Cryptocurrency is an increasingly common investment in spouses’ portfolios. While cryptocurrency can present unique challenges due to the various exchanges, different forms of recordkeeping, and new vocabulary, the key questions for purposes of divorce are the same as for more traditional assets:
When Was the Cryptocurrency Acquired?
It is important to identify when you purchased the cryptocurrency relative to the date of your marriage. Property acquired before marriage is considered the separate property of the spouse who acquired it.[1] In contrast, property acquired during marriage is presumptively community property.[2] In Washington, both community and separate property are subject to division in divorce;[3] however, courts are less likely to award one spouse’s separate property to the other spouse.
What Funds Were Used to Purchase It?
Assuming you acquired cryptocurrency during marriage, the next question is about the source of funds used to purchase it. Earnings during marriage are presumptively community property. So, if you purchased cryptocurrency with funds from your paycheck and while you were married, the cryptocurrency likely belongs to the community. However, property acquired “by gift, bequest, devise, descent, or inheritance” during marriage is separate property. So, for example, if you received an inheritance from the estate of your grandmother, Dolly, during marriage, and then used it to purchase cryptocurrency and can provide evidence to support this fact, the cryptocurrency is like to be characterized as your separate property.
Do You Need to Hire a Cryptocurrency Expert?
If the answers to the above questions are nuanced – for example, if you started investing in cryptocurrency before marriage but continued during marriage, or you used a mix of community and separate funds for a purchase during the marriage – you might consider hiring a cryptocurrency expert to determine the community and portion portions. The expert will likely request transaction histories for your wallets and exchange accounts, and statements for the bank accounts you used to purchase cryptocurrency. He or she will also likely require an advance fee deposit before starting their work. Though hiring an expert can increase your legal expenses, it is a good idea if you expect a contentious divorce or if there is a substantial amount of cryptocurrency at issue in your case.
Who Wants It Post-Divorce?
Cryptocurrency is not for everyone. One spouse may have neither an interest in nor the risk tolerance for holding cryptocurrency post-divorce. If you are the spouse who wants the cryptocurrency, you should understand the value, the character, and your spouse’s preference in this regard. This information can help your attorney and any expert identify and focus on the key issues that your spouse may raise.
As detailed above, cryptocurrency is an increasingly relevant topic in divorce. The Family Law Practice Group at Lasher is here to help you navigate these and other financial matters.
If you have any questions, please contact Mina Saudagaran at [email protected] or any of Lasher’s family law team.
[1] RCW 26.16.010.
[2] RCW 26.16.030.
[3] RCW 26.09.080.
