Property division is often the most complicated aspects of a California divorce. Today, cryptocurrency may be part of your asset division, potentially making asset division even more complex.
Investing in cryptocurrency has become popular in recent years. There are now various forms of cryptocurrency that are gradually becoming mainstream forms of digital payments.
You must disclose your cryptocurrency investments
Because cryptocurrencies are still relatively new and their digital nature makes it difficult to trace, they might be easy to overlook in a divorce. But if you own cryptocurrency investments, you have a duty to disclose them as you would any other asset in a divorce.
Both you and your spouse have a duty to disclose all assets and liabilities in divorce. While locating and valuing cryptocurrency may be difficult due to the lack of paper trail, you should never assume that your spouse or a court will not locate it.
If your cryptocurrency investments are located and a court determines you intentionally withheld them from your spouse, you could face sanctions from the court. Courts sometimes penalize a spouse for hiding assets by awarding the other spouse a higher share of community assets.
Alternatively, if you believe your spouse is intentionally hiding cryptocurrency investments, you have options for locating them. Forensic accountants are developing their skills and knowledge with locating cryptocurrency investments and there are even “crypto hunters” who focus on locating lost, hidden or stolen cryptocurrency.
Community and separate property
California is a community property state. This means that everything you and your spouse acquire during your marriage is considered community property and subject to equal division in a divorce.
There are some exceptions to this rule, including gifts or inheritances that either of you received separately. Everything else is generally community property.
Separate property is not divided in a divorce. Separate property is anything you or your spouse owned prior to marriage that was kept separate during your marriage. Separate property that mixes with community property becomes community property and is subject to division.
A common example of mixing is using cash from a bank account you held prior to marriage to make a down payment on a home that you purchase with your spouse. Using cash from the bank account converts it to a community property asset that you must divide with your spouse if you divorce.
How courts treat cryptocurrency
When it comes to cryptocurrency, California courts treat it the same as physical currency, such as cash. The challenge is that it is easier to place a value on cash than on cryptocurrency.
Cryptocurrency is typically considered a volatile asset, meaning its value can change frequently. For purposes of asset division, courts usually use the value of the cryptocurrency on the date your divorce was filed, rather than the date your divorce is finalized.
The goal with valuing cryptocurrency, as with any other community asset, is to find its fair market value. Once all cryptocurrency is located and valued, it should be split equally with other community assets.
