Cryptocurrencies are increasingly popular in New York, and if you are going through a divorce, it is critical to approach the division of these digital assets with care and precision. If either you or your spouse holds cryptocurrency, it’s essential to understand how these assets will be treated under state law.
Cryptocurrencies, like Bitcoin or Ethereum, are regarded as property and, hence, must be disclosed and equitably divided between parties, similar to other marital assets. Here are some tips for dealing with cryptocurrencies during your divorce.
Identification and disclosure
As you begin your divorce proceedings, the first step in managing cryptocurrencies is ensuring full disclosure. You and your spouse must be completely transparent about all digital currencies you own. This includes detailing the types and quantities of cryptocurrencies, as well as how and where they are stored. You might need to hire digital forensic experts to trace and verify these assets accurately, ensuring everything is accounted for during the division process.
Accurate valuation
Given the notorious volatility of cryptocurrencies, determining their true value can be quite challenging. To ensure a fair valuation, consider hiring financial professionals who specialize in these digital assets. They can help ascertain an accurate value close to your settlement date, considering market fluctuations to ensure the division is equitable.
Tax considerations
When dividing or liquidating cryptocurrency, be mindful of the potential tax implications, such as capital gains taxes. These implications can significantly impact the financial outcome of your divorce. Consulting with a tax professional who understands cryptocurrency can help you navigate these waters, ensuring you’re prepared for any tax liabilities.
Regular updates and monitoring
Cryptocurrency markets are highly dynamic, requiring regular updates on your asset values throughout the divorce process. This will help ensure that the valuation remains fair and reflects any significant changes in the market, which can be crucial for final negotiations.
Document everything
When dealing with cryptocurrencies, meticulous documentation is vital. Ensure you have comprehensive records of all transactions, holdings and access details. This includes purchase dates, amounts, valuations and any transfers or sales. Proper documentation will support your claims and provide clarity during the legal proceedings, helping to streamline the process.
Prioritize security protocols
With the digital nature of cryptocurrencies, ensuring robust security protocols during and after the transfer process is crucial. This includes using strong, unique passwords for any related accounts and employing multi-factor authentication where available. Post-divorce, you should also consider transferring assets to new wallets to further secure your holdings from potential threats.
Consider mediation
To handle disputes over cryptocurrency amicably, consider using mediation services. A mediator can help both parties reach a consensus on how to fairly divide these assets without the need for contentious court battles. This approach can save time, reduce costs and preserve a cooperative spirit throughout the process.
Legal guidance can be invaluable in determining the best approach to managing and dividing cryptocurrency in your divorce. At The Law Firm of Poppe & Associates, PLLC, our focus is relentless advocacy for our clients. If you or someone you know is considering divorce, reach out to schedule a consultation at 646-665-3903 or by contacting us online.
Let Me Be Your Brave
Mia Poppe, Esq.
Managing Partner