Dividing Cryptocurrency in Divorce

Cryptocurrency is becoming an essential part of many people’s financial portfolios. This means it is an increasingly common type of asset that must be addressed — and divided — in Missouri divorces. Importantly, courts treat cryptocurrency in divorce like any other assets. But because cryptocurrencies such as bitcoin and ethereum are intangible and fluctuate in value, they can present certain challenges.

How Are Digital Assets Divided in a Missouri Divorce?

Like tangible assets, digital assets that are characterized as marital property are subject to equitable distribution in a Missouri divorce. Marital property includes any assets that were acquired by either spouse during the course of the marriage. Under the equitable distribution law, a judge would divide cryptocurrency in divorce, and other marital assets, in a way that is deemed fair to both spouses. In most cases, equitable distribution results in marital property being divided equally — but an equal split isn’t always required.

Missouri courts apply a number of factors to determine how marital assets should be distributed between spouses, whether they are digital or tangible property. These factors include the following:

• Each spouse’s economic circumstances when the property division is to become effective
• Each spouse’s contribution to the acquisition of the marital property
• The value of any non-marital property set aside for each spouse
• Marital misconduct committed by either spouse during the marriage
• The custody arrangement for any minor children

Although every piece of marital property must be disclosed during divorce proceedings, cryptocurrency can be easier than other assets for a dishonest spouse to hide due to its digital and anonymous nature. A spouse who was not involved in the couple’s finances may not even know these assets exist. In addition, because of its volatility and the complexities of blockchain technology, cryptocurrency can be difficult to accurately value. If a spouse fails to make full financial disclosure, it may be necessary to use discovery tools and forensic accountants to trace these assets.

Methods of Dividing Cryptocurrency in Divorce

Once cryptocurrency has been identified and properly valued during the divorce process, the court must determine a method for division. Some common methods for dividing cryptocurrency can include:

• Dividing the crypto in-kind — The actual cryptocurrency may be split between the spouses in divorce. For instance, the court may order that one spouse’s share of the cryptocurrency is directly transferred to the other’s wallet.
• Selling the cryptocurrency — The cryptocurrency may be sold and the cash proceeds divided between the spouses. Notably, this method carries the risk of losing out on any increase in value of the digital assets that may later occur.
• Offsetting the cryptocurrency with other assets — If one spouse retains the cryptocurrency in divorce, it may be offset with other assets. This would allow the other spouse to receive a larger portion of a tangible marital asset to make up for the value of the digital assets. In these situations, an appraisal expert may be needed to determine the value of the cryptocurrency

Each method of dividing cryptocurrency in divorce has advantages and disadvantages, depending on the couple’s specific situation. While division in-kind can keep the crypto intact and allow both parties to benefit from any future increase in value, it also requires each spouse to have a crypto wallet. When crypto is offset with other assets, only the spouse who handled the crypto has to manage it moving forward — but that spouse also assumes the risk of any future decrease in value. Liquidating the crypto has the benefit of converting it into a specific dollar amount, but there can be a loss of investment potential in the event the asset increases in value after divorce.

Do You Need to Go to Court to Divide Digital Assets in Divorce?

Spouses don’t need to go to court to divide cryptocurrency in divorce — or any other digital and physical assets. Mediation and the collaborative divorce process are two alternative dispute resolution methods that can help spouses resolve the issues that need to be decided when they part ways without judicial intervention. Rather than let a judge determine how their property is divided, spouses can remain in control of the outcome. Often, these processes can help a couple find creative solutions concerning the division of digital assets that might not be available in the courtroom.

Specifically, mediation and the collaborative process can provide the spouses with an opportunity to negotiate and agree upon a customized plan when it comes to cryptocurrency in divorce. For example, if one spouse retains the crypto, they might share any future increase in value with the other spouse. Or, the crypto might be kept in a joint digital wallet for a specified period of time. Any settlement that is reached outside the courtroom must be drafted into a written agreement and submitted to the court to become a binding order.

Contact an Experienced Missouri Divorce Attorney

Dividing cryptocurrency in divorce can be complex. Divorce and family law attorney Mark A. Wortman is dedicated to guiding his clients through every step of the divorce process, and ensuring their legal and financial rights are protected. Providing reliable representation to clients in the greater Kansas City, Missouri area for divorce and a broad scope of family law matters, Mark works diligently to obtain the best possible outcome in every case.