As cryptocurrencies like Bitcoin, Ethereum, and other digital assets become increasingly integrated into investment portfolios, they are also emerging as significant considerations in high-net-worth divorce proceedings. In Colorado, where equitable distribution governs asset division, understanding how to protect and divide these digital assets is crucial. Contact us today by phone at (720) 744-3513.
Understanding Cryptocurrency in the Context of Divorce
Cryptocurrency is a form of digital or virtual currency that uses cryptography for security and operates independently of a central bank. Its decentralized nature and the anonymity it offers can complicate asset division during divorce. In Colorado, assets acquired during the marriage are typically considered marital property and are subject to equitable distribution . This includes cryptocurrencies acquired during the marriage, regardless of whose name is on the account.
What Is Cryptocurrency and What Is Bitcoin?
Cryptocurrency is defined by the IRS as a type of “virtual currency.” Virtual currencies represent value but do not have “legal tender” status in the United States. Cryptocurrency uses cryptography (codes) to secure transactions. The transactions are then kept track of digitally in a database called a “blockchain.” Bitcoin is a type of convertible virtual currency, meaning that it can be a substitute for real currency. Bitcoin transactions are recorded in blocks of encrypted data. These blocks then become part of a larger “blockchain” comprised of all transactions. While blockchains are public, individual owners of certain transactions are not. You can only find specific transactions through a public key which is a group of numbers on the blockchain. Bitcoin can be traded, purchased by, or exchanged into other real or virtual currencies, including the United States dollar.
Challenges in Dividing Cryptocurrency
Dividing digital assets like Bitcoin presents unique challenges:
Valuation Volatility: Cryptocurrency values can fluctuate significantly, making it difficult to determine an accurate valuation at the time of divorce.
Hidden Assets: The pseudonymous nature of cryptocurrencies can make it easier for one spouse to hide assets.
Access Issues: If one spouse controls the digital wallets and private keys, accessing and dividing the assets can be problematic.
Tax Implications: Transferring or selling cryptocurrency can trigger capital gains taxes, which need to be considered during asset division
Strategies for Protecting Digital Assets
To safeguard your digital assets during a divorce:
Full Disclosure: Ensure all cryptocurrency holdings are fully disclosed during the divorce proceedings.
Accurate Valuation: Work with financial experts to obtain accurate valuations of your digital assets at the time of separation.
Legal Agreements: Consider prenuptial or postnuptial agreements that specifically address the division of digital assets.
Secure Storage: Maintain secure records of all digital wallets and transactions to provide transparency.
Legal Support for High-Net-Worth Divorces Involving Cryptocurrency
Navigating the complexities of digital asset division requires legal expertise. At Johnson Law Group, our attorneys are experienced in handling high-net-worth divorces involving cryptocurrencies. We work with financial experts to ensure accurate valuation and equitable division of digital assets, while also considering the tax implications and potential for hidden assets.
As digital assets become more prevalent, understanding how to protect and divide them during a divorce is essential, especially for high-net-worth individuals. By working with experienced legal professionals and financial experts, you can ensure that your digital assets are accurately valued and fairly divided, safeguarding your financial future.
Contact Our Experienced Colorado Family Law Attorneys Today
If you are going through a divorce and need to discuss bitcoin with an experienced attorney, contact the Johnson Law Group today. We can discuss your unique situation and how best to handle bitcoin in a divorce based on your specific needs. Call our experienced Colorado family law attorneys today by phone at (720) 744-3513 or Text-to-Chat (720) 744-3513.
