Cryptocurrency is Changing The Face of Divorces, and Most People - Including Lawyers, Don't Even Realize It...

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To start, the usual legal jargon: I am not your lawyer; nothing in this article is legal advice; I most likely do not practice law in your jurisdiction; and I strongly suggest you speak to a lawyer about your specific situation.

Now, a few answers and comments on cryptocurrency and how it impacts divorces, including how not to go broke.

Are People Hiding Their Cryptocurrency Assets when Divorcing? 

If you were to ask me if I think people are using cryptocurrency to hide assets during a divorce, I would say it is a statistical certainty that people are. In the jurisdiction that I practice law there are zero cases that cite the words ‘cryptocurrency’ or ‘bitcoin’ (yes I know there are other coins) and the relevant Divorce Act. I repeat, zero cases!

Given that it is estimated that at least 5% of individuals hold cryptocurrency assets, that is an impossible statistic. This means people are getting divorced and not disclosing their cryptocurrency. Please note, I cannot stress enough that there are exceedingly large risks and consequences for not disclosing assets during a divorce.

How Can I Find Out If My Spouse is Hiding Cryptocurrency?

If you suspect your spouse is hiding assets, you should look into retaining a forensic accountant, preferably one with cryptocurrency experience. One of the more obvious signs is that your spouse’s transfers out of their bank accounts may show that they are buying cryptocurrency. However, individuals who are knowledgeable about cryptocurrency will be difficult to catch.

Imagine someone trading cash for cryptocurrency during an in-person transaction, this would be nearly impossible to trace.

Disclosure Risk and Public Divorce Documents: How Not to Have Your Cryptocurrency Stolen...

Now, when you are a good law abiding spouse and are disclosing your cryptocurrency assets during a separation, be sure not to have them stolen! Court cases are public information, so anyone can go down to the local courthouse and look at your family law file.

That means that if your cryptocurrency information is attached to a court document someone could steal your assets. In my jurisdiction the court has ruled in at least one case that when providing cryptocurrency documents you can partially redact any necessary information to ensure your assets are protected. So remember, disclose your assets but make sure they are protected as well!

Don’t Go Broke: The Issue with Cryptocurrency’s Large Fluctuations of Value...

Imagine the following scenario:

1. You’re happily married in 2015

2. You buy bitcoin in 2016 for $5,000 per coin. You’re a believer so you bought $100,000 worth!

3. In 2017 bitcoin hits $20,000 per coin, you’re rich! However, the new-found wealth impacts the marriage and you separate that day.

4. Your divorce is contentious and your divorce goes to court. Your divorce case is not decided until 2018. Now bitcoin is worth only $4,000 per coin.

5. In my jurisdiction the relevant dates for calculating net family property are date of marriage and date of separation. According to that, all things else being equal, you owe your spouse half of $400,000 of your bitcoin assets with a per coin cost of $20,000.

I’m sure you can see the massive problem you are now facing. You owe $200,000 to your spouse on an asset that is now only worth a total of $80,000. A strict approach to calculating Net Family Property will leave you destitute and suffering. Thankfully, there are legal arguments to make that you should pay your spouse based on the actual value of the cryptocurrency, not the value of it at the date of separation. These arguments are not guaranteed though, your spouse may not agree with them, and the court may not order it.

So what are some ways to protect yourself if you hold a large amount of cryptocurrency assets? To start a marriage contract, also known as prenuptial agreement, can set out how cryptocurrency assetswill be dealt with in the event of a separation or divorce. Please note, many couples enter into marriage contracts even after they are married so just because you are already married doesn’t mean you can’t protect yourself.

There are an almost unlimited amount of creative and sound ways you can protect yourself and your cryptocurrency assets before and during a divorce. The best option for you will largely depend on your specific fact scenarios and the relevant laws of your jurisdiction. Every country, state, or province is unique in at least one aspect. I highly suggest you speak with a qualified family law lawyer if you have cryptocurrency assets. Most jurisdictions will have a free helpline that will let you speak with a lawyer for up to 30 minutes for free. The best way to find them are to contact your local bar association or regulating body.

Ronan Blake is a family law lawyer practicing in Ottawa, Ontario, Canada.
Author: Ronan Blake
Contributor - Canada

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