What You Need to Know About Cryptocurrency and High-Net-Worth Divorces

May 16, 2024 O'Connor Family Law Divorce

High-net-worth divorces can present unique challenges in the Massachusetts divorce process. The division of financial and marital assets often takes an emotional toll on the parties, both of whom want to create a brighter future for themselves and their family than the struggles that may have affected their marriage. The couples’ points of view on what is fair and equitable may be vastly different, however, in comparison to what the family courts determine to be equitable. For instance, a high-income spouse who works as a physician may feel that an equitable division of assets should reward her with a higher share or valuation of assets than her husband who stayed home with the kids working part-time as a physical therapist. When considering this case, a judge may see a need for alimony which the higher earner may not have had in mind. For couples who own cryptocurrency assets, additional complications can make the asset division process lengthier.

The Commonwealth of Massachusetts and the Equitable Division of Assets

The Commonwealth of Massachusetts considers an “equitable distribution” of assets to be the standard when dividing a separating couple’s estate. This does not mean that assets are divided equally for a 50-50 split. Rather, the court looks at a wide variety of factors to determine equitable distribution. These include the length of the marriage, the respective parties’ contributions to the marriage, the nature and kind of property owned, how the assets were acquired, and each party’s ability to earn income and acquire assets after the divorce. This is not an exhaustive list, and a judge will often look at a number of other factors. It’s important to note that every marriage and divorce is considered individually. The concept of equitable distribution can be affected drastically by factors surrounding the marriage.

Traditionally, family assets have included homes, savings, investments, real property, and high-value personal property such as jewelry, rugs, antique furniture, and paintings. However, as technology evolves, the items being acquired by couples are changing as well. New generations mean new types of assets to consider. For some, this could mean trying to factor in income and assets obtained in the form of cryptocurrency.

Divorce and Cryptocurrency

The subject of divorce and cryptocurrency adds modern complexity to high-net-worth divorces. As a relatively recent development in Massachusetts divorce cases, there remains ambiguity around virtual currency, especially when only one member of a couple has chosen to invest. 

Cryptocurrency (also referred to as crypto) is a type of digital currency that eliminates the need to carry physical money. It exists only in digital form, and although people mainly use it for online transactions, you can make some physical purchases. Unlike traditional money printed only by the government, cryptocurrency is sold, transferred, and backed by companies. Cryptocurrency values can fluctuate dramatically (depending on a number of factors), and create a system that bypasses the need for a central bank. Effectively, crypto is transferred between individuals. The decentralized ledger of transactions between computers is 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. 

When a marriage ends, both spouses will need to provide full financial disclosures. The parties are required to cooperate, but much depends on trust and good faith. Often, spouses cannot be counted on to be fully transparent. Sometimes, acting in bad faith, one or both parties will hide assets. With digital assets, tracing investments can be difficult and opaque, leaving a potential loophole for exploitation by a more technologically-astute spouse. An experienced divorce attorney can help you take steps to uncover hidden assets in your soon-to-be-ex’s estate and avoid the need for future litigation. Ultimately, the better your (and your attorney’s) understanding of potentially complex processes like digital asset valuation, the easier it should be to apply that knowledge to your own circumstances. Seeking a divorce attorney who is familiar with the complexities of technically-based assets like cryptocurrency can be especially helpful when dealing with cryptocurrency throughout the divorce process to ensure that your rights are protected and you are awarded that which you are entitled to.

The legal system can be slow to regulate new industries, and the family court system is no exception. As the ways that people earn and safeguard digital assets changes, so too should the strategies of Massachusetts divorce attorneys. O’Connor Family Law is committed to the continuous education of our team members because we know that staying on top of changes to digital assets keeps us on the cutting edge of advocacy and allows us to help our clients start their next chapter in life more effectively. Looking for hidden crypto stashes in divorce proceedings has created an entirely new job category for forensic investigators.  Cryptocurrency is not regulated by any kind of centralized bank, so usually, you can’t subpoena a person or institutional entity to get documents and information related to a spouse’s cryptocurrency holdings.  And there aren’t just a couple of blockchains to worry about anymore. There are literally hundreds and hundreds of coins out there on their own independent blockchains.

One of the primary issues with divorce settlements and cryptocurrency is determining its value. This can fluctuate considerably from day to day, making an equitable distribution of the asset more complicated. It is essential to come to an agreement on how digital assets will be valued, whether the market value is taken on a certain date, taken as an average over a certain period, or determined by some other means. This allows it to be weighed against other marital assets to be divided in the settlement. A knowledgeable and experienced Hanover high-net-worth divorce lawyer can help you determine this valuation.

Note that there are a number of other digital assets that should be reviewed and perhaps divided in a divorce. These include photos, purchased media accounts, and the like. Who will have “custody” of these assets? How will they be transferred? A high-net-worth divorce lawyer can help you understand how to think about these assets in your divorce as well. 

Contact a Hanover High-Net-Worth Divorce Lawyer 

As with any divorce, obtaining the best possible legal counsel is often the most important first step, and situations involving divorce and cryptocurrency should be no exception. It is important to work with a legal firm that specializes in complex, high-net-worth divorces to protect your wealth and secure your fair share. If necessary, a family lawyer can enlist third parties to help with digital asset valuation.

If tracing or valuing cryptocurrency is a key challenge, a third-party independent forensic accountant is often engaged. 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.  

Here at O’Connor Family Law, we stay in the know when it comes to the modern challenges of dealing with cryptocurrency in divorce so that you can focus on what matters most.

Contact us today at 774-314-4725.

About the Author

Attorney Kristen Ploetz puts her passion for protecting families to work as family law attorney at O’Connor Family Law. Her love of education has driven her to continuously seek out the cutting edge of the legal world on many topics including mediation, asset division, and high-conflict divorce topics in between fighting for the rights of her clients.

100% of our attorneys at O’Connor Family Law have personal or familial experience with family law issues which means that we understand what it’s like to walk in your shoes.