Cryptocurrency is an unavoidable topic in today’s financial conversation, and is growing more quickly now than ever before.
Investing in cryptocurrency is something that has become increasingly popular on an international level. Bitcoin, Litecoin, Bitcoin Cash, Dogecoin, and Etherium are just some of the vast sea of cryptocurrencies that are slowly becoming part of the mainstream digital payment world.
Protecting cryptocurrency investments is important, as any digital commitment can come with risks. Any digital and cloud-based technology can be vulnerable to hacking, and cryptocurrency is uninsured, making it harder (if not impossible) to recover lost investments.
But what if the potential loss of cryptocurrency investments doesn’t stem from hacking or a lost wallet?
Digital currencies are difficult to trace, making them an easy oversight in legal battles such as divorce.
Property and asset division is common in divorce, but if you and your spouse share cryptocurrency investments, splitting that digital currency may be a bit more difficult.
Crypto and California Divorce
There is a lot on the line for both parties in a California divorce case. Property and asset division are determined by the courts, but how do they determine who gets what in a divorce?
When a couple files for divorce in California, their property and other assets are subject to equitable division.
While equitable may seemingly imply the equal distribution of all property and belongings, this isn’t always the case in divorce hearings. Equitable division simply refers to what the court deems fair when it comes to dividing marital assets.
Equitable division (or equitable distribution) requires an expert to determine the value of all assets and how to properly distribute them. Attorneys involved in the divorce case must be knowledgeable in identifying financial, legal, accounting, tax-related, and personal issues that a couple may need to discuss during the divorce process.
Assets like cryptocurrency can be easily covered up, due to the lack of third-party financial involvement (such as a bank or credit union). But in California, the rules play out differently during divorce proceedings that involve cryptocurrency.
How Is Cryptocurrency Divided in California?
Divorce Law Basics
While you may not think you need a lawyer for the divorce itself, you may need to hire one for the division of property and financial assets. It is highly recommended to protect yourself and your assets with the counsel of an experienced California divorce lawyer.
Legally, property refers to anything that can be bought or sold like a house, car, clothing, furniture, or other shared purchase. Property can also be something with a marked value such as bank accounts, 401k, stocks, pension, or insurance.
Courts make decisions on how to divide property in a divorce or legal separation. While a verbal agreement might seem easier for you, a formal decision (in writing) must be made.
Each state has its own property laws when it comes to divorce and legal separation.
Community Property State
California is a community property state, meaning that marriage makes the two people involved one legal “community.” The property and other assets that the couple acquires during their marriage and leading up to the time where they choose to file for divorce are considered community property.
This includes anything bought (not gifted) or earned during the marriage as well as everything that the couple purchases with those earnings (like a house, car, or vacation home).
Each member of the “community,” or each spouse, owns half of the community property according to California law.
Community Property and Crypto
Divorce law in California doesn’t distinguish between digital and physical currencies in a divorce case. Both currencies are treated the same.
With California recognizing all finances accrued during a marriage as community property, all currency is divided down the middle in a divorce or legal separation. This doesn’t include property brought into the marriage (i.e. savings that existed before the couple was married).
If one spouse came into the marriage with assets like cryptocurrency in their name, it would be considered separate property. However, if an account exists with both spouses’ names on it and contains digital assets such as Bitcoin, it belongs to the community.
This is why it helps to connect with a cryptocurrency expert during a divorce. They can assist in determining the nonvirtual value associated with digital currencies and other property. This may seem like a difficult process to nail down, but your divorce attorney can source the expertise of knowledgeable experts in the field for you.
Hiding Community Property
In California, it is illegal to hide any property during a divorce. To the courts, this is the same as hiding bank accounts or other sources of income. Both parties in the community must fully disclose all of their assets from income to investments and other property. Legal document submission early in the divorce proceedings should show all existing account statements.
When a California divorce case goes to trial in a court, the judge will determine how these assets are split. If the case doesn’t go to trial, it will be up to the couple to decide how to divide the community property.
If one party in the community doesn’t fully disclose all existing accounts and income in their name or that would be considered shared property, that individual could face fines and jail time.
Choose Hann Law Firm for The Best San Jose Divorce Attorneys
At Hann Law Firm, we take a personal approach to everything we do. From our first consultation, we’ll listen to your needs and concerns. Listening to our clients is at the heart of our success in the courtroom. When you work with us, we’ll address your specific challenges, prepare diligently for the best possible outcome, and create a personalized approach to help achieve your goals.
This kind of care takes more time, but the results of our personalized approach speak for themselves. While other firms see a case number and a bottom line, we see each client as a human being who deserves justice. We know your case is important to you, and we’ll take it just as personally. You – and your case – matter to us.
Contact us today for your free consultation.