Crypto assets and a divorce settlement
16th August 2023 by Jonathan Talbot
According to a report by Forbes Magazine in September 2022 there are now more than 20,000 crypto currencies worth a collective $982 billion, and NFT artworks (non-fungible tokens) are changing hands for huge sums. One of the ways in which these assets differ from the other assets which are considered for sharing in a divorce settlement, is that they are much easier to hide.
‘This is a massive market and although crypto assets are now commonplace, many people still do not have much understanding of how they work or what they are worth,’ says Jonathan Talbot, head of the family team at Laceys Solicitors.
‘When it comes to divorce, it is not uncommon for us to see clients surprised at the value of their former spouses’ crypto assets, but it is important to take all assets into account when negotiating a financial settlement.’
What are crypto assets?
They are digital assets commonly known as crypto currencies. ‘Crypto’ means hidden, referring to the secure digital way data is held on who owns the asset, and ‘currencies’ reflects that this is a type of digital money.
Some commonly known crypto assets include Bitcoin, Binance, Ethereum and Tether though there are thousands more, with new ones being added regularly.
Crypto assets differ from traditional assets in that there is no central regulation authority, or government to control and regulate them in the way there is with banks and building societies. They operate using blockchain technology which is essentially a database ledger system to authenticate digital transactions.
Are they included in a divorce settlement?
In short, yes. Both spouses are under a duty to make a full and frank disclose of all assets that they own. Crypto assets are considered to be an asset under the law of England and Wales and therefore they must also be disclosed, and will form part of the division of matrimonial assets. The assets will need to be valued, the same as any other asset.
How are crypto assets valued for divorce?
Crypto assets tend to trade in a highly volatile market. This is in contrast to traditional assets such as property, pensions and bank accounts which do not usually fluctuate to any great degree over the course of a few months. This means that if you are entering settlement discussions or attending court, and your pension valuation was six weeks old, it is unlikely to cause a problem as its value will be very similar to six weeks ago.
Each crypto asset has a value that can go up and down. How much of each crypto asset you hold will be multiplied by the published value for one of those assets, much the same way in which share valuations are calculated. It is important that the valuation of any crypto assets is up to date on the day of negotiations or a court hearing.
How can they be divided?
Crypto assets can be treated in the same manner as more traditional assets. The court has the power to order their transfer in whole or in part to the other spouse. This usually means a separate crypto account being set up for the other spouse. The court can also order their sale, with a division of the proceeds being ordered between the spouses.
It is not uncommon for significant variance in the value of crypto assets from one day to the next. This makes it hard to ensure that a fair settlement is achieved. Often judges will seek that both spouses end up owning some of each type of crypto currency. This at least ensures both are exposed to the potential gains and losses in the market.
However, sharing is not an option with an NFT. Significant caution should be taken by any spouse seeking to offset crypto assets against more stable and traditional assets. What seems like a fair deal one day, could be grossly unfair to one spouse by the next.
I think my spouse is hiding crypto assets, what can be done?
If you have evidence that your spouse previously owned crypto assets, or they told you that they did, then you can ask the court for an order for disclosure. If your spouse continues to deny holding any then it may be necessary to carry out a forensic investigation of their accounts. Often there can be historic signs in bank accounts, such as a transaction to initially buy some crypto-currency. It may be necessary to engage a specialist forensic accountant who can analyse your former spouse’s disclosure for irregularities.
Unfortunately, the reality of crypto assets means they are easier to hide than traditional assets. However, a judge has the power to infer that there are hidden assets, if there are irregularities that cannot be explained. The judge can then make an adjustment for this when making their final order.
How we can help
If you or your former spouse hold crypto assets, then it is important that you obtain early advice from a specialist lawyer in order that you can achieve the best outcome in your financial division.
For further information, please contact our Family department on 01202 377800 or email j.talbot@laceyssolicitors.co.uk
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Jonathan Talbot
Partner — Family
Direct dial: 01202 377844
-
“Jonathan has been amazing at helping me get a resolution with my ex-husband. He was a great listener when I was getting very upset about clauses in our old divorce agreement that were not being adhered to and reacted really quickly with a letter and support. I would not hesitate to ask Jonathan for help again but please excuse me if I hope that doesn’t happen for a while as we all know dealing with ex's is never much fun! Thank you Jonathan.”
-
“Very happy with how you dealt with my case. Many thanks for your help and advice from Mr Talbot and his secretary.”
-
“Jonathan Talbot explained the process and how things would proceed. He was very patient allowing us time to understand and adapt to our new situation. Legal language can be quite difficult to understand and he would explain what it meant and how it would impact.”
-
“I always use Laceys for my legal work, I feel able to talk to them and I know they listen. They have always been professional and kind.”
-
“I’d like to extend heartfelt thanks to you and Shannon for helping me through this difficult time, I am really very appreciative to have had you on my team this year, you’ve been an enormous support. ”
Jonathan heads up Laceys family department and having qualified as a Solicitor in 1983, he has over 35 years experience in Family Law.
He specialises in Family and Relationship Breakdowns, Financial Remedies, Collaborative Law and International Family Law.
Jonathan has a exceptional caring nature and will always strive to find solutions to family issues outside of the court if at all possible.
Outside of work Jonathan likes to keep himself busy by competing in Ironman 70.3’s when he gets the chance – which are no easy feat at having to complete a 1.2 mile swim, a 56-mile bike ride, and then a 13.1 mile run each race!
Related articles
Is a postnuptial agreement part of your family business succession plan?
The 2020s have been called ‘The Great Wealth Transfer,’ as £1 trillion of wealth built up by...
How are gifts treated in divorce or dissolution of a civil partnership?
The Government’s 2022 English Housing Survey reported that 27 per cent of first-time buyers used gifts from...