Before the court grants a divorce in Massachusetts, each spouse is supposed to make a full financial disclosure. Depending on the level of animosity and legal delaying tactics involved, the parties may only need to exchange financial statements, but it often becomes necessary to conduct serious discovery to obtain records of all assets and debts.
One factor that is starting to complicate financial disclosure and other aspects of divorce is cryptocurrency. Spouses sometimes use crypto to hide assets. In other cases, they forget they own it, or how to access it. Even in the best case scenario, dividing cryptocurrency poses special challenges in a Massachusetts divorce. Anyone who has or believes they may have crypto holdings or other virtual assets such as non-fungible tokens should work with a divorce attorney who understands how to handle these complex assets.
Cryptocurrency Can Be Hard to Track
Unlike traditional bank and brokerage accounts—and even online savings accounts—cryptocurrency accounts often do not come with automatic quarterly reports showing holdings and transactions. Transactions in crypto will only show up on credit card or bank statements when a spouse used one of those means to purchase the currency. That makes crypto holdings much more difficult—but not impossible—to locate.
Cryptocurrency holdings are identified by a private key, which is a secret number that may not even be known to the purchaser. Many crypto investors access their holdings through a virtual wallet, exchange or custodian and these entities may actually hold the private key on behalf of the owner. When someone who owns cryptocurrency loses the private key, there is often no way to retrieve it and recover the assets. The key is not traceable, so finding a key will not necessarily lead you to the owner.
These factors make it easier to hide and lose cryptocurrency. The IRS now requires disclosure of crypto transactions, but a spouse who is willing to hide assets in divorce may not be afraid to hide it from the IRS either.
The Problems with Valuing and Dividing Cryptocurrency in Divorce
Cryptocurrency that was acquired during a marriage should be divided between spouses as marital property. If one spouse owned crypto before the marriage, their holdings at the time of the wedding would be their own separate property, but any increase in value during the marriage could potentially belong to both spouses. Make sure your attorney is aware of who owned what when you married so your legal representative is prepared to help you keep all assets to which you are entitled.
The process of valuing and dividing crypto currency can be much more difficult than for simple assets. Privacy concerns make it hard to enable a spouse without their name on an account to gain access to crypto holdings. Trying to place an equivalent dollar value on cryptocurrency also proves challenging since the value fluctuates so widely and rapidly.
Work a Divorce Attorney Who is Prepared for the Challenges of Cryptocurrency
When your divorce attorney understands the legal and logistical challenges and you provide information to enable them to dig deeper to uncover potentially hidden assets, then you put yourself in the best position to receive your fair and equitable share of assets in divorce. The dedicated team at Koiles Pratt Family Law Group has the knowledge to help you succeed in reaching your goals. Contact us today to learn more about how we can help with cryptocurrency and other complex assets.