Tag Archive for: crypto and divorce

What Your Lawyers Aren’t Telling You About Cryptocurrency And Divorce

Cryptocurrency has moved from niche curiosity to a mainstream financial reality. Whether held as an investment, used for business, or received as payment, digital assets now appear on more balance sheets and in more divorce filings. 

For couples navigating the end of a marriage, crypto introduces unique legal, valuation, tax, and enforcement challenges. 

This guide explains what you need to know in 2025: how courts are treating crypto, practical steps for preserving your rights, important tax and regulatory updates, and how Masters Law Group can help protect your interests.

Why Crypto Matters in Divorce

Cryptocurrencies, bitcoin, Ethereum, stablecoins, tokens, and even NFTs are usually treated as property for legal and tax purposes. That means they’re potentially divisible marital assets, subject to disclosure and distribution under state laws governing equitable distribution or community property. Yet unlike a bank account or a house, crypto’s features (pseudonymous wallets, self-custody, rapid price swings, and cross-border exchanges) make discovery, valuation, and enforcement more complicated. Courts and practitioners increasingly must adapt traditional asset-division tools to this new asset class. 

Four Practical Challenges Unique to Crypto

  1. Disclosure and hidden holdings: Crypto can be moved quickly, split across many wallets, or stored on offshore platforms. One spouse may overlook (or intentionally hide) holdings, send assets to friends, or convert crypto to fiat before trial. Full, early disclosure is essential, and forensic accountants or blockchain tracing tools are becoming standard in contested cases.
  2. Valuation volatility and timing: Crypto prices can swing dramatically in short periods. Parties and the court must agree on a valuation date and method (e.g., market price at petition date, trial date, or an average over a period). Clear contract language in settlements about valuation and future price movements helps avoid later disputes.
  3. Tracing and commingling: If one spouse used marital funds to purchase crypto and later transferred it to a separate wallet, courts will look at tracing rules to determine whether the asset remains marital or has become separate. Commingling crypto with jointly owned funds (for example, transferring crypto into a joint account or spending jointly) can complicate the analysis. 
  4. Custody of private keys and enforceability: The person who controls the private keys effectively controls the asset. Even after a court orders distribution, enforcing that order can be tough if the holder refuses to cooperate or deletes keys. Solutions include supervised transfers, escrow arrangements, requiring exchanges to freeze accounts when possible, or awarding equivalent value in other assets. Law firms increasingly draft very specific division instructions (wallet addresses, transfer steps, timing) into settlement documents to make orders enforceable. 

Recent Regulatory and Economic Context (2024–2025): Why it Matters to Divorce Cases

Crypto and Divorce

Crypto’s legal and tax landscape has evolved rapidly, and divorce practitioners must factor these changes into planning and settlement drafting.

Tax and reporting developments. The IRS continues to treat virtual currency as property; taxpayers must report transactions and income from digital assets. Recent IRS guidance and updates have emphasized reporting obligations and clarified treatments for things like hard forks and staking income. Moreover, increased reporting by exchanges (including new reporting frameworks implemented since 2024–2025) means tax authorities have better visibility into accounts, which also makes it easier for the spouse seeking disclosure to obtain evidence.

Regulatory momentum. In 2025, the SEC and other U.S. agencies have been active in staking out regulatory boundaries for digital assets, releasing staff statements and plans to clarify which crypto activities fall inside securities regulation and which do not. Those rulemaking and enforcement efforts affect market infrastructure (custody, exchanges, staking services) and, therefore, the tools available to enforce divorce orders. For example, clearer standards for regulated custodians mean parties may prefer placing crypto with regulated custodians to make future enforcement easier. 

Macro adoption and market trends. Mainstream adoption by institutions, growing consumer interest, and ongoing integration of crypto into corporate treasuries and platform rewards have increased the prevalence of crypto in household portfolios. That broadening adoption means more divorces will involve digital assets in one form or another, and courts are seeing more cases addressing how to treat them. 

Valuation: Best Practices for Courts and Practitioners

Because price volatility is a major issue, valuation needs to be deliberate:

  • Agree upfront on a valuation date and source: Parties commonly use a market close price from a major exchange on a specific UTC date/time, or an average price over several days to smooth volatility. Specify which exchange or data provider is authoritative in your agreement.
  • Document the source wallet and transaction history: Settlement language should identify wallet addresses, exchange accounts, and transaction IDs. This can help reduce ambiguity when transfers occur later.
  • Use qualified experts: If valuation is contested, blockchain forensic specialists and experienced valuation professionals can trace assets, determine acquisition dates and cost basis, and recommend fair valuation methods.
  • Plan for tax consequences: Remember that transfers can create taxable events. A “transfer” to satisfy a divorce award may be treated differently for tax purposes depending on whether it’s part of a divorce settlement or a property transfer incident to divorce, and whether it triggers recognition of gain. 

Tax Consequences: What to Watch For

The IRS treats cryptocurrency as property, meaning capital gains taxes can apply when crypto is sold or otherwise disposed of. Important considerations in divorce:

  • Transfers incident to divorce: Historically, transfers of property between former spouses incident to divorce could be non-taxable events under certain Code provisions, but tax treatment can be nuanced with digital assets. Confirm current IRS guidance and, when possible, structure transfers to avoid unexpected tax consequences.
  • Cost basis tracking: Accurate, wallet-by-wallet cost basis tracking matters, especially after 2025 changes requiring stricter reporting and tracking of digital-asset transactions. If parties agree to divide future proceeds from crypto sales, remember to allocate cost basis and recognition of gains/losses in settlement documents.
  • Staking, forks, and “earn” programs: Income from staking, hard forks, airdrops, or interest-like programs can generate taxable income that should be reported and allocated between spouses where appropriate. Recent IRS rulings have addressed some of these events, but practitioners must stay current. 

Discovery and Forensic Tools: How to Find Hidden Crypto

Crypto and Divorce

If one spouse suspects undisclosed crypto, the following tools and legal strategies can help:

  • Subpoenas and third-party discovery: Request records from exchanges, payment processors, and custodians. Improved reporting requirements and exchanges’ obligations make this route more fruitful than in the early crypto years.
  • Blockchain analytics: Blockchain tracing firms can follow on-chain movements, link addresses to known exchanges, and sometimes identify off-chain relationships. Combined with subpoena power, tracing can reveal conversion to fiat or transfers to third parties.
  • Narrowly drafted interrogatories and asset searches: Ask for detailed statements about wallets, private keys, and related digital assets (NFTs, tokens, DeFi positions).
  • Forensic accountants: They can reconcile on-chain and off-chain activity, identify patterns of concealment, and estimate present-day value at agreed valuation dates. 

Practical Division Options Courts Use

There is no one-size-fits-all. Common approaches include:

  • In-kind division: Transferring specified tokens or NFTs to the receiving spouse’s wallet. This requires cooperation to transfer private keys or use custodial escrow.
  • Buy-out: One spouse keeps the crypto and compensates the other with equivalent value in cash or other assets. This avoids key-transfer headaches but raises valuation and tax questions.
  • Phased transfer: To manage volatility, parties may use a phased schedule (e.g., a portion transferred immediately and the remainder over time) with clauses to rebalance if significant price moves occur.
  • Escrow or court-supervised transfer: Using a neutral custodian or escrow to enforce transfers and verify completion.
  • Alternative equivalent award: Awarding non-crypto assets equal to the crypto’s value, sidestepping custody problems.

Settlement documents should be extremely detailed, include wallet addresses, exact token amounts, transfer windows, verified steps for key transfer, and remedies for noncompliance (e.g., contempt, sanctions, or awarding equivalent value). Recent practice shows courts favor specific, enforceable mechanisms rather than vague promises. 

Enforcement: What if a Spouse Refuses to Transfer?

Enforcement can be complicated, but remedies exist:

  • Contempt and sanctions: If a party refuses to comply with a court order, courts can impose contempt sanctions.
  • Constructive trust or equitable relief: Courts can impose remedies that recognize the claimant’s interest in misappropriated assets.
  • Third-party account freezes: If funds were moved to regulated exchanges, a subpoena or temporary restraining order may freeze accounts.
  • Criminal referral: In extreme cases involving fraud or theft, criminal authorities may get involved, though civil remedies are typically the first line.

The takeaway: protecting rights requires detailed settlements and aggressive discovery when concealment is suspected.

How Recent Economic and Regulatory Shifts Affect Divorce Strategy

  • Better reporting and exchange cooperation: As exchanges come under stricter reporting rules, obtaining records via subpoena is more likely to succeed. That should encourage full disclosure, but also incentivize concealment strategies that require forensic tracing. 
  • Regulatory clarity: If more custodians operate under clear regulatory regimes, parties may prefer placing assets with regulated custodians during divorce to simplify division and enforcement. SEC and federal agency actions in 2025 are moving in this direction.
  • Macro adoption increases prevalence: As institutions and individuals hold more crypto, divorces involving digital assets are more common, meaning courts and counsel are becoming more experienced and precedents are accumulating.

Practical Checklist for Clients

  1. Inventory every digital asset: Coin/token names, wallet addresses, exchange accounts, transaction IDs, date acquired, and cost basis.
  2. Preserve evidence: Don’t delete apps, accounts, messages, or transaction histories; preserve devices and create mirror images if necessary.
  3. Consider immediate protective orders: If you suspect active concealment or dissipation, ask the court for a temporary restraining order or asset preservation order.
  4. Use professionals: Forensic accountants, blockchain analysts, and tax advisors can provide necessary technical support and credibility.
  5. Draft precise settlement language: Include valuation date, data sources, wallet addresses, transfer steps, and remedies for noncompliance.
  6. Factor taxes in settlement allocation: Decide who bears tax consequences for transfers or future gains. 

Why You Need an Experienced Family Law Firm for Crypto Cases

Crypto complicates nearly every stage of a divorce: discovery, valuation, tax planning, negotiation, and enforcement. Without knowledgeable experience, clients risk:

  • Accepting settlements that omit hidden assets.
  • Receiving awards that are impossible or costly to enforce.
  • Facing unexpected tax liabilities from poorly structured transfers.

How Masters Law Group Can Help

Crypto and Divorce

At Masters Law Group, we understand that divorce is challenging enough without the added complexity of dividing digital assets. Our team is well-versed in handling cases that involve cryptocurrency, NFTs, and other digital property. We know how to uncover hidden assets, work with forensic experts to trace transactions, and draft enforceable settlement agreements that help protect your financial future.

Here’s how we can help you:

  • Comprehensive Asset Discovery: We partner with forensic accountants and blockchain analysts to help ensure full disclosure of crypto holdings.
  • Valuation & Division Strategies: Our attorneys will help you determine accurate valuations, select the right valuation dates, and create clear division methods that account for crypto’s volatility.
  • Tax-Aware Settlements: We work closely with tax professionals to help ensure that transfers and allocations are structured in the most tax-efficient way possible.
  • Enforcement & Protection: If your spouse refuses to disclose or transfer digital assets, we’ll pursue court orders, sanctions, or subpoenas to protect your rights.
  • Personalized Guidance: Every divorce is unique. We tailor strategies to fit your specific needs, whether you want to keep crypto holdings, liquidate them, or receive equivalent value in other assets.

When your financial security is on the line, you need a family law firm that not only understands the law but also the fast-evolving world of digital assets. Masters Law Group brings both to the table, giving you peace of mind in an otherwise uncertain time.

Final Thoughts and Next Steps

Digital assets are now a routine part of many marital estates. The intersection of technology, law, and finance means that divorce involving crypto requires thoughtful strategy, technical knowledge, and precise legal drafting. Courts, regulators, and market actors continue to shape the landscape, and Masters Law Group stays current to help protect client interests in this evolving environment. Recent regulatory and reporting changes have made it easier to trace and document holdings, but concealment risks remain. Early disclosure, careful valuation planning, and enforceable settlement mechanics are key.

If you suspect undisclosed crypto in your marriage, are unsure how to value or divide tokens and NFTs, or want a tax-aware settlement that’s enforceable in practice, contact Masters Law Group. We’ll evaluate your situation, explain your options, and coordinate the technical and legal resources needed to secure a fair outcome.

Disclaimer: This blog is for informational purposes only and does not constitute legal advice. If you need legal assistance, please contact the qualified attorneys at Masters Law Group. Our firm can help you handle your family law case in Illinois, including divorce, custody, and mediation services.

Crypto Divorce Lawyer

Dividing assets is a standard part of any Illinois divorce case. At Masters Law Group, our skilled cryptocurrency divorce attorneys track down these digital assets and negotiate an appropriate and fair division.

While some cryptocurrencies are easily found during the discovery phase of divorce proceedings, others, such as bitcoin, can be more challenging to find, particularly when they are private. If you have an impending divorce on your hands, you need to know how to find, value and divide them.

If you or your spouse own cryptocurrency, you are going to want to make sure it is discussed with your divorce attorney. It may be a marital asset that needs to be valued and divided; but due to cryptocurrency wildly fluctuating, it can sometimes be problematic to value, and therefore split fairly.

Here’s what you need to know about handling bitcoin and other cryptos in divorce.

A QUICK RECAP OF CRYPTOCURRENCY

The use of cryptocurrency varies user to user. Some people prefer to use cryptocurrency for online purchases to ensure secure financial transactions. Others might use it simply to capitalize on discounts or rewards offered for the use of digital currencies.

The most popular form of cryptocurrency is Bitcoin. Some examples of other digital currencies are Litecoin, Ethereum, Ripple, Zcash, Bitcoin Cash, and Cardano. Digital currency is bought, sold, and traded on various platforms. Coinbase is a popular platform used for Bitcoin. Some other digital currency exchange platforms are Kraken, BitStamp, ShapeShift, Gemini, and Bisq.

Cryptocurrencies are validated by a blockchain. This refers to a list of records called blocks that are linked together like a chain. Blockchains are designed to be secure. The foundation of a blockchain is a “decentralized database.” Blockchains can include a piece of information called a hash.

It is very important to know if any parties in a family law matter have cryptocurrency. Cryptocurrency can be a marital asset eligible for division in a divorce. If you know cryptocurrency exists, it will need to be valued. Cryptocurrency has an exchange rate just like standard currency and it can be converted into U.S. dollars. There are programs on the internet that can assist with the conversion of cryptocurrency to dollars. It may be helpful to know which conversion rate program that cryptocurrency owner utilizes.

LOOKING FOR CRYPTOCURRENCY

Valuation presents the primary difficulty when two people need to divide digital currency. Cryptocurrency assets are notorious for sharp shifts in value over short periods of time.

Figuring out whether or not cryptocurrency exists is important. Have you discussed cryptocurrency with your spouse? Have you overheard them boating to their friends about their crypto wallet? Will bank account statements or credit card statements show deposits or withdrawals from a digital currency platform? Are there emails or other correspondence that contain information about cryptocurrency?

If any of these are true in your marriage or divorce, you should notify your attorney immediately. Your attorney will need to start collecting information about the cryptocurrency. Obtaining documentation about cryptocurrency can be tricky because often the point of cryptocurrency is for transactions to remain private or secure.

First, it needs to be determined if the cryptocurrency owner has a wallet and whether that wallet is online or is a physical device. The wallet will have an ID and a password for logging which can be requested in discovery. Wallets can be similar to a portable hard drive and be an actual physical item. In other instances, the wallet may just be online and through one of the cryptocurrency exchange platforms. Different steps need to be taken to preserve information from both kinds of wallets.

An owner can usually download a transaction history from his/her wallet or exchange platform. The transaction history is often downloaded as an Excel spreadsheet or other electronic document. The download contains information like a bank statement such as date, time, amount of cryptocurrency, conversion rate, balance, transaction ID, and hash information.

Most transactions will show some sort of confirmation of purchase. Often the confirmation occurs via email and serves as a receipt. The confirmation may include the conversion rate, dollar amount, and a date and timestamp. In some instances, the confirmation may identify where the cryptocurrency user deposited the funds after sale or where they withdrew the funds from to make a purchase. This can help you in the long run to identify other assets.

Cryptocurrency Division

After identifying crypto as a marital asset and considering its valuation, you have four main options for dividing the assets in  question:

  • Simple Division: In this approach, you simply receive a share of the cryptocurrency in its current form.
  • Custodial Holding: Should you not wish to set up a cryptocurrency account, you may find the custodial approach suitable. A third-party custodian who can transact in cryptocurrency receives your share and holds it until the divorce is final.
  • Cryptocurrency Owner Liquidation: The former spouse who owns the asset will convert the other party’s share to cash. The digital currency’s value on the day of sale determines how much money you receive.
  • Liquidation With No Claim Upon Remaining Cryptocurrency: This approach starts the same as #3. However, both parties have agreed in advance that the original owner of the cryptocurrency now has full title to the remaining asset and does not owe the former spouse any more of the cryptocurrency regardless of how its value may change in the future.

Choosing how to distribute cryptocurrency in a divorce requires careful evaluation. You may need to weigh advice from your divorce attorney to arrive at the best solution for your unique case.

FINAL THOUGHTS

These days, bitcoin and other cryptocurrencies are all the rage. As such, the issue of bitcoin is bound to pop up in divorce cases.

Lack of familiarity with cryptocurrency or outright discomfort with it add another wrinkle to divorce negotiations. Which is why it is important to make sure that bitcoin is properly discovered and valued in family law matters. If you know or suspect that cryptocurrency will be a part of your divorce, talk to your family law attorney immediately and put together a game plan for dealing with it. This may include a plan for how to explain how cryptocurrency works with other parties or professionals in your case.

If you are concerned about how your or your spouse’s cryptocurrency assets could affect your divorce or the asset division process, Masters Law Group can help. Our team of highly trained and experienced attorneys are here to answer your questions about divorce and digital asset division.

Contact us today for more information, or to schedule a consultation.

The Illinois Divorce Process and Cryptocurrencies

Cryptocurrencies are a new form of currency, rapidly gaining popularity and media attention across the globe. It’s estimated more than 20 million Americans may own cryptocurrency, and how to split holdings has become a growing concern in divorce settlements. 

The problem for divorcing couples is that the division and valuation of cryptocurrencies can be just as difficult as dividing up the equity in a home.

Throughout our cryptocurrency series we have answered many questions regarding different types of crypto and where you can find hidden assets. In a world where cryptocurrency is increasingly accepted as legitimate, it’s only natural that Masters Law Group’s experienced attorneys would know how to handle it. Here’s a quick look at how the state handles the issue at hand.

Disclosing Bitcoins And Cryptocurrencies in an Illinois Divorce

It’s important to understand how the state of Illinois divides and separates cryptocurrency assets. Illinois has taken steps to protect individuals who have invested in cryptocurrencies by allowing them to be counted as part of their overall net worth during divorce proceedings.

However, there are some stipulations involved in this process. Any money received from selling cryptocurrency is considered to be liquidated property and thus should not be counted as part of the overall net worth of an individual during a divorce settlement.

This process may trigger a couple of questions. How would you verify Bitcoin holdings? Would you print a screen grab from an online platform where you hold Bitcoin or other cryptocurrencies? Would you entrust your ex-spouse or their attorneys with the password to your accounts? Coin exchange companies such as Coinbase will issue a 1099-K each year if there have been $20,000 or more in exchanges of cryptocurrency.

Typically, the opposing party’s attorney will go through the process of cleaning up the financial affidavit and ask you for these documents to verify the claimed assets. The opposing party’s attorney will issue a “Notice To Produce” asking for copies of statements for your 401k, bank accounts, etc. If you have access to those documents, you must provide them a copy of those documents if they request it. Failure to do so can result in a finding of contempt of court.

The Illinois Department of Revenue requires 1099-K forms to be submitted electronically to Illinois when four or more separate transactions exceed $1,000 or if you are required by the IRS* to electronically file Forms 1099-K.

Essentially any 4 crypto-currency purchases, sales or trades will trigger a 1099-K in Illinois and the cryptocurrency holder will have those 1099-K as part of their standard tax packet. If your spouse will not fully disclose their cryptocurrency holdings, you may have to turn to an expensive third party to discover any additional holdings.

How Do You Divide Crypto in Illinois?

After determining the actual existence and quantity of your spouse’s cryptocurrency, the next step in the analysis is to figure out what portion of the cryptocurrency is marital. In Illinois, all property held by either party is presumed marital property unless it falls under an exception such as being acquired before the marriage, being a gift or an inheritance.

Typically, if both parties agree to the settlement they might have to include a formula for the volatility of the crypto. Once the judge approves of the formula, the price of that cryptocurrency in the martial estate becomes more foreseeable. 

Dividing crypto in Illinois is similar to the division of any other assets. Illinois is not a community property state, which means the court will split assets purchased, converted or appraised throughout the marriage in an equitable manner. It’s important to note that when it’s split equitably, it doesn’t always mean equal. Here are a couple factors that determine equitable distribution:

  • Age, health, financial circumstance of a spouse
  • Financial contributions to marital estate
  • Court-ordered obligations related to previous marriages
  • Child custody considerations
  • Prenuptial and postnuptial agreements
  • Tax Concerns
  • Marriage Duration
  • Alimony provisions

If you are ever unsure about the ownership of your property, you should consult legal counsel immediately in order to avoid any uncertainness. Lastly, if both parties agree to the settlement they might have to include a formula for the volatility of the crypto. Once the judge approves of the formula, the price of that cryptocurrency in the martial estate becomes more foreseeable.

The volatility of the price of these assets makes it very difficult to adequately value at the time of the divorce. Discovery and final negotiation of a divorce can sometimes take months and in that time a cryptocurrency could double or halve in value. A cash out of the cryptocurrency before the finality of the divorce is probably advised to finalize the marital value.

How Masters Law Group Can Help

When it comes to modern-day divorce cases, Masters Law Group has you covered on all things crypto. If you’re facing a divorce and suspect that your spouse is hiding crypto (and don’t know what signs to look out for), you can find that information in our recent blog here. If you have questions about the different types of popularized crypto, you can find that information right here.

Masters Law Group is here to help you through this stressful time. It’s important to consult your attorney as soon as you find any hidden cryptocurrency and discuss everything you know about the assets such as the type of crypto, the date of purchase and its appreciation. Gather any documents and records you may need in order to get your affairs in order. 

Our team of attorneys are highly experienced in dealing with Cryptocurrencies in divorce and are here to answer your questions about divorce and digital asset division.

Contact us today for more information, or to schedule a consultation.

Can You Lose Bitcoin in a Divorce?

While some cryptocurrencies are easily found during the discovery phase of divorce proceedings, others, such as bitcoin, can be more challenging to find, particularly when they are private. If you have an impending divorce on your hands, you need to know how to find, value and divide them. Here’s what you should know. 

In the first of our Cryptocurrencies and Divorce series, we discussed how the rise and popularity of cryptocurrency has led to some spouses hiding digital assets during divorce settlements, and tracking down the funds isn’t an easy process.

If you or your spouse own cryptocurrency, you are going to want to make sure it is discussed with your divorce attorney. It may be a marital asset that needs to be valued and divided; but due to cryptocurrency wildly fluctuating, it can sometimes be problematic to value, and therefore split fairly.

Here’s what you need to know about handling bitcoin and other cryptos in divorce.

A Quick Recap of Cryptocurrency 

The use of cryptocurrency varies user to user. Some people prefer to use cryptocurrency for online purchases to ensure secure financial transactions. Others might use it simply to capitalize on discounts or rewards offered for the use of digital currencies.

The most popular form of cryptocurrency is Bitcoin. Some examples of other digital currencies are Litecoin, Ethereum, Ripple, Zcash, Bitcoin Cash, and Cardano. Digital currency is bought, sold, and traded on various platforms. Coinbase is a popular platform used for Bitcoin. Some other digital currency exchange platforms are Kraken, BitStamp, ShapeShift, Gemini, and Bisq.

Cryptocurrencies are validated by a blockchain. This refers to a list of records called blocks that are linked together like a chain. Blockchains are designed to be secure. The foundation of a blockchain is a “decentralized database.” Blockchains can include a piece of information called a hash.

It is very important to know if any parties in a family law matter have cryptocurrency. Cryptocurrency can be a marital asset eligible for division in a divorce. If you know cryptocurrency exists, it will need to be valued. Cryptocurrency has an exchange rate just like standard currency and it can be converted into U.S. dollars. There are programs on the internet that can assist with the conversion of cryptocurrency to dollars. It may be helpful to know which conversion rate program that cryptocurrency owner utilizes.

Looking for Cryptocurrency

Figuring out whether or not cryptocurrency exists is important. Have you discussed cryptocurrency with your spouse? Have you overheard them boating to their friends about their crypto wallet? Will bank account statements or credit card statements show deposits or withdrawals from a digital currency platform? Are there emails or other correspondence that contain information about cryptocurrency?

If any of these are true in your marriage or divorce, you should notify your attorney immediately. Your attorney will need to start collecting information about the cryptocurrency. Obtaining documentation about cryptocurrency can be tricky because often the point of cryptocurrency is for transactions to remain private or secure.

First, it needs to be determined if the cryptocurrency owner has a wallet and whether that wallet is online or is a physical device. The wallet will have an ID and a password for logging which can be requested in discovery. Wallets can be similar to a portable hard drive and be an actual physical item. In other instances, the wallet may just be online and through one of the cryptocurrency exchange platforms. Different steps need to be taken to preserve information from both kinds of wallets.

An owner can usually download a transaction history from his/her wallet or exchange platform. The transaction history is often downloaded as an Excel spreadsheet or other electronic document. The download contains information like a bank statement such as date, time, amount of cryptocurrency, conversion rate, balance, transaction ID, and hash information.

Most transactions will show some sort of confirmation of purchase. Often the confirmation occurs via email and serves as a receipt. The confirmation may include the conversion rate, dollar amount, and a date and timestamp. In some instances, the confirmation may identify where the cryptocurrency user deposited the funds after sale or where they withdrew the funds from to make a purchase. This can help you in the long run to identify other assets.

Can You Lose Bitcoin in a Divorce?

Bitcoin is treated the same as any other asset in a divorce. If the bitcoin transaction was before the marriage, was given as a gift or through an inheritance, it is not marital property and usually cannot be divided. Therefore, if the transaction was during the marriage, it is marital property and can be divided.

When bitcoin is considered marital property, the easiest way to divide them is to split the determined value 50/50. Since most bitcoin can be cashed out in full, splitting the value 50/50 means each spouse would simply get half.

Another way to divide bitcoin is by negotiating other marital property in exchange. If the spouse with the bitcoin wants to keep them, they can give up other marital property with the same determined value to the other spouse.

Final Thoughts

These days, bitcoin and other cryptocurrencies are all the rage. As such, the issue of bitcoin is bound to pop up in divorce cases.

It is important to make sure that bitcoin is properly discovered and valued in family law matters. If you know or suspect that cryptocurrency will be a part of your divorce, talk to your family law attorney immediately and put together a game plan for dealing with it. This may include a plan for how to explain how cryptocurrency works with other parties or professionals in your case.

If you are concerned about how your or your spouse’s cryptocurrency assets could affect your divorce or the asset division process, Masters Law Group can help. Our team of highly trained and experienced attorneys are here to answer your questions about divorce and digital asset division.

Contact us today for more information, or to schedule a consultation.

 

How is Cryptocurrency Divided in Divorce?

Cryptocurrency is an asset like any other kind of asset, and as a result, it may be considered separate property or marital property. What many people do not understand is exactly how complicated this can become. 

Cryptocurrency is a type of code or software that dictates how a unit of currency is produced and regulated.  Essentially, the creator of the cryptocurrency makes the units using an algorithm that relies on cryptography to secure the currency. The most common cryptocurrency, and the first of its kind, is Bitcoin, but there are thousands of other types that can be purchased or earned.

Despite Bitcoin and Crypto prices being extremely volatile, (the recent Crypto crash being a prime example), cryptocurrency is gaining in popularity and becoming a more and more common asset seen in divorce cases.

Crypto and Divorce Trend

Cryptocurrency has gone from an obscure hobby to a significant investment for many people across the country. As crypto assets like bitcoin rose dramatically in price, many investors became wealthy, especially those who entered the crypto market in the early days. However, cryptocurrency can also add new complications to a divorce, particularly when it comes to dividing assets between divorcing spouses.

Here’s a look at some commonly asked questions about cryptocurrency assets in a divorce.

Q: What is Cryptocurrency and is it Considered Marital Property?

A: Bitcoin is a cryptocurrency that allows secure transactions on the internet without having to go through a bank. Bitcoins can be exchanged or traded for other currency, products, or services and have increased in use since their creation in 2008. With this increase comes new challenges in a divorce when it comes to dividing up assets.

Cryptocurrency is considered an asset and as a result, it may be considered separate property or marital property. In some cases, growth in the value of cryptocurrency during the marriage may be considered a marital asset, even if the original purchase took place before the marriage. 

This is especially true when both spouses were involved in using cryptocurrency, investing in crypto assets, or planning to rely on crypto to fund future financial ventures. If you’re a crypto investor considering divorce, you should always consult with your lawyer about how you can expect your investments to be affected by the separation.

Q: Can You Lose Bitcoin in a Divorce?

A: Bitcoins are treated the same as any other asset in a divorce. If the bitcoin transaction was before the marriage, was given as a gift or through an inheritance, it is not marital property and cannot be divided. Therefore, if the transaction was during the marriage, it is marital property and can be divided.

When bitcoins are considered marital property, the easiest way to divide them is to split the determined value 50/50. Since most bitcoins can be cashed out in full, splitting the value 50/50 means each spouse would simply get half.

Another way to divide bitcoins is by negotiating other marital property in exchange. This means, if the spouse with the bitcoins wants to keep them, they can give up other marital property with the same determined value to the other spouse.

Q: Can Cryptocurrency Be Used to Hide Assets During Divorce?

A: A misinformation gap can easily arise especially when only one partner is involved in the crypto market and the other spouse has little knowledge on the aspects of crypto investments. This gap can lead to one partner not knowing what to look for when it comes to uncovering crypto holdings in the asset division process. 

The growing awareness of cryptocurrency technology has led to more divorce attorneys thinking about how to deal with crypto as a way of hiding assets. In some cases, a spouse may suspect the other party has undisclosed crypto holdings, while in other cases, they may notice that the other spouse suddenly seems to have a source of funds that is not tied to their existing employment or investments.

There are several ways that cryptocurrency assets may be discovered. The best-known and easiest to uncover are bitcoin and ethereum. Other cryptocurrencies may offer higher levels of anonymity. Those assets are much less valuable and more volatile than the better-known digital currencies. A forensic expert typically brought in by the parties, may search for cryptocurrency tickers, login credentials for exchanges, or keys for certain types of digital wallets.

Bank statements, credit card statements, and other financial documents may indicate transactions for crypto purchases from various exchanges.

Final Thoughts

During a marriage, it’s important for both partners to have an understanding of their marital income, and investments. With greater knowledge about finances shared between spouses, it can be far more difficult for one person to hide assets during a divorce. 

If you are concerned about how your or your spouse’s cryptocurrency assets could affect your divorce or the asset division process, Masters Law Group can help. Our team of highly trained and experienced family law attorneys are here to answer your questions about divorce and digital asset division.

Contact us today for more information, or to schedule a consultation.