Digital Assets in Divorce: Who Gets the Crypto?
As technology continues to evolve, so does the complexity of dividing property during a divorce. Digital assets such as cryptocurrency, non-fungible tokens (NFTs), and other online valuables present unique challenges for couples navigating divorce. Understanding how Georgia courts handle these cutting-edge assets is essential for ensuring a fair division.
What Are Digital Assets?
Digital assets are intangible items stored electronically and often traded or valued online. Examples include:
Cryptocurrency: Bitcoin, Ethereum, and other digital currencies traded on online platforms.
Non-Fungible Tokens (NFTs): Digital art, music, or other collectibles recorded on a blockchain.
Online Assets: Domain names, digital royalties, and monetized social media accounts.
The rapid adoption of digital assets has introduced complications into the property division process, particularly due to their intangible nature, high volatility, and often decentralized storage.
Classifying Digital Assets in Georgia
In a divorce, the first step in handling digital assets is to determine whether they are marital or separate property. Georgia law follows the principle of equitable distribution, dividing marital property fairly based on the circumstances of each case.
Marital Property: Any digital asset acquired during the marriage is generally considered marital property, even if it is held in one spouse’s name. For example, cryptocurrency purchased using income earned during the marriage is likely marital property under Georgia law.
Separate Property: Digital assets acquired before the marriage, inherited, or received as gifts are usually considered separate property, provided they have not been commingled with marital assets. If, for instance, one spouse brought cryptocurrency into the marriage but used marital funds to purchase additional tokens, the court may treat part of the cryptocurrency as marital property.
Valuing Digital Assets
Assigning a value to digital assets is one of the most challenging aspects of divorce proceedings. Cryptocurrencies, in particular, are notoriously volatile. Their value can change dramatically in a short period, making it difficult to establish a consistent number.
Timing: The court typically selects a specific date for valuing all marital property—usually the date of the final hearing, should there be one. This is especially important for cryptocurrencies, as their value can fluctuate significantly from one day to the next.
Market Trends: The value of digital assets depends on market trends, platform fees, and liquidity. Parties should track historical values and account for the potential costs associated with converting cryptocurrency into cash or other forms of value.
Given the stakes, it’s crucial to maintain accurate documentation of digital assets, including purchase dates, values at the time of acquisition, and any changes in ownership or storage.
Identifying Digital Assets
Cryptocurrency and other digital assets are often stored in decentralized systems, making them harder to identify during divorce proceedings. However, Georgia courts require full financial disclosure from both parties. If one spouse suspects the other of hiding assets, they can seek:
Crypto Account Records: Transaction histories from cryptocurrency exchanges, wallets, or other online platforms can provide insight into holdings.
Tax Returns: Because the IRS treats cryptocurrency as taxable property, it often appears on tax filings. Reviewing prior tax returns can reveal hidden holdings or income from digital assets.
Banking Account Records: To purchase digital assets, you usually need to use more traditional purchasing methods, such as buying using funds held in an ordinary banking account or other similar financial account. While it can be hard to locate crypto accounts when you do not know exactly what to look for, it can be easier to locate the transactions that resulted in the purchase of crypto assets, which makes finding them much easier.
Failing to disclose digital assets in a divorce is a serious offense. Courts may impose penalties, including awarding a greater share of the marital estate to the other spouse.
Dividing Digital Assets
Once identified and valued, digital assets must be divided between the parties. Georgia courts aim for equitable distribution, which considers factors such as:
The contributions of each spouse to the marital estate.
The future financial needs of each party.
The overall fairness of the proposed division.
Preparing for the Future
For those planning to marry or who already hold significant digital assets, it’s worth considering proactive steps to avoid disputes in the event of divorce:
Maintain Documentation: Keep records of when and how digital assets were acquired. This information is critical for distinguishing between marital and separate property.
Separate Accounts: Avoid commingling digital assets acquired before the marriage with marital funds or accounts.
Prenuptial or Postnuptial Agreements: These agreements can specify how digital assets will be divided, offering clarity and reducing conflict.
Conclusion
Digital assets like cryptocurrency add a layer of complexity to divorce proceedings, but Georgia law provides a framework for addressing these challenges, much like any other asset class. Whether you own digital assets or suspect your spouse does, a clear understanding of your rights and responsibilities can help protect your interests.
At Resurgens Legal Counsel, we are well-versed in the intricacies of digital asset division. Our firm can help you navigate this emerging area of family law, ensuring a fair and equitable resolution. Schedule a consultation today by calling 770-765-7550 or through our website.