How Cryptocurrency Is Divided in a Florida Divorce

Cryptocurrency, an increasingly popular form of digital asset, presents unique challenges in divorce proceedings. Florida law, particularly under Chapter 61 of the Florida Statutes, governs the equitable distribution of marital assets and liabilities. This article explores how cryptocurrency is treated during divorce in Florida, offering clarity to those navigating this complex legal terrain.
Understanding Marital and Nonmarital Assets
The first step in determining how cryptocurrency is divided in a Florida divorce is distinguishing between marital and nonmarital assets. According to Section 61.075 of the Florida Statutes, marital assets include those acquired by either spouse during the marriage, regardless of whose name is on the title. Conversely, nonmarital assets are typically those acquired before the marriage or through inheritance or gift.
Cryptocurrency purchased during the marriage is generally considered a marital asset subject to equitable distribution. However, cryptocurrency acquired before the marriage may be classified as a nonmarital asset unless marital funds were used to enhance its value.
Valuation of Cryptocurrency
Valuing cryptocurrency can be one of the most contentious aspects of a divorce. Unlike traditional assets such as real estate or retirement accounts, cryptocurrency is highly volatile and often lacks transparency. Florida law under Section 61.075(3) requires courts to use competent, substantial evidence to determine the value of marital assets. This includes establishing the fair market value of cryptocurrency at the time of the divorce filing or another equitable date as determined by the court.
To accurately value cryptocurrency, expert testimony from forensic accountants or cryptocurrency valuation specialists may be necessary. Courts may also require documentation such as transaction records, wallet addresses, and exchange statements to substantiate claims about the asset’s value.
Tracking and Disclosing Cryptocurrency
Florida law mandates full financial disclosure during divorce proceedings. This includes the disclosure of all cryptocurrency holdings. Section 61.075(3) emphasizes the importance of identifying and valuing marital assets to ensure an equitable division.
Cryptocurrency, by its nature, can be challenging to track. Its pseudonymous nature and the ability to store assets in digital wallets make it easier for individuals to conceal these holdings. Parties should be prepared to use discovery tools, such as subpoenas and forensic investigations, to uncover undisclosed cryptocurrency assets. Intentional nondisclosure or concealment of assets may lead to severe penalties, including an unequal distribution of marital property.
Equitable Distribution of Cryptocurrency
Under Section 61.075(1), Florida courts begin with the premise that marital assets should be divided equally unless there is justification for unequal distribution. The court will consider factors such as each spouse’s contribution to the marriage, economic circumstances, and the intentional dissipation of assets.
Cryptocurrency may be divided in several ways during a divorce:
- Direct Division: Splitting the cryptocurrency between spouses in proportion to the court’s equitable distribution ruling. This requires the creation of new digital wallets or the transfer of cryptocurrency to existing wallets.
- Offsetting Assets: Awarding one spouse the entire cryptocurrency holding while compensating the other spouse with assets of equal value, such as real estate or cash.
- Liquidation: Selling the cryptocurrency and dividing the proceeds between the spouses. This approach can be risky due to market volatility.
Addressing Volatility and Tax Implications
Cryptocurrency’s extreme price volatility poses unique challenges in divorce cases. Courts must ensure that the division is fair despite fluctuations in value between the filing date and the distribution date. This often requires precise valuation dates and expert input.
Additionally, the tax implications of cryptocurrency transactions must be considered. Selling cryptocurrency to facilitate equitable distribution can trigger capital gains taxes, which should be factored into the overall division of assets. Failure to address tax consequences can result in unexpected financial burdens for one or both parties.
Impact of Premarital Agreements
Premarital agreements can play a significant role in the division of cryptocurrency during divorce. Under Section 61.079 of the Florida Statutes, such agreements must be in writing and signed by both parties. If the agreement specifically addresses cryptocurrency and designates it as nonmarital property, it may not be subject to equitable distribution.
However, premarital agreements must meet certain criteria to be enforceable. A spouse may challenge the agreement if it was signed under duress, coercion, or without adequate financial disclosure. Courts also scrutinize agreements that are deemed unconscionable.
Addressing Concealed Cryptocurrency
The pseudonymous nature of cryptocurrency creates opportunities for concealment. Section 61.075(1)(i) explicitly allows Florida courts to consider the intentional dissipation or concealment of marital assets when determining an equitable distribution.
If one spouse suspects the other of hiding cryptocurrency, forensic investigations can uncover concealed assets. Blockchain’s transparency allows experts to trace transactions and identify wallet addresses linked to undisclosed holdings. Once uncovered, concealed cryptocurrency is often subject to an unequal distribution as a penalty for noncompliance.
Sarasota, Bradenton, and Venice, Florida Cryptocurrency Lawyer
Navigating cryptocurrency division during a Florida divorce requires expertise and attention to detail. Florida’s equitable distribution laws provide a framework for fairly dividing marital assets, but the complexities of cryptocurrency demand a thorough understanding of both the law and the technology.
If you are facing a divorce involving cryptocurrency in Sarasota, Bradenton, Lakewood Ranch, or Venice, Florida, it is essential to protect your rights and financial interests. Contact the Law Offices of Matthew Z. Martell, P.A. by calling (941) 556-7020 or contacting us online for a consultation. Our experienced divorce attorney can help you navigate the legal complexities of your case and ensure a fair outcome.