Cryptocurrency and Divorce in California: What You Need to Know

The division of marital property is challenging in even the most straightforward divorces, but when you add cryptocurrency to the mix, you can expect things to heat up considerably. Because protecting your financial rights throughout the divorce process is paramount, consulting with an experienced Orange County property division lawyer sooner rather than later is always in your best interest.

The Division of Marital Property in California

In California, everything that you, your spouse, and you and your spouse together came to own over the course of your marriage is considered community property, which means it belongs to both of you equally. The only exceptions to this rule include the following:

• Any gifts that either of you received in your name alone
• Any inheritances that were bequeathed in one spouse’s name only
• The pain and suffering compensation that either of you received in a personal injury claim that was initiated during your marriage

All the rest is marital property, and in California, these assets – or their attached value – are generally split evenly between the two spouses unless the court has a significant reason for ruling otherwise. This means that, if either of you acquired cryptocurrency while you were married, it almost certainly belongs to both of you, but the issue doesn’t end here.

The Matter of Separate Property

Anything that you or your spouse owned prior to marriage and that you kept separate while you were married is considered separate property that belongs solely to the original owner. Any intermingling of separate and marital assets, however, can fade the dividing line between them. Intermingling can amount to treating the asset like a marital asset, agreeing between yourselves that the asset is marital, or using marital funds to maintain or develop the asset.

Further, even when an asset is strictly defined as separate, any amount that it increases in value over the years that you are married is very likely to be treated as marital property. In other words, some assets are both separate and marital in nature, which can make the already challenging divorce term of property division that much more so.

When it comes to cryptocurrency, it is separate property if either of you owned the asset in question before you were married. With cryptocurrency, however, the name of the game is financial growth, which means that even separate cryptocurrency is very likely to have a marital component, and determining the amount that the currency has grown in value since your marriage can be a very complicated matter.

Cryptocurrency vs. Physical Currency

In a California divorce, the courts don’t distinguish between cryptocurrency and physical currency – or cash. A big difference between the two, however, is that it’s quite easy to attach a value to cash while putting a value on cryptocurrency can be slippery.

California courts consider cryptocurrency a volatile asset, and as such, they generally use the value attached on the date the couple filed for divorce – rather than the value attached on the date that the divorce was finalized. The goal is establishing a fair valuation, which – in the case of cryptocurrency – is determined by its market price on the date in question. From this point on, the cryptocurrency is generally treated the same way any other currency would be.

Hiding Cryptocurrency Tends to Be Much Easier than Hiding Other Assets Would Be

It’s important to point out that both parties to divorce are responsible for laying their financial cards on the table, which includes sharing all their assets and liabilities with the other. While financial transparency is required by law, this doesn’t alter the fact that some unscrupulous spouses aren’t above hiding assets in order to keep more for themselves.

While most assets can eventually be located and assessed for value through paper trails and forensic accounting, the same isn’t always true of cryptocurrency. If your spouse is a lot more involved in your family’s finances and does all the investing, for example, you may not know exactly what you’ve got, and this is if you’re lucky. If you’re not so lucky, your spouse may be doing everything they can to keep you in the dark.

Ultimately, if your spouse is engaged in intentionally devious financial practices, cryptocurrency has the potential to be very difficult to discover or track down. This form of currency is easier to hide than most other assets for all the following reasons:

• It is decentralized, which means that it generally isn’t controlled by a bank or another kind of central authority.
• The related records aren’t as readily available as they are for other assets. While the blockchain ledger is public, for example, the spouse who is in the dark doesn’t know what they don’t know, and some people will go to great lengths to cover their tracks.
• Large sums can be transferred with speed and discretion via digital wallets that make it very challenging to assign ownership and to track.

The fact that cryptocurrency is easier to hide, however, doesn’t make it any less wrong to do so, and the court can impose serious consequences in response.

While the Law Struggles to Keep Up

While the law may have trouble keeping up with cryptocurrencies, this doesn’t mean that they aren’t gaining ground. Forensic accounting is also catching up, and some specialists – who call themselves crypto hunters – focus their efforts squarely on cryptocurrencies.

An Experienced Orange County Property Division Attorney Is in Your Corner

Yes, cryptocurrency complicates the matter of property division in divorce, but this shouldn’t dissuade you from going all in when it comes to protecting your financial rights. The proactive Orange County property division lawyers at Minyard Morris are proud of our reputation for leaving no stone unturned in relation to tracking down assets in  complex property division cases, including those involving cryptocurrency, and we’re here for you too.

To learn more about what we can do to help you, please don’t hesitate to reach out and contact or call us at 949-724-1111 today.

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