Assets like Bitcoin, Ethereum, and other cryptocurrencies can pose a challenge when dividing property during a divorce. Unlike real estate or traditional bank accounts, cryptocurrency can be easily concealed by warring spouses, can fluctuate greatly in value, and is subject to reduced regulation by nature.
Working with an Overland Park divorce attorney at Joseph, Hollander & Craft can help. Our lawyers are experienced at working alongside forensic accountants and ensuring that property division is handled fairly for both parties. When it comes to crypto and divorce, we have the skills and resources you want on your side.
Is Crypto Divided in a Divorce?
In Kansas, all marital property is subject to equitable division of the assets. This does not mean that your property will be split 50/50, however. Instead, a judge will attempt a fair and equitable division of assets between both spouses. For instance, if one spouse is allowed to keep the house, they should expect to lose other shared assets of similar value.
Cryptocurrency (and other digital assets) are subject to these same laws. Absent an agreement to the contrary, any cryptocurrency purchased during the marriage or with commingled funds is subject to division. If you wish to keep your wallet intact, then you may expect a judge to grant other assets to your spouse as part of the equitable division.
Even if you purchased your cryptocurrency before your marriage, money you made off the sale during your marriage may also be considered marital property.
Are All Digital Assets Considered Marital Property?
Digital currencies are generally considered part of the marital estate when they were acquired over the course of the marriage. It does not matter whose name is on the account. Other digital assets, such as NFTs or tokenized assets, may also be considered marital property. The timeline of the acquisition is the most important factor. Property acquired after filing for a divorce is not subject to division under Kansas state law.
How Will a Kansas Court Determine the Value of Cryptocurrency?
When it comes to digital assets vs. traditional assets, one of the most complicated issues during a divorce is determining the market value. Anyone who is serious about cryptocurrency knows that its value can fluctuate dramatically. This can lead to immense gains or losses practically overnight – whereas most Kansas divorces can take up to a year to finalize.
However, a Kansas court must find a way to impose a consistent valuation on the asset in order to include it in divorce proceedings. This is typically done by selecting a valuation date or series of dates and assessing the market value from the selected period of time. The valuation can be done with input from forensic accountants or other specialists, and may attempt to account for crypto volatility by taking an average, instead of a single valuation.
Dates considered for valuation are usually the day of separation, the day of filing, or the trial date, but can also involve other significant moments in the timeline of the divorce. Working with an experienced Overland Park family law attorney from our firm can help build up context around how the asset should be valued, which can ensure its fair inclusion during asset division.
Dividing Crypto: Tax Implications in Divorce in Overland Park
Transferring crypto can trigger capital gains taxes. However, a divorce does not trigger this tax on its own. This is due to IRS Code Section 1041, which deals with transfers of property between spouses. Section 1041 recognizes that no gain or loss of value takes place when transferring asset ownership between divorcing spouses, therefore no capital gains tax is put into play.
There are additional elements to be aware of when it comes to cryptocurrency and divorce, however. For one, the transfer must take place within a timely manner. The property is considered incident to the divorce if the transfer takes place within one year after the date on which the marriage ceases.
Hiding Crypto Assets Can Land You in Hot Water
Hiding assets is taken very seriously by Kansas courts. If you or your spouse is discovered hiding crypto assets, you can be held in contempt of court or charged with perjury. You can be fined or even face jail time in the most serious cases. It can also damage your credibility in cases involving child custody or visitation, since judges do account for each party’s honesty and trustworthiness when making their decisions. Finally, hiding assets in Kansas risks forfeiture and significant delays during the legal process. The end result of hidden crypto may mean its transfer over to the other spouse, or your case being reopened to penalize you for your actions.
Forensic accountants are particularly skilled at uncovering hidden assets. They can spot red flags like:
- Sudden transactions
- Suspicious dates on withdrawals or transfers
- Missing or incomplete financial records
- Newly opened bank accounts
- Changes in spending habits
- Inflated debts
Contact Our Divorce Attorneys in Overland Park for Help
Joseph, Hollander & Craft maintain office locations in Overland Park as well as in Lawrence, Topeka, Wichita, and Kansas City, MO. Our attorneys have a history of excellence in representing our clients since our founding in 2001. When it comes to dealing with cryptocurrency in divorce, you need detail-oriented representation from lawyers who understand the nuances involved. Contact our firm today to see how we may be able to help.
