how is bitcoin handled in divorce

Bitcoin And Divorce

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If you’ve paid attention to the news lately, you’ve noticed Bitcoin all over the place. Cryptocurrency has become a hot topic as it’s increased in both popularity and value. It’s also become a frequent point of contention in divorce.

What Is Bitcoin?

For those of you not familiar with the term, Bitcoin is a form of cryptocurrency. It’s the first decentralized digital currency that exists on a distributed and decentralized ledger.  Bitcoin is one of many digital currencies but still remains the most popular.

Operating without a central bank, administrator, or single authority, transactions take place directly between users.

Bitcoin offers relative anonymity— the term is pseudonymous—as it’s linked to a numbered address rather than a real-world entity, like a bank.

Bitcoin and Divorce: A Divisible Asset

At a basic level, Bitcoin, as well as any other cryptocurrency, is an asset in a divorce, an asset with a specific value. When it comes to the division of property, the courts treat digital currency as such.

California is a community property state. Any assets, monies, or properties acquired during a marriage, the state views as belonging to both spouses.

Courts view digital currency as community property if earned or obtained while married, and separate property if acquired before, or as a gift or inheritance.

So, if a couple follows the law, dividing a Bitcoin portfolio should be relatively straightforward. Like all other assets, you declare it upfront and divide it like any other valuables in the divorce settlement. But because of Bitcoin’s unique nature, it’s often more complex than that.

Related Reading: Moore Marsden, Shared Homes, and Divorce

Bitcoin and Hiding Assets

It’s no secret that people often attempt to hide assets in a divorce. Not only is this against the law, it often backfires and ends up damaging a divorce case.

You’ve got classics like safe deposit boxes, setting up accounts in other people’s names, transferring assets to family members, overstating debts, and many more.

Since Bitcoin operates without larger centralized oversight, it’s largely anonymous. This privacy is part of the allure.

And because of this, many now try to use digital currency to squirrel away money and conceal it from spouses during the divorce process.

Like other methods of hiding assets, this strategy is obviously illegal. And while Bitcoin is different than your average bank account and other things that leave a paper trail, it’s not completely anonymous.

Users have numbered identities associated with Bitcoin wallets. It may take some digging and a particular set of skills, but it is possible to track and identify users. It’s simply not as common, and not as many people have that talent. You may have to employ a forensic specialist, but it’s possible to hunt down the owner.

There’s also the fact that, if there’s a substantial sum in Bitcoin, both parties probably know it exists. Even if your spouse tries to move it around, you know it’s on the table, or that it should be. And if it’s not, you know to root around and look for it.

Related ReadingDigital Snooping and Divorce

Risks of Hiding Bitcoin

The risks of hiding Bitcoin in divorce are the same as trying to conceal other resources. The perpetrator’s chances of receiving a smaller share of marital assets. Criminal charges may come into play, as well as contempt of court. This technically constitutes lying, which is illegal in divorce proceedings, and perjury could even result in jail time.

In addition to these consequences, hiding assets like Bitcoin leads to a loss of credibility. If your case continues, the fact that one party lied leaves a shadow looming over the rest of the proceedings.

If you lied under oath, why would a judge believe later testimony about the inability to pay child support or spousal support? Or when you testify in a custody hearing? It can come back to haunt you down the road.

Bitcoin may be a bit of an outlier right now, but it’s becoming increasingly common. It has millions of users and an ever-growing number of merchants accept it as payment.

The more often it pops up, the more divorce lawyers and judges know to look for it. The more common it is, the harder it becomes to conceal, and the probability of the plan backfiring increases.

Like hiding other assets, trying to conceal a Bitcoin stash isn’t worth the risk and potential consequences. If you’re that concerned about your Bitcoin wallet, it’s possible to protect it with a prenuptial agreement or similar contract.

Related Reading: Bankruptcy Or Divorce: Which One Do You File First?

Bitcoin may sound like a modern version of Swiss bank accounts from an ‘80s movie, where shady people hid their ill-gotten gains from the rest of the world.

But as it becomes increasingly prevalent, it’s something the legal profession has had to adapt to. And as other crypto-currencies develop—many new ones keep users much more anonymous—it’s only just getting started.

Related Reading: Credit Card Debt And Divorce
Related Reading: How Are Assets Split In A Divorce In California?

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