TRACING MARITAL ASSETS IN FAMILY LAW CASES by Kathleen M. Wobber In a recent “Brown Bag Lunch,” Leon Berg skillfully navigated the shoals of the Melrod, Noffsinger and Richards cases regarding the traceability of marital assets. In Melrod, 83 Md. App. 180 (1990), the husband claimed that a large part of his income (>90%) was non-marital due to a substantial non-marital incomegenerating trust. Although he comingled the marital and non-marital income, husband proceeded on the theory that assets purchased with the co-mingled funds should be considered marital or non-marital in the same proportion that his income was marital to non-marital. While the trial court agreed with this theory, the appellate court found the theory erroneous because the source of funds used to purchase the property was not directly traceable to a non-marital source. The court emphasized that “directly traceable” is not synonymous with “attributable,” and since husband had comingled his income from non-marital sources with marital income, the money used with acquire the property or reduce indebtedness could not be directly traced to any particular source. Three years later the court again examined the issue of tracing in Noffsinger, 95 Md. App. 265 (1993). The husband made a final payment on a non-marital investment by depositing $20,000 of non-marital funds into a marital checking account, before making the payment on the non-marital investment. The Court found that the funds were not comingled just because the non-marital funds may have “rested in the same account as marital funds.” The court concluded that “only when the spouse chooses to commingle marital and non-marital funds to the point that direct tracing is impossible does his or her property lose its non-marital status.” So the law remained for twelve years until Richards, 166 Md. App. 263 (2005) threw a wrench into the system. This time it was the wife who wanted to claim, as non-marital, monies which were left to her by her mother. Before her death, wife’s mother opened up two bank accounts with her daughter and
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son-in-law’s names on the accounts. After mother’s death, the accounts in husband and wife’s name were consolidated and then put into a joint brokerage account, into which Husband also contributed his own non-marital funds. Note that the Court found the bank accounts were not intended to gift the husband/son-in-law money, because the mother had left nothing in her will to husband, thus they were wife’s non-marital property. Out of the brokerage account the couple purchased vacation property, subsequently husband drew out half the money and placed it in his own account, and then spent he most of the money. Despite the addition of nonmarital funds by both parties, the purchase of real estate (which was found to marital) and despite the fact that the account had grown substantially, the trial court found that the remaining portion of husband’s separate account was wife’s non-marital funds “which arose substantially” from her inherited money from her mother. The trial court further noted that husband’s one-time contribution to the account did not defeat the court’s ability to trace the funds. The appellate court affirmed this trial court’s decision, which Leon noted appeared to be results oriented. In summary, when tracing non-marital assets, the burden of proof rests with the spouse who is claiming non-marital property. To meet that burden the proponent must show how the asset is “directly” or “substantially” traceable to a nonmarital source.
Paul E. Alpert, Retired Judge Available for Mediation and Arbitration Former Judge of District Court, Circuit Court and Court of Special Appeals
410-484-2088
June 2015