Valuation and Distribution of Cryptocurrency Assets in Divorce Proceedings
Finalizing a divorce entails full disclosure from both spouses of their assets, liabilities, income, and expenses. Here in Long Island, this was a relatively easy process, as these items could not be concealed easily from the court or the spouse.
That changed in 2009 when cryptocurrency arrived at the scene. So in divorce proceedings, how do you split cryptocurrency or money stashed away in them? Let’s look at your options.
Checking for Undisclosed Cryptocurrency
When both parties declare all their assets, including cryptocurrency, the court can decide on how to distribute them. Problems arise when your spouse fails or refuses to disclose any cryptocurrency they own.
If you suspect that your spouse has invested in cryptocurrency, or had converted some of their money to it and stashed it away, you should make a formal standard discovery request to look at all of your spouse’s financial statements. These will be scrutinized for signs of cryptocurrency transactions. Bank statements showing unexplained, large cash withdrawals or wire transfers to peer-to-peer sites are a good sign your spouse is withholding cryptocurrency.
Confirming the Existence of Cryptocurrency
Should your spouse fail to reveal any cryptocurrency investments or savings, your lawyer or the court can hire companies that specialize in finding them. Know that there are ways to trace bitcoins and other commonly used cryptocurrencies. Once the special investigators have established your spouse’s ownership of bitcoins or other cryptocurrencies, the court can issue an order or subpoena to the companies involved in the transactions to release their records.
Determining Their Value
When cryptocurrency has been declared or its existence confirmed, you will be required to calculate their fair market value. It can be complicated and tricky since cryptocurrencies are extremely volatile.
For example, if the cryptocurrency is in bitcoins, their value may change significantly, and probably multiple times throughout your calculation, settlement, and actual distribution of assets.
The fair way is to refer to a guide like this one to determine the cryptocurrency’s fair market value. Note that there is no single correct or legal calculation method. You, your spouse, your divorce lawyers and the court should agree to what is a fair valuation and split any cryptocurrency fairly and reasonably.
Distributing the Cryptocurrency
One option is to not peg or express a specific monetary value to the cryptocurrencies at that time, and agree that the value would be based on the value at the time of the distribution. For example, if one of the parties owns 3 Bitcoin and 50 Ethereum, they must give half of the cryptocurrency or 1.5 Bitcoin and 25 Ethereum to the other party, regardless of their monetary value at the time of distribution.
In divorce proceedings, you should know that if any cryptocurrency assets were undeclared, this could place the non-disclosing party in contempt of court and liable for penalties. Cases where one of the parties attempt to conceal their cryptocurrency assets are rare, but know that their liability can be severe, and treated as having hidden overseas bank accounts. The presiding judge will take this into account when making the final judgment. When distributing cryptocurrency assets, both parties, their lawyers and the court should always seek a fair and reasonable agreement that conforms to local laws.
To ensure that your divorce proceedings are thorough and will go as smoothly as possible, hire an experienced team of legal professionals. Contact The Law Offices of Ian S. Mednick, P.C. today.
