Tag Archive for: crypto assets

Splitting Digital Assets in Divorce

In an age where our lives are increasingly intertwined with technology, the division of assets during a divorce has taken on a new dimension. As we enter 2024, “digital assets” have become a significant consideration in divorce proceedings. 

These assets encompass various digital properties, from cryptocurrencies to digital media collections and online businesses. In this blog, we’ll explore the complexities and challenges of splitting digital assets in divorce for 2024. Here’s what you need to know.

Defining Digital Assets

In divorce proceedings, the concept of digital assets has introduced a new layer of complexity. As couples navigate the intricacies of separating their lives, digital assets have become a significant factor to consider. Digital assets encompass any property or wealth existing solely in the digital realm. Here are a few key areas to consider:

  • Cryptocurrencies: In light of the surging popularity of cryptocurrencies like Bitcoin and Ethereum, divorcing couples may encounter the challenge of dividing their digital currency holdings.
  • Online Businesses: Couples who have established or invested in online businesses, such as e-commerce platforms or software startups, must grapple with dividing their digital business assets.
  • Social Media and Online Accounts: Contentious issues may arise regarding access and control over social media accounts, email accounts, and other online profiles.

Understanding the specific complexities of each category is essential. Addressing these digital assets is crucial to achieving fair and equitable divorce settlements in the digital age.

Challenges in Splitting Digital Assets

During the process of a pending divorce, it’s crucial for both you and your spouse to take inventory of all your digital assets, much like you would with physical ones. Each party should compile a comprehensive list of everything categorized as marital property. Here are a few things to consider: 

  • Valuation: Determining the value of digital assets can be challenging, as their worth is often subjective and volatile. Cryptocurrency values, for instance, can fluctuate significantly.
  • Ownership: Establishing ownership of digital assets can be complex. Cryptocurrencies might be held in hidden wallets, and online businesses may have multiple stakeholders.
  • Privacy and Security: Access to digital assets often requires sensitive information, such as private keys for cryptocurrency wallets or login credentials for online accounts. Sharing this information can pose privacy and security risks.
  • Tax Implications: Transferring digital assets between spouses may have tax consequences, depending on the jurisdiction and the nature of the assets involved.

Digital asset division laws and regulations can vary significantly from state to state. This can add complexity to the divorce process. Working with an experienced divorce attorney can help you understand the digital asset division.

Understanding Asset Division in Illinois

If you suspect that your spouse may be concealing cryptocurrency assets, there are steps you can take to investigate the matter thoroughly. In divorce proceedings, fully and honestly disclosing all assets, including cryptocurrencies, is crucial. In Illinois, dividing cryptocurrency assets follows a process similar to any other marital property.

Illinois does not adhere to the community property principle. Instead, the court will equitably distribute assets purchased, converted, or appraised during the marriage. It is important to understand that equitable does not necessarily mean equal; various factors are taken into account in determining the distribution, including:

  • Age, health, and financial circumstances of each spouse.
  • Contributions made to the marital estate.
  • Obligations related to previous marriages, as ordered by the court.
  • Considerations regarding child custody.
  • Pre and post-nuptial agreements.
  • Tax implications.
  • Duration of the marriage.
  • Alimony arrangements.

If you ever find yourself uncertain about the ownership of assets, seeking legal counsel is recommended to help ensure everything is clear.

Working With a Divorce Attorney

Working with a divorce attorney experienced in splitting digital assets can be a game-changer for individuals going through a divorce in 2024. Divorce attorneys understand the complexities of digital assets so that nothing is left to chance during asset division proceedings.  

At Masters Law Group, our experienced attorneys can help you with the following: 

  • Professional Assistance: Consult with financial experts and lawyers experienced in dealing with digital assets. They can help assess these assets’ value, ownership, and tax implications.
  • Negotiation and Mediation: Amicable negotiations can help couples reach mutually agreeable solutions for dividing digital assets without litigation.
  • Court Intervention: In cases where spouses cannot agree on the division of digital assets, a court may step in and decide based on applicable laws and regulations.

From cryptocurrencies’ volatile valuations to online businesses’ intricate web of ownership rights, our divorce attorneys can provide valuable guidance in assessing digital holdings’ value, ownership, and tax implications.

Final Thoughts

As we navigate the digital age, the division of digital assets has emerged as a crucial aspect of divorce proceedings. For couples facing separation in 2024, it’s essential to recognize the challenges and complexities associated with splitting digital assets. 

Let Masters Law Group provide transparency so you can work towards a fair and equitable distribution of your digital assets. Our skilled attorneys, serving communities across Chicago and the suburbs of Elmhurst, Hinsdale, DuPage, and Oakbrook, offer experience and insights into digital assets and divorce, helping you navigate this complex process.

Contact us today to set up your complimentary consultation.

A Guide to Divorce and Cryptocurrency

In 2022, cryptocurrencies are playing a big role in divorces. If you’re facing a divorce and lost on how to find, value and split cryptos, here’s what you need to know. 

With the rise in popularity of cryptocurrency over the past few years, it is becoming a hot topic in many divorce cases. When it comes to dividing assets in a divorce, it can be difficult to know what to do with cryptocurrency. While there are many different types of cryptocurrencies, they all operate in fundamentally similar ways: they are digital currencies that can be exchanged for goods and services or other currencies, and many are traded on online exchanges.

This guide will give you a high-level overview of cryptocurrency and explain your options on how to deal with it in a divorce. Let’s take a look.

Cryptocurrency Basics

The rise (and falls) of cryptocurrency has been unlike anything we’ve ever seen. The market is so volatile that some have compared it to the Wild West. And yet, the demand for it seems insatiable. So what is cryptocurrency, and why are people so interested in it?

Cryptocurrency is a virtual or digital currency that can be used like real money as a medium of exchange. It is not a physical token, like a dollar bill, but is similar to an electronic payment system (think of swiping your credit card) as a way to pay for something.

Cryptocurrency “coins” are held in a digital wallet, which can be an online service, a software program, or a personal hard drive among other things. The wallet allows the owner to make secure transactions for goods and services or keep it as a type of investment. Since the coins are not issued by a central authority, like a bank or government, they are theoretically immune to inflation and other government interference.

Cryptocurrency and Taxes

When you sell or transfer cryptocurrency, it is treated as property and capital gains are taxed. You will incur a gain or loss when sold, transferred as payment for goods or services, exchanged with another crypto, and at other various scenarios.

You are required by the IRS to report gains and losses on each transaction even if the gain or loss is not material. The difference between the purchase price and sales/transfer price is what will be taxed.

If the value at the time of sale or transfer is more than the purchase price, you will incur a capital gain. If the value at the time of sale or transfer is less than the purchase price, you will incur a capital loss.

Understanding Cryptocurrency and Divorce

When you are going through a divorce, you will need to provide financial disclosures to your spouse. This includes information about your assets, income, and expenses. Cryptocurrency is considered an asset and not income. As such, it should be listed on your financial disclosures when you are going through the divorce process.

Most cryptocurrency holdings have a current value which is listed when you log into your account. The values listed are based on current exchange rates for that specific cryptocurrency to US dollars. However, values can fluctuate by a significant amount daily so it is important to keep this into consideration when using the value listed on the financial disclosures when dividing property.

How to Determine the Marital Portion of Cryptocurrency in a Divorce

Property division laws vary from state to state. A vast majority of states are equitable distribution states where assets are divided fairly but not always equally.

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. 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.

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.

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.

 

Cryptocurrency Series: 12 Most Popular Types of Crypto and What to Know Before Divorce.

Cryptocurrency is by design difficult to trace, making it an ideal asset to hide from a spouse. If you’re new to the world of Crypto, it gets even more challenging. Here’s a list of the most popular cryptos to look out for and how to include them in your divoce settlement. 

If you’ve been following our Crypto and Divorce series you may already be aware of the difficulties crypto assets bear in divorce. As a quick recap, we’ll be covering what Cryptocurrency is as well as the 12 most popular types of crypto in the market.

With all of these forces at play during a divorce, it’s best to be prepared for whatever the outcome may be and hiring a family law attorney well-versed in cryptocurrencies is always an advantage. Here’s what you need to know about the 12 most popular types of Cryptocurrencies and how you can best prepare for them before divorce. 

Cryptocurrency is a digital form of payment that can be used to purchase goods or services online. Every transaction is done online and tracked via a highly secure ledger called a blockchain. Let’s jump into some of the various types of crypto there is on the market.

  • Bitcoin (BTC)

Notably known as the most popular form of crypto, Bitcoin is widely known as the first major cryptocurrency to hit the market. It first debuted in 2009 and many others have become popular but not as popular as the original. 

Bitcoin is still the coin people generally reference when they talk about digital currency. Its mysterious creator — allegedly Satoshi Nakamoto — debuted the currency in 2009 and it’s been on a roller-coaster ride since then. However, it wasn’t until 2017 that the cryptocurrency broke into popular consciousness.

  • Ethereum (ETH)

Ethereum is the second name you’re most likely to recognize in the crypto space. The system allows you to use ether to perform a number of functions, but the smart contract aspect of Ethereum helps make it a popular currency.

Ether is used mainly for two purposes: It is traded as a digital currency on exchanges in the same way as other cryptocurrencies, and it is used on the Ethereum network to run applications. According to Ethereum, “people all over the world use ETH to make payments, as a store of value, or as collateral.”

  • Tether (USDT)

Tether’s price is anchored at $1 per coin. That’s because it is what’s called a stablecoin. Stablecoins are tied to the value of a specific asset, in Tether’s case, the U.S. Dollar. Tether often acts as a medium when traders move from one cryptocurrency to another. Rather than move back to dollars, they use Tether. However, some people are concerned that Tether isn’t safely backed by dollars held in reserve but instead uses a short-term form of unsecured debt.

  • Binance Coin (BNB)

Binance Coin is the cryptocurrency issued by Binance, among the largest crypto exchanges in the world. While originally created as a token to pay for discounted trades, Binance Coin can now be used for payments as well as purchasing various goods and services.

  • USD Coin (USDC)

Tether and USD Coin are both stablecoins that are attached to the dollar, meaning that its value should not fluctuate. The currency’s founders say that it’s backed by fully reserved assets or those with “equivalent fair value” and those assets are held in accounts with regulated U.S. institutions.

  • Ripple (XRP) 

Formerly known as Ripple and created in 2012, XRP offers a way to pay in many different real-world currencies. Ripple can be useful in cross-border transactions and uses a trust-less mechanism to facilitate payments. 

Ripple is known for their advanced blockchain technology for global payments. Where financial institutions are able to expand into new markets around the world and eliminate pre-funding by leveraging the power of XRP.

  • Solana (SOL)

Solana was created in 2017 by Anatoly Yakovenko alongside current Solana board member and Chief Operations Officer Raj Gokal. Yakovenko, now Solana Lab’s CEO, came from a background in system design and wanted to apply his knowledge toward a new blockchain paradigm that enabled faster processing speeds.

Solana is a newer cryptocurrency and it touts its speed at completing transactions and the overall robustness of its “web-scale” platform. The issuance of the currency, called SOL, is capped at 480 million coins. Solana’s increasing popularity has made it Ethereum’s growing rival. 

  • Terra (LUNA)

Using its currency Luna, Terra is a platform that helps backstop a range of stablecoins based on real currencies such as the dollar or euro. Terra helps stabilize the price of stablecoins through various technical means, and it also supports smart contracts.

According to the Terra website, the Terra protocol creates stablecoins that track the price of any fiat currency using a combination of open market arbitrage incentives and decentralized Oracle voting. On the Terra blockchain, users may spend, save, trade, and swap Terra stablecoins.

  • Cardano (ADA)

Cardano is the cryptocurrency platform behind ada, the name of the currency. Cardano is a proof-of-stake blockchain platform: the first to be founded on peer-reviewed research and developed through evidence-based methods. It combines pioneering technologies to provide unparalleled security and sustainability to decentralized applications, systems, and societies. Cardano was created by the co-founder of Ethereum, and this cryptocurrency also uses smart contracts, enabling identity management. 

  • Avalanche (AVAX)

Avalanche is a fast and low-cost smart contracts-based blockchain platform focused on building decentralized apps and facilitating the creation of custom blockchains. Its users can process transactions in the native AVAX token. 

The AVAX token is hard-capped which makes it a scarce asset that is used to pay for fees, and secret the platform through staking. Ultimately the hard cap provides a basic unit of account between the multiple subnets within Avalanche.

  • Polkadot (DOT)

Polkadot is a currency that connects blockchains which allows value and data to be sent across other incompatible networks. For example Bitcoin and Ethereum. It’s also designed to be fast and scalable. 

The DOT token is used for staking and governance; it can be bought or sold on Coinbase and other exchanges. Polkadot was founded by another co-founder of Ethereum. Industry specialists believe Polkadot is looking to eventually dethrone Ethereum.

  • Dogecoin (DOGE)

Dogecoin originated as an alternative to traditional cryptocurrency such as bitcoin. Both the name and logo were based off of a meme that went viral. Dogecoin is intentionally abundant which is different in comparison to bitcoin which is scarce. In 2021, Dogecoin became one of the biggest cryptocurrencies in the market. Dogecoin crypto can be used for payments or sending money.

Divorce and Crypto 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.

Bottom Line

The cryptocurrency market could be compared to the Wild West. Although, the U.S. government has been taking on a more active role in overseeing crypto space. Volatility can be intense, with crypto assets fluctuating significantly even in a single day. This leaves individual investors to trade against highly sophisticated players, making it a fraught experience for beginners getting into crypto.

Regardless of your skill level, splitting digital currency may be more complex than traditional investments, such as stocks, bonds, or mutual funds. It is important to be prepared and make sure that crypto 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 in your divorce case.

Our team of award-winning 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.