Cryptocurrency, which was first made public in 2009, is a type of virtual currency. Unlike U.S. dollars, cryptocurrency is decentralized, meaning it works the same way all across the globe and is not tied to any one country. The most famous form of cryptocurrency, Bitcoin, reached mainstream acceptance in 2021.
The question for us is, where does cryptocurrency fit into a divorce settlement in Florida?
Cryptocurrency and Divorce: Florida Amends Its Disclosure Requirements
As you may already know, you must disclose all your assets when getting a divorce in Florida. Attempts to hide your assets can lead to serious legal consequences. Still, as a leading divorce attorney in Florida, we have seen the lengths people sometimes go to hide their marital assets, especially in high net-worth divorces.
Until recently, cryptocurrency was one such way.
Cryptocurrency has long been a blind spot in Florida divorce proceedings. Since it was still misunderstood or ignored by the courts and attorneys, spouses could hold large amounts of assets in cryptocurrency and not have them disclosed or divided in their divorce. That changed in 2021 as Florida amended their disclosure requirements to include the following:
- “Parties in any family law case are now required to disclose to each other any virtual currency transactions within the past twelve months and provide a listing of all current holdings of virtual currency, which includes cryptocurrency.”
Now cryptocurrency is considered an asset that can be divided during a divorce in Florida. You can’t just hide it anymore.
Cryptocurrency and Divorce Concern: How to Find the Hidden Assets
In Florida, cryptocurrency and divorce proceedings typically start during your first interview with the lawyer. If you suspect that your spouse may own cryptocurrency, your lawyer will start gathering evidence. There are many ways to gather evidence.
1. Bank/Credit Card Statements
In the discovery process of the divorce, attorneys will check bank and credit card statements to see if any cryptocurrency is being bought. If virtual assets are involved, they will look at their valuation and include them as marital assets in the division process.
2. Tax Returns
The IRS treats cryptocurrency as a property. That means, like all property transactions, tax rules also apply to transactions involving virtual currency. Your attorney can request your spouse’s tax returns to identify hidden virtual assets. However, merely purchasing and holding cryptocurrency is not a taxable transaction, so this method can sometimes prove less effective than we hope.
Other places where a skilled divorce attorney in Florida may find evidence of cryptocurrency concealment in relation to taxes include:
- Your spouse’s email, laptop, and phone
- Loan applications
- Computer hard drives
- Financial statements and transactions
Attorneys may use financial forensic professionals to trace cryptocurrencies. It is important for the spouse holding the virtual assets to be upfront about their existence as well. It is now the law that they must be disclosed, so hiding them would be illegal.
How Will the Court Value and Divide the Cryptocurrency?
One of the primary concerns is determining the value of cryptocurrency. Cryptocurrencies like Bitcoin and Ethereum are very volatile. Since the currency exchange rate of cryptocurrency to dollars tends to change rapidly, the valuation will be as up-to-date as possible. It’s a bold new world of marital assets, even though many divorce attorneys in Florida have not yet figured out how to handle it.
However, like all marital assets, the Florida courts will divide cryptocurrency equitably. However, that does not necessarily mean a 50-50 division. Usually, there are four ways to do this:
1. Simple division
In simple division, you will receive half (or a fair share) of the cryptocurrency in its original form. It doesn’t get converted to cash. For example, if your spouse has 5 Bitcoins, you get 2, 2.5, or even 3 Bitcoins as a share.
The court will consider factors like your contribution to the marriage, financial circumstances, the duration of the marriage, and your job. To receive your share, you need to set up a cryptocurrency account. The Bitcoins will be transferred to it after your divorce is finalized.
2. Custodial Holding
In this approach, a third-party custodian will hold your share of the cryptocurrency until your divorce is finalized. After that, they will liquidate it and distribute the money to you. The custodian may charge a fee for their services.
3. Liquidation
Your ex will convert your share of the cryptocurrency into cash. The value of the cryptocurrency on the day of liquidation will determine how much money you will get.
4. Liquidation without a Claim
This process is similar to liquidation. The only difference is that you and your ex agree that your ex has the full title to the remaining cryptocurrency. You don’t have a claim even if its value changes in the future.
You will need a competent divorce attorney in Florida who has handled cases involving cryptocurrencies. The complexity of these situations and the recent changes in the law make it necessary to take every step carefully. Talk to an attorney as soon as possible and discuss your case.
Work with a Professional Divorce Attorney in Florida
If you’re looking for a divorce attorney with experience in cryptocurrency, look no further than C. Alvarez Law. Many law firms in Florida do not yet have experience dealing with cryptocurrency in divorce cases, since it has been added into Florida law so recently. C. Alvarez Law has significant experience dealing with cryptocurrency in divorce cases. We can read cryptocurrency statements and have even been paid by cashing out cryptocurrency.
Cryptocurrency is a big new concept, but it is here to stay. If you are getting a divorce in Florida and dealing with assets in cryptocurrency, contact C. Alvarez Law today. We help families come to a resolution so they can move on peacefully.
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