Dividing digital assets has become more common in divorces. It can be complicated to locate digital assets and to put a value on them. However, they are divided like any other marital asset in California.
Digital Assets and Community Property
Generally, all assets accumulated by a married couple during their marriage belong to them both as community property. Exceptions are separate property that one of the spouses owned prior to the marriage, or property that was received by one spouse by inheritance or gift.
If the separate property is sold, and a new asset is purchased with the proceeds, that new property can still remain separate as long as it is not commingled with community property.
It is becoming more common place for people to purchase digital assets. Sometimes a spouse may purchase bitcoin or other digital assets and not tell their spouse about it. Since these assets are kept in a digital wallet, it can be difficult to know that they exist. California law requires that all assets and debts be disclosed, including digital assets. These assets can be characterized as either community property or separate property, just like any other asset.
If a spouse does not disclose the digital assets, they can be challenging to discover and valuing them can be equally difficult, given the volatility of the crypto currency market. Giving your spouse, or their attorney, the log-in information for your digital wallet can be risky, as your spouse then has equal control over the account and can do with it what they will. Since putting a value on these assets can be difficult, they are Often these assets are divided in-kind, by transferring to the “non-owner” spouse their share of the digital assets. The spouse may need to set up a separate digital wallet so that half of the value of the Bitcoin or other digital asset may be transferred into their new wallet or account.
Risk to the Non-Disclosing Spouse
California has strict rules requiring divorcing spouses to disclose all assets, whether community property and separate property. Since digital assets may be held in the name of only one spouse, in their digital wallet, it can be easy to hide the asset and not disclose it on their financial disclosure.
The spouse who does that may feel like they got away with keeping the asset to themselves. This is a big risk. The law frowns on spouses who fail to disclose, and when the hidden asset is discovered, and it most often is discovered, the penalties imposed upon the non-disclosing spouse by the court for the deception are great. In one California case, a spouse failed to disclose that they had purchased digital assets after the couple had started their divorce process, and upon discovery the court ordered an unequal division of the asset in favor of the unknowing spouse. The spouse that purchased the digital assets argued that they should be divided equally, because the funds invested had increased in value, but the Court did not agree.
Contact us at Chase, Berenstein and Murray, Counselors at Law
For assistance with your divorce, how to discover hidden assets, and how to divide digital assets, contact the team at Chase, Berenstein and Murray, Counselors at Law.