Cryptocurrency ownership complicates divorces

On Behalf of | Apr 22, 2022 | Property Division |

Many individuals and couples in the Denver Metro area have diversified their investment portfolios to include cryptocurrencies. The digital currency market is quite speculative and extremely volatile – especially in these uncertain times.

If you are divorcing your spouse and either of you invested in cryptocurrency, these digital currency purchases can make the asset division process more complex and arduous. Below are some considerations when dealing with cryptocurrency investments in your divorce.

Find the crypto can be an issue

If the two of you together invested in the crypto market, you should have a good grasp of the amount purchased. But it is common for only one spouse to make these purchases, often unbeknownst to the other.

Since you cannot split what you don’t know you own, this is the tricky part. A forensic accountant with experience in tracking crypto ownership is vital to you getting your fair share of the marital assets.

An accurate valuation is challenging

Crypto values rise and fall with the markets, the geopolitical landscape and even tweets from Elon Musk. What the value is today is unlikely to be the same as it was yesterday, tomorrow or a week from now. Some divorcing couples manage these discrepancies by including a volatility formula that can affect the division of other assets to compensate for the rise and fall of the digital currency markets.

Don’t forget about the associated taxes

Tax consequences can include long-term capital gains, so be aware of those ramifications on your federal income tax filings. Also, don’t forget to include any income you (and/or your spouse) derived from your crypto purchases.

Don’t try to hide your digital currency assets from your spouse

It is a myth that crypto purchases are untraceable. While they are harder to track than more traditional investments, forensic analysts can, and do, follow the money and ferret out these purchases divorcing spouses try to hide.

By working closely with your family law attorney and your financial adviser, you will be in a better position when it comes time to negotiate for your share of marital assets.