Divorce and Cryptocurrency: How the New Currency is Affecting Property Settlements
As if the divorce process wasn’t downright messy and complicated enough, our high-tech modern world has decided to invent a brand-new type of asset for divorcing couples to fight over –cryptocurrency.
What is Cryptocurrency?
Simply put, cryptocurrency is a type of digital asset that uses cryptography to secure its transactions and control the creation of new units. Bitcoin, Ethereum, Litecoin, and Ripple are some of the most well-known types of cryptocurrencies. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
What makes it different from traditional currency (e.g., Dollars, Euros, or Yen) is its decentralized infrastructure that allows users to make transactions on a peer-to-peer basis and to store value independently of any government, company, or financial institution. Cryptocurrency is typically stored in a digital wallet and can be used to buy goods, purchase services, and/or traded on exchanges for other assets, just like traditional currency.
Division of Assets During Divorce
When it comes to divorce, dividing property between spouses can be one of the most contentious aspects because all assets and debts that have been accumulated during the marriage must be allocated, and spouses rarely agree on who should receive what. While each state has its own laws governing how these assets and debts are to be divided, the court will generally try to divide them approximately equally between the two spouses. This can be a difficult task when you consider all of the different types of assets that may need to be divided, such as houses, cars, furniture, bank accounts, and investments.
When you add cryptocurrency into the mix of divorce assets to be valued and divided, things get more complicated very quickly. Because this new currency is still relatively new, there are few laws and regulations in place to govern how it should be handled, valued, or considered in a divorce settlement. This can lead to disagreements and disputes between spouses about who gets to keep the cryptocurrency and how it should be valued. In this article, we will explore how cryptocurrency can affect divorce property settlements and provide some tips on how to handle these issues in a smooth and fair manner.
What About Valuing Cryptocurrency?
Cryptocurrency is considered to be property for divorce purposes in many states, including South Carolina. This means that it should be subject to division, just like any other asset during a divorce. However, when valuing cryptocurrency for divorce purposes, there are a few things to consider.
First, you will need to determine when the cryptocurrency was acquired and its value at that time. You will also need to account for any changes in value that have occurred since then. If one spouse is awarded the cryptocurrency, they will be responsible for paying any capital gains taxes that may be due on the appreciation in value from the date of acquisition until the date of divorce.
If one spouse is receiving all the cryptocurrency, then there must be an agreement as to the exact value of the cryptocurrency so that the other spouse can receive an equal value of other assets in the divorce. However, one complicating factor is that the value of the cryptocurrency can (and often does) change suddenly.
Also, it is extremely rare that the property division agreement and the divorce are finalized on the same day. If the parties have agreed to the property division, but the divorce isn’t finalized for another few weeks, and the cryptocurrency loses the majority of its value or has significant gains in that intervening time, what happens then?
One option to try to avoid such a scenario is the divide the cryptocurrency between the parties equally. That way, if there is any significant change in value, both parties suffer the gain or loss equally, and neither spouse receives a windfall of more “secure” assets when the divorce is finalized.
If you or your spouse own cryptocurrency, it is important to discuss this with your divorce attorney so that they can advise you on how to best protect your interests and ensure that any property settlements are fair and equitable.
How to Discover Cryptocurrency Your Spouse May Be Hiding
Another very real problem with cryptocurrency is proving it exists when one party is actively trying to conceal it from the divorce proceedings. In these cases, it will be important to engage the services of a forensic accountant who specializes in finding this type of asset.
Because these assets are kept in digital wallets, as opposed to accounts managed by brokerage houses or financial planners who must keep certain records and make detailed reports to tax agencies, it may be necessary to engage in a complicated and specialized review of electronic devices used by the person who has bought the cryptocurrency to detect what is owned by that person.
Are Digital Assets Here to Stay?
It can be difficult to predict the future of any given technology, but it appears that cryptocurrencies are here to stay. If you or your spouse own cryptocurrency, or you suspect your spouse may be hiding financial assets using digital currency, it’s important to discuss this with your divorce attorney so they can help protect your interests. Working with an experienced and technologically savvy divorce attorney can help you navigate these complicated waters, which will give you a better chance of reaching a fair and equitable property settlement agreement at the end of your divorce.
If you and your spouse are considering divorce, don’t make any decisions about how to proceed before talking with a trusted attorney in your area. Your divorce and any settlement you create will be subject to your state’s divorce laws. Without discussing your situation with an attorney, your agreement may not be what you want or what is beneficial to your future. If you’re in South Carolina, it’s important to contact an experienced family court attorney like Ben Stevens today to discuss your specific situation. Even if you aren’t in South Carolina, Mr. Stevens is happy to offer referrals to a well-qualified attorney located in your state.
Ben Stevens has provided exceptional legal counsel and support to families throughout South Carolina for over twenty-five years, handling all matters of family law, such as prenuptial agreements, divorce, separation, alimony, and child custody. Our firm is well-equipped to handle all divorce and family law matters, no matter your circumstances. Contact our office at (864) 598-9172 or SCFamilyLaw@offitkurman.com to schedule an initial consultation.
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Contact our office at (864) 598-9172 or SCFamilyLaw@offitkurman.com to schedule an initial consultation.
ABOUT J. BENJAMIN STEVENS
Ben.Stevens@offitkurman.com | 864.598.9172
Aggressive, creative, and compassionate are words Ben Stevens' colleagues freely use to describe him as a divorce and family law attorney. Mr. Stevens is a Fellow in the prestigious American Academy of Matrimonial Lawyers, the International Academy of Family Lawyers, and is a Board Certified Family Trial Advocate by the National Board of Trial Advocacy. He is one of only two attorneys in South Carolina with those simultaneous distinctions. He has held numerous leadership positions in the AAML, and he currently serves as one of its National Vice Presidents. Mr. Stevens has a statewide practice and regularly appears all across South Carolina. His practice is focused on complex divorce and child custody cases.
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