Cryptocurrency in Divorce: Navigating Property Settlements and Financial Agreements

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An increasing number of divorce proceedings have started to involve cryptocurrency assets, reflecting the growing popularity of digital currencies. According to market research firm GWI, about 10.2% of global internet users aged 16 to 64 own cryptocurrencies, with most ownership concentrated in nations experiencing high inflation or fluctuation in the value of their national currencies. Clair Walczak, a senior associate at independent law firm Lander & Rogers, claims that family lawyers are witnessing a rising number of divorce settlements featuring digital assets.

This evolving area of law calls for specialist family law advice when dealing with cryptocurrency matters, says Walczak. Once divorce proceedings are initiated, the court follows a process to determine the settlement of property and financial matters, including assessing which assets are available for division, considering contributions from both parties and evaluating each party’s future requirements. The same process applies to crypto assets, which both parties in the divorce are required to disclose to the court.

As part of this process, the court identifies and values the existing assets of the parties, including all digital assets. The value of cryptocurrency assets is determined by the open market and can be assessed via an exchange. Market fluctuations may impact these values, posing a risk to clients seeking to retain a considerable portion of their property settlement entitlements in the form of cryptocurrency. Ultimately, it falls on the court to determine who retains cryptocurrency assets or whether these assets should be sold.

Crypto staking rewards can also form part of either spouse’s income and are recorded on their individual tax returns, similar to how dividends are handled. Walczak notes that retaining these rewards has the potential to impact a party’s property settlement entitlements. Prenuptial agreements can also play a role in determining specific entitlements to assets like cryptocurrency tokens in the event of a divorce. If a binding financial agreement is in place, then these specific entitlements must be honored according to that agreement.

As an increasing number of individuals acquire cryptocurrency as an investment asset, the complexities of handling these assets in divorce settlements will likely continue to expand. With markets and regulations constantly changing, it is crucial for individuals to seek expert legal advice when navigating property settlements involving crypto assets.

Source: Cointelegraph

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