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Bitcoins and Divorce: How to Find, Value, and Divide Them


What is Bitcoin?

Bitcoin is a cryptocurrency that allows secure transactions on the internet without an intermediary, such as a bank. Bitcoins can be exchanged or traded for other currency, products, or services and have dramatically increased in use since their creation in 2008. With this increase comes new challenges in a divorce when it comes to dividing up assets.

How to Find Bitcoins in a Divorce Action

Most bitcoins can be found like any other asset in a divorce, so long as your attorney knows what questions to ask. Almost every divorce action, for example, goes through what is called a discovery process. Discovery is where each spouse is asked specific questions to determine what should be divided, how much each spouse earns, etc. Each spouse can ask for the production of documents through this process, including tax records and bank statements. In addition to discovery, your attorney may request a deposition with your spouse to ask them direct questions on any cryptocurrency transactions. When bitcoins are involved, your attorney should include questions and request information on any cryptocurrency your spouse may have to ensure a fully informed division of marital assets.

Other bitcoins can be more challenging to find, particularly when they are private. A private bitcoin means that only the “owner” of the transaction has access. If they do not provide the access information or forget it, it is impossible to get back. However, there is some good news as every bitcoin transaction at the start has an electronic paper trail that can be accessed through a computer’s hard drive. To find this electronic paper trail, a forensic examiner needs to go through the hard drive.

How to Value Bitcoins

Once bitcoins are found, their value needs to be determined to divide them between the spouses. Unfortunately, this can be difficult because they are traded like a stock, so their values frequently change.

Tax records can shed some light on the value of prior bitcoin transactions by looking at the reported gains and losses. The gains and losses show how much the value increased or decreased up to when they were taxable.

For any bitcoins not on a tax record, it is essential to value them as close to a settlement or trial to get the most accurate value.

How to Divide Bitcoins Between Separating Spouses

Bitcoins are treated the same as any other asset in a divorce. If the bitcoin transaction was before the marriage, was given as a gift or through an inheritance, it is not marital property and cannot be divided. Therefore, if the transaction was during the marriage, it is marital property and can be divided.

When bitcoins are considered marital property, the easiest way to divide them is to split the determined value 50/50. Since most bitcoins can be cashed out in full, splitting the value 50/50 means each spouse would simply get half.

Another way to divide bitcoins is by negotiating other marital property in exchange; meaning, if the spouse with the bitcoins wants to keep them, they can give up other marital property with the same determined value to the other spouse.

Whether a bitcoin transaction is easy to find or not, it is important to be forthcoming about your assets when going through a divorce. Informing your attorney of every bitcoin transaction will make the process more manageable in the long run.

Our attorneys at The Harris Law Firm are knowledgeable in dealing with cryptocurrencies during divorce. For legal counsel you can trust, contact our award-winning Colorado firm online or at (303) 622-5502 today.

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