Cryptocurrencies, such as Bitcoin and Ethereum, have gained significant mainstream attention in recent years due to their potential as investment opportunities. While the use of cryptocurrencies in divorce settlements is not yet a common occurrence, it is possible that they may be treated like any other asset in a divorce and subject to division between spouses.
One of the main challenges in dealing with crypto-assets in a divorce is valuing them. Unlike traditional assets such as real estate or stocks, crypto-currency is not backed by any physical asset or government regulation, and its value can fluctuate significantly. This makes it difficult to determine the fair market value of a crypto-asset, which is necessary for the purpose of equitable distribution in a divorce.
Another issue is the lack of legal precedent regarding the treatment of crypto-assets in divorce proceedings. In some jurisdictions, crypto-assets may be treated as property, while in others, they may be considered as a form of intangible personal property. This lack of clarity can lead to uncertainty and disputes between spouses over the ownership and distribution of crypto-assets.
In addition, the decentralized and anonymous nature of many crypto-currencies can make it challenging to track and verify these assets’ ownership and transaction history. This can be particularly problematic when one spouse attempts to hide or undervalue their crypto assets to avoid having to divide them in the divorce settlement.
Spouses can take a few steps to address these issues when dealing with crypto-assets in a divorce. One option is to hire a forensic accountant or currency expert to help value the crypto assets and determine their fair market value. This can be particularly helpful in cases where the value of the assets has fluctuated significantly over time.
It is also crucial for spouses to be transparent and open about their crypto assets, as hiding or undervaluing these assets can lead to legal consequences. It is generally recommended that spouses fully disclose all of their assets, including crypto-assets, during the divorce process to ensure an equitable division of property.
Couples can seek the assistance of a mediator or arbitrator to help resolve disputes over the ownership and distribution of crypto assets. This can be a more cost-effective and efficient way to resolve disputes, as it allows the parties to reach a mutually agreed-upon resolution without the need for lengthy and expensive litigation.
The parties will need to decide how to divide the cryptocurrencies between them. This may involve physically transferring the assets from one spouse to the other, or it may involve selling the assets and dividing the proceeds. It is important to carefully consider the tax implications of any transactions involving cryptocurrencies, as the Internal Revenue Service (IRS) has specific rules for the taxation of virtual currency transactions.
There are also practical considerations to keep in mind when dealing with cryptocurrencies in a divorce settlement. For example, if one spouse is in possession of the private keys to the cryptocurrency wallets, it may be necessary to take steps to ensure that the other spouse has access to their share of the assets. It may also be necessary to address issues of ownership and control if the parties are unable to agree on how to divide the assets.
Overall, the use of crypto-currency in divorce settlements can be complex and challenging due to the unique nature of these assets and the lack of legal precedent. It is important for spouses to seek the assistance of experts and legal professionals in order to properly value and divide crypto assets in a fair and equitable manner. Contact our office today for advice regarding your divorce.