by Flora Garcia-Sepulveda

Divorce MediationJune 26, 20240 comments 0 Likes

Cryptocurrency and Divorce: How to Value and Divide Digital Assets

Do you have questions about cryptocurrency and divorce? At WGS Law, we understand that cryptocurrencies pose a unique but frustrating challenge during divorce proceedings. This is because these digital assets are secured by cryptographic methods and aren’t traditionally stored in bank accounts. A spouse could easily hide them and make the division process more complicated.

Our legal team at WGS Law has helped countless people through the process of property division. Below, you can read more information about how to identify, value, and divide cryptocurrencies during a divorce. Call now or book a virtual consultation today.

Identifying Hidden Cryptocurrencies

Unfortunately, due to their decentralized nature, cryptocurrencies can be easy to hide from a spouse. They cannot be traced through many standard financial documents and may require some expertise to uncover. However, there are a few ways in which hidden cryptocurrencies can be identified:

• Review bank statements, tax returns, and credit card statements for any indications of unusual transactions.
• Find discrepancies between your partners’ reported income and spending patterns.
• Look for large amounts of funds that have disappeared and cannot be accounted for.
• Examine devices like computers and smartphones for evidence of cryptocurrency wallets or related software.
• Seek assistance from legal professionals who have expertise in uncovering and valuing hidden cryptocurrencies.

Valuing Cryptocurrencies

Before you can value cryptocurrencies, it is crucial to identify any hidden assets. Many people turn to cryptocurrencies to conceal assets due to their decentralized nature, making them harder to trace. Forensic experts can be employed to investigate electronic devices for login credentials or search for digital currency ticker symbols. Additionally, tax returns, bank statements, or confirmation emails from Crypto Exchanges (CX) like Binance, Coinbase or KuCoin can provide evidence of cryptocurrency investments.

Determining the Value

Once you have identified hidden cryptocurrency holdings, the next step is to determine their value. This is another challenge, considering how their value can fluctuate significantly within short periods. The volatility of cryptocurrencies like Bitcoin and Ethereum makes it difficult to establish a consistent value.

Establishing a Valuation Date

Establishing a valuation date for the cryptocurrencies can be complex. Courts can choose different dates based on the unique circumstances and jurisdiction involved. These dates might include:

• The date of filing for divorce
• The date of separation
• The current date

The chosen date can significantly impact the final valuation due to the fluctuating nature of cryptocurrencies.

Professional Consultation

Given these complexities, it is highly recommended to consult with a professional. This could include:

• Family Law Attorney: They understand the legal aspects of divorce and can guide you through the process.
• Forensic accountants: They specialize in investigating and valuing digital assets.
• Financial experts: They can provide an accurate assessment of the worth of your partner’s assets at the given valuation date.

Recommendations for Handling Cryptocurrency in Divorce

Here are some key steps to take when dealing with cryptocurrency in divorce:

• Disclose all cryptocurrency assets: Ensure all digital assets are declared to avoid legal consequences.
• Obtain a professional valuation: Engage experts to accurately determine the value of the cryptocurrencies.
• Consider tax implications: Be aware of any potential tax consequences from transferring or retaining cryptocurrency assets.
• Work with a mediator: A neutral third party can help navigate the complexities and reach a fair settlement.
• Update legal agreements: If you have prenuptial or postnuptial agreements, make sure they are updated to reflect the division of cryptocurrency assets

Dividing Cryptocurrencies

There are various options when it comes to dividing cryptocurrency during divorce. The most common ones are in-kind division, offsetting assets, or selling and dividing proceeds. However, which one of these is most appropriate for your situation depends on various factors such as:

• The complexity of your cryptocurrency portfolio
• The total value of cryptocurrency assets
• Current market conditions
• Precedents in your jurisdiction
• Preferences of the parties involved
• Tax implications

This is where a skilled attorney will play a crucial role. They can help explain the implications of cryptocurrency and divorce along with each division method in detail, considering your specific circumstances. They’ll help you make the decision that best aligns with your financial goals.

Learn More About Cryptocurrency and Divorce: Work with a Skilled Divorce Attorney

Finding a way through cryptocurrency and divorce can be a challenge. It requires a lot of patience, knowledge, and experience to identify hidden assets, accurately value them, and then ensure fair distribution. This is why working with a skilled divorce attorney is so important. Don’t hesitate to contact our team of experienced lawyers at WGS Law. Book a virtual consultation and get the necessary information and guidance at every step of the process.