offering skilled guidance to protect your financial interests throughout the divorce process.

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