Under the divorce laws of both Maryland and the District of Columbia, when a couple obtains a divorce, the marital assets of the couple are equitably divided as part of the final divorce decree. Pretty much anything that a couple has bought or earned or received during the marriage is going to be considered “marital property,” and all marital property is subject to the requirement of equitable division. Certain property — like a weekend cabin or a segregated financial account — that was owned separately before the marriage by one spouse of the other can remain separate property over the years of the marriage. However, an increase in the value of those separate assets is most often deemed to be marital property.
This then brings us to our discussion of cryptocurrencies like Bitcoin and other digital coins and tokens. The D.C. divorce attorneys at The Law Offices of Thomas Stahl continue with more information about cryptocurrency and divorce.
Even though cryptocurrencies are not physical in nature, they are nonetheless considered “marital assets” and “marital property” for purposes of equitable division during a divorce. The fact that cryptocurrencies are virtual and intangible does not remove them from the jurisdiction of the divorce court or from the competing claims of the spouses. Many assets — like copyrights — are intangible and have long been equitably divided between spouses during a divorce.
Being financial in nature, cryptocurrencies should be seen as most similar to other financial accounts. The value of a cryptocurrency digital wallet can be determined on a given date. That amount is then taken into consideration by the divorce court when determining the equitable division of marital property.
Cryptocurrencies tend to be volatile in terms of market value, so the valuation of a cryptocurrency account can cause problems of proof. Divorce courts generally resolve this issue by establishing a specific date and time when the value of the account will be deemed “final” for purposes of the divorce. Other options include dividing the account itself (regardless of value), having the spouses agree on the date/time for valuation, or having the divorce court order liquidation of the cryptocurrency account.
As noted, if one spouse can show that a cryptocurrency account was separate property owned solely before the marriage, then that cryptocurrency might NOT be split between the spouses. However, as also noted, the increase in value of the cryptocurrency account is likely to be a marital asset.
What about taxes?
Divorce courts take into account any taxes that might be assessed against an asset subject to marital property division. This is a common and familiar problem for divorce courts, and they are used to taking tax consequences into account when valuing and then dividing assets.
For example, accounting for tax consequences with respect to retirement accounts is often a problem but is resolved without too much difficulty. Sometimes the solution is to equitably divide the cryptocurrency account itself, which resolves any tax consequence (since whatever the tax consequence, it is shared by the spouses post-divorce). Otherwise, divorce courts will take evidence about the tax consequences and account for those in valuation and division.
Divorce Attorneys in D.C. and Maryland
Contact the seasoned and experienced Maryland and D.C. family law lawyers at The Law Offices of Thomas Stahl for more information on the way cryptocurrency will be treated in your divorce. We have the skills and expertise you need. We have proven experience with family law for Maryland and the District of Columbia. Schedule a consultation today or call us at (410) 696-4326 or (202) 964-7280. We have offices in Columbia, MD, and Washington, DC.