The division of assets can be challenging during any divorce. Traditionally, these assets have always been staples of day-to-day living: properties, savings, investments, etc.  However, as the world around us continues to evolve, the items being divided are changing as well. New generations mean new assets to consider. For some, this could mean trying to factor in the bold new frontier of divorce and cryptocurrency.

From keen Bitcoin investors to curious spouses, digging into digital currency could reveal a complex, even ambiguous web within your shared finances — something you will need to unravel if you want a fair and even split. If either of you have already made an investment, it’s vital to understand what is involved when dividing cryptocurrency in divorce. To complete the picture, you will also need to understand how digital asset valuation might help you to secure your fair share of the matrimonial pot. 

This guide will shed light on how cryptocurrency works, the potential challenges of division, and the most suitable strategies for ensuring a fair split. 

Divorce and Cryptocurrency: How Does it Work?

The subject of divorce and cryptocurrency adds a new and very modern layer of complexity to the age-old issue of asset division. As a fairly recent development, there remains ambiguity around virtual currency, especially when only one member of a couple has chosen to invest. 

Therefore, it might be useful to clear up any confusion by defining what cryptocurrency is, and how it works. 

What is Cryptocurrency?

Using the practice of hiding information in code — or cryptography — for security, cryptocurrency is a virtual form of currency that bypasses the need for a central bank. Effectively, money is transferred between individuals, with the traditional ‘middle man’ absent from the process entirely. This decentralised ledger of transactions between computers is also known as a blockchain and is regarded as a borderless form of payment. 

Although the numbers continue to grow, the most common forms of cryptocurrency are currently Bitcoin, Ethereum, Ripple and Litecoin. 

The Implications for Divorcing Couples

When a long-term relationship ends, both spouses will need to provide full financial disclosure. This will allow each party, and their legal teams, to obtain a detailed understanding of the total value of the combined matrimonial pot. Once assets have been valued, it can then be decided how best to divide them fairly. 

Although full financial disclosure is a legal requirement, much depends on trust and good faith. With digital assets, tracing investments can be murky, leaving a potential loophole for a spouse to exploit. Ultimately, the better your understanding of potentially complex processes like digital asset valuation, the easier it should be to apply that knowledge to your own circumstances. 

What Makes Dividing Cryptocurrency in Divorce Difficult?

One of the most complex features of divorce and cryptocurrency is establishing a digital asset valuation. As with any other asset, it’s important for all parties to know what an investment is worth in order to divide it fairly among spouses. However, digital asset valuation is often made much more challenging by the volatility and unpredictability of the currency. 

It’s not unheard of for the likes of Bitcoin to drop or rise in value by between 50% and 80% within a matter of days. If this were to happen during divorce and separation, it could radically alter the terms being discussed and lead to more protracted discussions.

Full financial disclosure is a legal requirement in divorce law so, ideally, both parties will have a solid grasp of shared finances before proceedings begin. However, despite the potential penalties for hiding assets, some partners may see the ambiguities of crypto ownership as an opportunity to conceal their wealth. In these cases, it’s important to work with a legal firm that can utilise the talents of skilled financial experts when dividing cryptocurrency in divorce.  

The 4 Best Strategies to Simplify Divorce and Cryptocurrency

Whether you want to obtain your fair share of a settlement or need to understand how you go about dividing cryptocurrency in divorce, there are a few options available to you. Many of these strategies are relevant to all types of assets during separation, and are not simply applicable to divorce and cryptocurrency. Here are our four tips for making this potentially complex process easier:

1 – Keep Documents Up to Date

The importance of maintaining accurate, up-to-date records of your transactions cannot be overstated. This means keeping track of purchase dates, the amount spent, a recent digital asset valuation, and any other transfers or trades that have been made. This information will be essential in determining the value of your investments and can be made simpler by using a digital wallet to record any crypto transactions made. 

It’s not uncommon for there to be delays during divorce proceedings due to difference of opinion regarding asset valuation. Presenting up-to-date information will minimise the chances of this happening in your case. Naturally, you should keep all of this sensitive information in a safe location to ensure that it can’t be accessed without your permission.    

2 – Obtain Reliable Third Party Advice

As with any divorce, seeking appropriate legal guidance is often the most important first step. A situation that involves divorce and cryptocurrency should be no exception. It’s important to work with a legal firm that specialises in complex, high net worth relationships in order to protect your wealth and secure your fair share. If necessary, a family lawyer can enlist other third parties to help with digital asset valuation.

If tracing or valuing cryptocurrency is a key challenge, one such party may be a forensic accountant. These financial experts are highly-skilled at unearthing ‘hidden’ finances and revealing underlying data. They can be used to establish an accurate digital asset valuation and present evidence on your behalf.

Ultimately, using an array of specialists could reduce the time taken dividing cryptocurrency in divorce and save you additional stress.  

3 – Be Open and Cooperative

As discussed, full financial disclosure is a non-negotiable legal requirement that should be taken seriously. The consequences of being seen to be hiding assets include anything from being compelled to pay court fees to receiving a much reduced settlement. Finally, being fully transparent about dividing cryptocurrency in divorce can set the tone for a more collaborative process — which could save you time and money in the long run.

If you suspect that your other half is concealing assets, it’s important that you don’t decide to take matters into your own hands. Instead, inform your solicitor, who will instigate a thorough investigation into their behaviour. They may use financial experts to extract all the evidence required to establish any wrongdoings.

4 – Enter into a Pre or Post Nuptial Agreement

Nuptial agreements are an increasingly common feature of modern relationships. Some sources suggest that as many as one in five marriages in England and Wales use one from the start. If you have significant amounts of cryptocurrency, entering into this type of agreement could make an eventual separation much more transparent.   

Dividing cryptocurrency in divorce can be extremely complex. As we’ve established, tracing ownership can be a long-winded and intricate process that requires considerable expertise. Being open about your investments at the beginning of the relationship means that both sides understand what is at stake and the eventual division is set out in black and white.

Secure Your Best Interests with Lowry Legal

As a relatively new type of asset, cryptocurrency has the potential to add a complex new dimension to any separation. If you have your own investment, you might be wondering how best to put a valuation on it ahead of entering into an agreement. Alternatively, perhaps you’re currently going through divorce and know very little about how much your other half has invested? 

At Lowry Legal, we excel at delivering first class advice for couples who have significant wealth. A highly-regarded member of the Legal 500 we can help with everything from nuptial agreements to finances after separation, child arrangements, and much more. We specialise in providing sensitive guidance that can simplify your circumstances and secure your best interests.

To talk with one of our talented family lawyers, get in touch today.