Cryptocurrency and Divorce – Everything You Need to Know

Cryptocurrency and Divorce – Everything You Need to Know

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Settling on a fair distribution of assets is one of the most challenging aspects of going through a divorce. Things become significantly more difficult when one spouse isn’t truthful about disclosing all of their assets. While many divorce attorneys have a wealth of experience dealing with undisclosed investments, bank accounts, income, and bonds, cryptocurrency is a new asset class that is beginning to appear in divorce proceedings. As the general public becomes increasingly aware and interested in this digital currency, it’ll be a bigger problem for many divorce court cases. Unlike other assets, cryptocurrency is more difficult to track and prove ownership and can’t be seized in the same manner.

Is Cryptocurrency Considered as Marital Assets?

Don’t allow hidden digital assets to deny the division of equal assets in a divorce.

Yes, marital assets are considered to be anything acquired during the marriage. Physical items like a car or chair purchased during the marriage are considered a marital asset, which means it’s considered to be the joint property of both spouses. It doesn’t matter which spouse bought the asset or how it’s titled.

It’s important to know that marital assets aren’t limited to tangible items. They include intangible property such as investment and retirement accounts, bank accounts, frequent flyer miles, and even crypto assets.

That’s why how your divorce is handled is important. In a traditional divorce court system, the judge will likely rule that each spouse receives 50% of all cryptocurrency holdings. However, in a private process like collaborative divorce, the judge may take factor you and your partner’s interest.

If you’re excited about the upside of cryptocurrencies, but your spouse is risk-averse, you may get a larger share of the crypto assets, while your partner receives equal value in a retirement account or cash.

Can Bitcoin be Seized in Divorce?

Yes, Bitcoin and other digital currencies are treated the same as other assets in a divorce. All cryptocurrency transactions that occurred before the marriage or given through inheritance or a gift will be classified as separate property, and therefore won’t be divided. However, if they occurred during the marriage, it can be seized, at least half of them. Of course, the partners can negotiate to ensure both parties receive equal value.

Hiding Cryptocurrency Assets in Divorce

Hiding assets is a big concern when it comes to cryptocurrency and divorce. This is particularly true, when one spouse is heavily involved in the cryptocurrency markets, while the other has very little knowledge about the technical and financial information related to crypto investments. As a result, the partner with a lack of knowledge won’t know what to look for in their partner’s cryptocurrency holding.

Why Finding Hidden Cryptocurrency is Tricky

Cryptocurrency USB wallet can hold an infinite amount of assets.
Unlike cash or physical assets, cryptocurrency is held on a digital wallet – a USB drive.

If you notice missing money, it may be that the spouse has sold their traditional assets and bought digital assets instead during or before the divorce process. There are many reasons why cryptocurrency is an asset class that is prone to financial deception, especially in divorce cases.

  • There are many crypto exchanges and wallet addresses that a person can use making it very difficult to find and track.
  • Wallet addresses don’t have any identification associated with the ownership. Thus, finding evidence that the wallet is there’s is difficult.
  • Cryptocurrency is highly technical and the other spouse may not have any clue as to where they would hide the money.
  • Cryptocurrency is highly liquid and can be moved from one exchange to the next along with new wallets.
  • There is no central authority that can seize the money other financial institutions can.

The Discovery Process

During the divorce process, both parties must present an accurate accounting of their marital property. Any dishonesty or hiding of assets can have significant tax consequences and legal ramifications. If a spouse suspects that their partner is hiding assets, they can hire a family divorce lawyer to enact a court order. This forces the partner to reveal their accounts with cryptocurrency wallet providers.

Sometimes the family law attorney will recommend bringing onboard forensic experts who are experienced at tracing cryptocurrency transactions. They will search for all kinds of information such as login credentials from exchanges, or keys for digital wallets. Additionally, they will look at financial statements, bank statements, confirmation emails, and any other information that help to discover the spouse’s cryptocurrency holdings.

Tips to Finding Hidden Cryptocurrency From Your Spouse

While divorce lawyers can help, you may want to do a little research first to see if it’s worth the cost.

  • Search for Transactions Related to Cryptocurrencies in Bank Statements
  • Check Emails from Cryptocurrency Exchanges
  • Look at Your Tax Return
  • Is there an Obvious USB Drive or External Hard Drive Laying Around?
  • Hire a Family Lawyer

How Family Law Firms Can Help

If you’re concerned about how you and your spouses’ cryptocurrency assets could be affected by your divorce, a family attorney may provide the guidance and advice you need. Contact us and book a free consultation, so we can help you keep your assets.

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