In today’s digital age, cryptocurrency has become an increasingly popular investment and valuable asset. As digital currencies like Bitcoin and Ethereum continue to grow, they are also becoming more common in divorce proceedings. During a New Jersey divorce, the division of assets can be complex, and cryptocurrencies present unique challenges given their decentralized nature. If you are navigating a divorce and have cryptocurrency holdings, it’s imperative to understand how these assets will be handled in the context of property distribution. Please continue reading as we explore the challenges in dividing cryptocurrency and how our skilled Edison Property Division Lawyers can help protect your financial interests.
Why Digital Currencies Matter in Divorce?
A significant challenge in dividing cryptocurrency in a divorce is accurately determining its value. Unlike traditional assets, cryptocurrencies are often highly volatile, meaning they can experience substantial price fluctuations in a short time. Therefore, to achieve a fair distribution, both parties may need to agree on a specific date for valuation. Given the complexity of this scenario, you should consult a family law attorney who understands the nuances of this digital currency. In addition, cryptocurrencies can easily be concealed from a spouse, making the discovery process much more intricate. This is due to the pseudo-anonymous nature of cryptocurrency transactions.
How is Cryptocurrency Divided in a NJ Divorce?
In the event of a divorce, states handle the division of marital property in one of two ways: “community property,” where assets are split equally, or “equitable distribution,” where the court seeks to divide property fairly. New Jersey follows the equitable distribution principle when dividing marital assets. This means a judge will take several factors into account, including the length of the marriage, each spouse’s income, contributions to the marriage, and more to determine an equitable split.
Cryptocurrencies can hold significant financial value. If digital currencies aren’t accounted for during the discovery process it can result in an inequitable division of assets. Depending on when the cryptocurrency was acquired it may be classified as marital or separate property. If the cryptocurrency was acquired during the marriage with marital funds, it qualifies as a marital and is subject to equitable distribution. Conversely, if one party purchased the cryptocurrency prior to the marriage or used separate funds for the acquisition, it may be deemed separate property and excluded from property distribution.
You should note that cryptocurrencies are subject to tax rules. When you divide or liquidate digital currencies it can trigger capital gains taxes, which should be factored into the divorce settlement.
At Arndt, Sutak, & Miceli, LLC we are prepared to help you navigate the complexities surrounding cryptocurrencies in divorce. Connect with our firm today for guidance and skilled representation.
