how courts divide crypto in a divorce

How Courts Divide Crypto In A Divorce

Dividing assets is one of the biggest challenges in a divorce. Each state has its laws governing how these assets are divided. Throw cryptocurrencies into the mix and the situation becomes even more complex.

How are Cryptocurrencies Divided in a Divorce?

When a couple talks to their divorce attorney about property division, it is important that they mention the assets they have in Bitcoin. With more than 16% of the US population owning Bitcoin, cryptocurrencies are playing a larger role in divorces than ever before.

In many cases, the value held in cryptocurrency is high. When dividing cryptocurrency, both parties must disclose their assets. Searching for cryptocurrency funds is time-consuming and expensive if one tries to lie or hide assets. It will limit the amount of money either party gets when the divorce is finalized.

Although Bitcoin is valued for its anonymity, it is not impossible to trace. There are several tools that attorneys can use to trace assets. This is even true if the cryptocurrency is held offshore.

One of the biggest challenges is valuing cryptocurrencies. The currency’s value can swing 5% or more during the day. What cryptocurrency holdings were worth when divorce papers were filed is not necessarily the same as what they will be worth once the judge finalizes the divorce. In many cases, splitting spouses choose to divide the cryptocurrency instead of the USD equivalent.

Community Versus Separate Property

In states like California, if one or both parties purchase Bitcoin during the marriage, it will probably be viewed as community property. In California, spouses have to divide community property 50/50.

However, if either party came into the marriage with their own cryptocurrency, it is viewed as separate property. It will also be considered as individual property if one party inherits it.

Assets with Cryptocurrency

Spouses do attempt to use cryptocurrency to hide their assets. This is a bigger problem when one spouse is deeply involved in cryptocurrency while the other has little understanding of the technical or financial aspects of the investment. This can lead to one partner having no idea what to look for when uncovering hidden crypto holdings.

However, as the use of cryptocurrency has become more prevalent, more attorneys are aware of cryptocurrency being used as a way to hide assets.

They may ask their client if they think their spouse has an undisclosed crypto holding. If so, they can begin forensic investigations to try to bring these hidden holdings to light.

The Importance of Financial Knowledge in a Marriage

The ability to hide cryptocurrency and the challenges of dividing cryptocurrency during a divorce underscore the importance of both parties having financial knowledge during the marriage and when preparing for divorce. The more that both parties know about their income, the harder it will be for one party to hide an asset during a divorce.

If a person is concerned that their spouse is hiding crypto assets, they should immediately express this concern to their lawyer. That way, the lawyer will be able to provide guidance that can assist them.

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