Divorce & Digital Assets – How Are Cryptocurrency Assets Like Bitcoin Split?

Posted in Property Division on February 5, 2021

Digital assets have become a hot topic of conversation in recent years among investors, governments and even divorce lawyers. Digital currency assets can refer to cryptocurrency assets, such as bitcoin, that have no physical form. Digital assets exist entirely in the online or virtual network. They can be difficult to find, trace and value…making them easy to overlook in divorce cases. It is important to look for digital assets during your divorce to fully protect your property rights.

How Are Digital Assets & Bitcoin Divided in California?

The law in California does not differentiate between digital and nondigital assets in a divorce case. It treats digital currencies the same way it treats non-digital currencies: it splits them down the middle if a case goes to trial. California is a community property state, meaning all forms of community property – including cryptocurrencies – are divided in half in a divorce case.

Community property only refers to the assets and debts acquired during marriage; it does not refer to assets brought into the marriage, kept separate by either spouse, or given to or inherited by one spouse during the marriage. If your spouse is a cryptocurrency owner and the account in question was in both of your names during your marriage, you legally own 50% of all nonvirtual assets acquired. This is why it is important to look for digital assets such as bitcoin during a divorce case.

What Happens If My Ex Is Hiding Assets in Cryptocurrencies?

It is illegal to hide any sort of asset during a divorce, including virtual currency assets like Bitcoin, Ethereum, Litecoin etc. Failing to disclose assets owned in cryptocurrencies is the same as hiding bank accounts or sources of income. It is a crime in California. Both spouses in  divorce proceedings must fully and truthfully disclose 100% of their assets, income and earnings in the early stages of a divorce. They must do so by submitting legal documents of their account statements under penalty of perjury.

If an investigation of your spouse discovers that he or she is hiding assets in cryptocurrencies, your ex could face penalties such as fines and even jail time. Your ex will also be required to disclose all digital assets that qualify as community property. If your divorce case goes to trial, these digital assets will be subject to division by a judge. Otherwise, it will be up to you and your ex to divide community property, including cryptocurrencies, how you wish in a divorce settlement.

how is bitcoin BTC split during divorce

What Should I Do If I Suspect My Former Spouse Is Hiding Assets?

Digital assets and cryptocurrencies are relatively new concepts and have resulted in massive net worth gains for individuals and couples. Cryptocurrency is still an unregulated type of asset that is difficult to trace. Thus, it can be extremely hard to uncover digital assets your former spouse is hiding during a divorce case. If you suspect hidden digital assets, start collecting available evidence. Do not delete any texts or information about the cryptocurrency. Then, contact a family law attorney right away for assistance.

An attorney will have the resources to investigate your former spouse’s assets, including virtual currencies. Your family lawyer can help you establish cryptocurrency exists, as well as your ex’s failure to disclose this on his or her asset sheet. Establishing the existence and ownership of cryptocurrency requires a search for all money that entered the digital sphere. Your lawyer can trace bitcoin, for example, that was purchased from a bank account.

Once cryptocurrencies enter the digital arena, however, it can be much more difficult to trace where the money goes. You may need experienced financial experts and forensic accountants to find and track hidden digital assets. A divorce lawyer will be able to guide you on how to search for hidden cryptocurrencies without spending more on financial experts than the digital assets are likely worth. A lawyer will have experience in this complicated area to put to good use on your case for family law matters.