Bitcoin and other forms of cryptocurrency have added a new spin to property division in divorce. In theory, crypto should be treated like other marital assets. But practical challenges often make this difficult. Now is a good time to examine this type of property and how it can be handled in a divorce.
If you or your spouse own cryptocurrency or you suspect your partner may have purchased crypto at some point but could be hiding it from you, it is important to work with a divorce lawyer familiar with strategies for locating and dividing complex intangible assets.
Understanding Bitcoin and All the Rest
Cryptocurrency is an alternative form of payment that exists entirely in the digital realm. These currencies are not issued or backed by the government, and their value can fluctuate wildly.
You never have possession of your cryptocurrency. Instead, you access it through a virtual wallet that holds the key you use to link to your currency. If you lose access to your wallet or lose your key, it is generally impossible to gain access to your cryptocurrency, so you effectively lose your investment.
There are a vast number of cryptocurrencies, with new ones appearing regularly. Bitcoin, Ethereum, Litecoin, and Dogecoin are some of the best-known.
Your Cryptocurrency Should Be Divided if it is Marital Property
Like other assets, cryptocurrency is usually divided by spouses in divorce if it is marital property. If it is legally considered separate property, then the spouse who owns it does not have to share it with the other spouse but can walk away with it intact after the divorce.
The key question is whether the cryptocurrency is marital or separate property. If either spouse acquired it during the marriage, then it is marital property even if the account is held in the name of only one spouse. If the crypto was acquired before the marriage, it starts as separate property. But it may turn into marital property over time, particularly if both spouses used it. At the very least, any increase in value throughout the marriage would probably be subject to division as marital property.
If the spouses executed a prenuptial agreement specifying that the cryptocurrency would remain separate property, however, that agreement would ensure that the Bitcoin or other currency would belong only to that spouse.
Spouses May Try to Hide Cryptocurrency
One of the challenges with cryptocurrency in divorce is locating it. If both spouses have access to the account or the spouse with access shares the appropriate information, then this asset can be divided like any other, although it presents some logistical difficulties. If one spouse will keep the crypto while the other will receive an equivalent in another property, it can be hard to choose the date and time for establishing the value of the cryptocurrency since it changes so quickly.
When a spouse is not forthcoming with information about cryptocurrency, divorce attorneys often call on forensic accountants or other specialists who use a variety of strategies to locate these assets. In cases where one spouse can show that the other was trying to hide assets, the judge will often take a dim view of the tactic and may award additional assets to the spouse that played by the rules.
Work with a Divorce Attorney Who Knows How to Handle Complex Assets
It can be easy to buy and trade cryptocurrency, but this asset created with encryption algorithms is incredibly complex. Transaction records are maintained in decentralized systems. It can be easy for one spouse to hide or undervalue cryptocurrency holdings which should be divided as marital property.
The experienced team at Weis Law Group can fight to protect your cryptocurrency interests in divorce. For a confidential consultation to learn more about how we could help, contact us today.