Crypto and Divorce: How are assets split?

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What are crypto assets?

Crypto assets in a divorce refer to any digital assets, currencies or tokens that are held as part of an individual or couple’s financial portfolio. These assets can include well-known types of crypto such as Bitcoin, Ethereum, or Litecoin.

In the context of divorce proceedings, crypto assets are treated similarly to other financial matrimonial assets, such as cash, stocks, or property. They must be disclosed during the financial disclosure process, and their value must be determined for the purpose of equitable distribution between the divorcing parties.

During a divorce involving crypto assets, both parties are typically required to disclose all relevant holdings as part of the financial discovery process. The value of crypto assets at the time of divorce may be subject to appraisal by financial experts or forensic accountants, especially considering the volatility of cryptocurrency markets.

The legal professionals on our panel are experienced in both family law and cryptocurrency matters and can provide guidance on how to navigate the complexities of dividing crypto assets during divorce proceedings, ensuring fair and equitable outcomes for all parties involved. Please get in touch with our crypto and divorce lawyers today to find out more.

Are cryptocurrency assets included in divorce settlements?

Yes, cryptocurrency assets are typically included in divorce settlements, just like any other financial asset. During divorce proceedings, both parties are required to go through a full and frank disclosure of all assets, including cryptocurrencies.

Once disclosed, cryptocurrency assets are subject to equitable distribution according to UK divorce laws. Equitable distribution means that assets are divided fairly but not necessarily equally, taking into account various factors such as the duration of the marriage, each party’s financial contributions, their earning capacities, and their needs.

Valuing cryptocurrency assets can be particularly challenging due to their volatility and fluctuating market prices. Courts may need to enlist the help of financial experts or forensic accountants to determine the value of cryptocurrency holdings at the time of divorce.

Ownership of cryptocurrency assets also needs to be established, especially if the assets are held in wallets or accounts that are not solely in one party’s name. Tracing ownership may require expert assistance to ensure a fair division of assets.

Additionally, tax implications must be considered when dividing cryptocurrency assets in a divorce settlement. Capital gains tax may apply when transferring cryptocurrency assets between spouses, and professional tax advice may be necessary to understand and mitigate potential tax liabilities. You would need the private and public keys holding the crypto to identify what is owned.

If you have reason to believe that your spouse may be hiding crypto assets during divorce proceedings, then you may have to request disclosure through the courts and potentially conduct a forensic investigation into your spouse’s accounts. Crypto owners may have private keys to access the currency in hidden digital wallets. Due to the digital nature of crypto assets, it can be easier for them to be hidden compared to traditional, tangible assets, but there are specialists who can assist and investigate when there are some irregularities pointing to hidden crypto assets.

How are crypto assets valued?

Valuing cryptocurrency assets in a divorce can be complex due to their unique characteristics, such as volatility and fluctuating market prices. Here are some methods commonly used to value cryptocurrency assets during divorce proceedings:

  • Market Value: One straightforward approach is to determine the market value of the cryptocurrency assets at a specific point in time. This typically involves obtaining pricing data from reputable cryptocurrency exchanges and calculating the total value of the holdings based on prevailing market prices.
  • Average Price: Instead of relying on a single snapshot of market prices, parties may choose to average the prices of the cryptocurrency over a specific period, such as a day, a week, or a month. This can help mitigate the effects of short-term price fluctuations.
  • Independent Valuation: Parties may enlist the help of financial experts or forensic accountants to conduct an independent valuation of the cryptocurrency assets. These professionals may use various methodologies, such as discounted cash flow analysis or comparable company analysis, to determine the fair value of the assets.
  • Blockchain Analysis: In cases where the cryptocurrency assets are held in wallets with identifiable addresses, blockchain analysis can be used to track crypto transactions and assess the value of the holdings. This method may require technical expertise and access to specialised tools.
  • Agreed-upon Exchange Rate: Parties may agree to use a specific exchange rate or pricing index to value the cryptocurrency assets. This approach can simplify the valuation process, especially if the parties are amicable and trust each other’s judgment.
  • Liquidation Value: In some cases, parties may choose to liquidate the cryptocurrency assets and convert them into fiat currency before dividing them. The value of the assets would then be determined based on the proceeds from the sale, minus any transaction fees or taxes.

 

How are crypto assets divided in a divorce?

In the UK, divorce settlements typically aim to achieve a 50/50 split for both parties. However, this split is not always achievable due to other circumstances that arise, meaning that one party will receive a more significant proportion of the matrimonial assets than the other.

The Court must consider several factors included in section 25 of the Matrimonial Causes Act 1973 as well as the Civil Partnership Act 2004 when dividing assets in a divorce. This includes the financial needs and income of each party, as well as the family’s standard of living enjoyed prior to the divorce.

  • Identifying and Valuing Assets: The first step is to identify all assets owned by the spouses, including property, vehicles, bank accounts, investments, retirement accounts, businesses, and any other property. Once identified, the next step is to determine the value of each asset.
  • Classification of Assets: Assets are typically classified as marital or separate property. Marital property generally includes assets acquired during the marriage, regardless of how they are titled, while separate property includes assets acquired before the marriage or acquired by gift or inheritance during the marriage.
  • Negotiation and Settlement: Spouses may negotiate the division of assets themselves, often with the assistance of their law attorneys or mediators. They may reach a settlement agreement that outlines how assets will be divided, including any spousal support arrangements. If the spouses are unable to reach a settlement, the Court may intervene to make decisions regarding asset division.
  • Court Intervention: If the spouses cannot agree during the division process of assets, the Court may intervene and make decisions based on the circumstances of the case. The Court will consider various factors, including the financial needs of each spouse, their contributions to the marriage, and the overall fairness of the division.
  • Implementation: Once a division agreement is reached or ordered by the Court, steps must be taken to implement the division of assets. This may involve transferring ownership of property, dividing financial accounts, updating estate planning documents, and any other necessary actions to effectuate the division.

Throughout the process of dividing assets in a divorce, it’s essential for both spouses to seek legal advice from professionals experienced in family law. Our legal advisors can provide guidance on the rights and obligations of each spouse and help ensure that the division of assets is fair and complies with the law.

How can Expert Family Law assist?

Our panel of friendly and professional divorce and family lawyers have the expertise and experience to deal with your crypto and divorce case professionally and with empathy. They will guide you through the divorce process, helping you to make the difficult decisions in an understanding, non-judgmental manner.

Our panel of divorce solicitors and experienced family law firms will help you navigate a range of issues and disputes, such as financial matters, and will assist you in reaching an agreement on such issues.

Each solicitor we work with is authorised and regulated by the Solicitors Regulation Authority (SRA)

Whether you are going through a divorce or dissolution of a civil partnership, our panel of family law solicitors will provide pragmatic legal advice and assistance surrounding cryptocurrency and divorce, guiding you through every step of the process.

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