How to Protect Your Assets During Divorce Proceedings
Divorce is a deeply emotional process, but it also has serious financial consequences. Asset protection is a critical consideration for anyone ending a marriage.
Those who fail to prepare for the financial aspects of divorce risk losing property they have worked hard to build. For individuals in Maryland, understanding how to handle assets during divorce proceedings can make a significant difference in long-term stability.
Kathleen M. Kirchner, Attorney At Law represents individuals throughout Maryland in divorce proceedings with a clear focus on asset protection. Maryland family law sets out specific rules for dividing marital property, determining which assets are subject to division, and identifying what belongs to each spouse.
Without proper legal guidance from a Maryland divorce lawyer, individuals may walk away from a marriage with far less than they are entitled to under the law.
Marital vs. Separate Property
Under Maryland divorce law, not all assets are treated equally. The court distinguishes between marital property and separate property.
Marital property includes most assets and debts acquired during the marriage, regardless of whose name is on the title or account. This includes:
Real estate
Retirement accounts
Income
Other financial or physical assets gained while married
In contrast, separate property typically includes anything acquired before the marriage, as well as inheritances or gifts received by one spouse individually.
However, during a marriage, separate property can become blended with marital property in ways that make the distinction less clear. For instance, if one spouse uses an inheritance to buy a family home or contribute to a shared investment account, that asset may lose its separate status.
Maryland divorce law allows the court to divide only marital property in a divorce, and it does so based on the principle of equitable distribution.
This means the division must be fair, though not necessarily equal. Each party’s contributions to the marriage, both financial and non-financial, are considered, along with future earning potential and other factors.
Financial Disclosure and Transparency
One of the most important aspects of protecting assets during a divorce is full financial disclosure. Maryland divorce law requires both spouses to provide a complete accounting of their financial situation, including income, expenses, debts, and property.
Any attempt to conceal or undervalue assets can backfire and lead to unfavorable outcomes in court. In high-conflict or high-asset divorces, forensic accountants may become involved to trace hidden accounts or improperly transferred assets.
The court has the authority to penalize a spouse who attempts to manipulate finances during the proceedings. Full disclosure is not only a legal requirement—it’s also essential to building a strong case for a fair asset division.
Kathleen M. Kirchner, Attorney At Law, emphasizes the need for organized records during divorce. Tax returns, bank statements, property appraisals, and other documents can help present a clear picture of what exists and how it should be divided.
Safeguarding Business Interests
Divorce law in Maryland can become particularly complicated when a business is involved.
Whether it’s a small sole proprietorship or a larger entity, any business interest acquired or grown during the marriage may be subject to equitable division. Even if only one spouse managed the business, the other may still have a claim based on indirect contributions or financial support.
To protect business assets, it’s critical to determine the value of the business and whether it has marital or separate components. Business valuations are often performed by outside professionals using market-based or income-based approaches. If the business existed before the marriage but grew in value during it, the appreciation might be considered marital property.
Proper business planning before or during marriage, such as operating agreements or buy-sell provisions, may provide additional protection. During divorce proceedings, the court may award one spouse full ownership of the business and compensate the other with a share of other marital property.
Protecting Retirement Accounts and Pensions
Maryland divorce law treats retirement accounts and pensions as marital property if contributions were made during the marriage. These accounts, including 401(k)s, IRAs, and pension plans, can represent significant portions of marital wealth. Dividing them requires careful handling to avoid tax penalties and legal complications.
In most cases, the court will issue a Qualified Domestic Relations Order (QDRO) to divide retirement accounts properly.
This legal document allows the transfer of retirement funds from one spouse to the other without triggering early withdrawal taxes. Pensions may also be divided according to a set formula, depending on the number of years the employee-spouse worked during the marriage.
Kathleen M. Kirchner, Attorney At Law, advises clients to review the terms of retirement accounts early in the process. Some accounts may require specific legal language for division, while others may be better offset by granting the other spouse different marital assets of equal value.
Addressing Real Estate and the Marital Home
Real estate often represents one of the largest assets in a marriage, particularly the family home. Maryland divorce law allows for several outcomes regarding the marital residence. In some cases, the home is sold and the proceeds divided. In others, one spouse retains the home and the other receives compensation through other assets.
Keeping the home may seem emotionally appealing, especially when children are involved, but it also comes with financial responsibilities. Property taxes, mortgage payments, and upkeep costs must be weighed carefully. The spouse retaining the property may need to refinance the mortgage to remove the other’s name.
Determining the value of real estate requires a professional appraisal. The court will use this valuation to decide how much equity exists and how it should be distributed. Divorce law does not automatically favor one spouse over the other when it comes to the home—each case is evaluated based on fairness and long-term impact.
Debt and Liability Considerations
In addition to dividing assets, Maryland divorce law also addresses the allocation of debt. Debts incurred during the marriage, such as credit card balances, personal loans, or mortgages, are typically considered marital obligations. This means both spouses may be held responsible, regardless of who signed the loan documents.
It’s important to identify which debts exist and how they were used. Courts may assign certain debts to one spouse if they primarily benefited from the expense. However, creditors are not bound by divorce decrees, which means both parties could remain liable if the responsible spouse fails to pay.
One way to protect against this is by refinancing or paying off joint debts before the divorce is finalized. This minimizes future legal and credit risks and provides a cleaner financial break between the spouses.
Legal Agreements Before and During Marriage
One of the most effective ways to protect assets in divorce is through legal agreements. Maryland divorce law recognizes both prenuptial and postnuptial agreements, provided they meet certain legal standards. These agreements allow spouses to define how property will be handled in the event of divorce, offering predictability and protection.
A valid prenuptial or postnuptial agreement must be signed voluntarily, with full financial disclosure and without coercion. The terms must be fair at the time of signing and at the time of divorce. Courts will enforce these agreements if they meet legal requirements, making them a powerful tool for asset protection.
Kathleen M. Kirchner, Attorney at Law advises individuals with significant personal or business assets to consider these agreements carefully. While no one plans for a marriage to end, having clear financial expectations in place can prevent disputes later on.
Reach Out for the Next Steps
Kathleen M. Kirchner, Attorney at Law works with individuals in Maryland to understand their rights under divorce law and protect their financial future. She is proud to serve Anne Arundel County, Maryland, as well as throughout Queen Anne's County, Calvert County, Prince George's County, and Howard County. Call today.