What to Know About Cryptocurrency and Divorce

 Posted on August 23, 2024 in Property Division

As the popularity of cryptocurrency continues to rise, it increasingly becomes a factor in divorce proceedings. For couples in Illinois, understanding how cryptocurrencies are treated during a divorce can significantly impact asset division and financial settlements. If cryptocurrency is a factor in your divorce, discuss with an attorney what implications it may have on your divorce proceedings. Your lawyer will be able to 

provide clear insights for individuals facing a divorce involving cryptocurrencies.

Understanding Cryptocurrency and Marital Property

In Illinois, all property acquired during the marriage, including cryptocurrency, is generally considered marital property and subject to equitable distribution. This means any Bitcoin, Ethereum, or other digital assets obtained during the marriage may be divided between spouses.

However, determining the exact value of these assets can be tricky due to cryptocurrency market volatility. It is important to identify when and how the cryptocurrency was acquired to understand whether it qualifies as marital property or separate property, with separate property being exempt from division.

The Disclosure and Discovery of Digital Assets

One of the most significant hurdles in divorces involving cryptocurrency is ensuring both parties fully disclose their assets. Unlike traditional bank accounts or investments, cryptocurrency can be more challenging to trace, especially if one spouse is attempting to conceal assets.

Illinois law requires both spouses to provide a complete and honest disclosure of their financial information during the divorce process. If you suspect that your spouse may be hiding assets, you may need to work with a forensic accountant specializing in digital currencies to uncover such information.

Challenges and Strategies for Valuing Cryptocurrency

Valuing cryptocurrency can be particularly complicated due to its fluctuating market prices. When dividing marital property that includes cryptocurrency, both parties must agree on the valuation date and method. It may be beneficial to consult with a financial professional who can provide insight into average market values, historical trends, and the potential for future appreciation or depreciation.

Properly documenting the value of these assets at the time of divorce can ensure a fair division and help avoid future conflicts.  

Considering Tax Implications of Cryptocurrency

Finally, it is crucial to understand the tax implications associated with cryptocurrency in a divorce. Transferring cryptocurrencies between spouses can trigger capital gains taxes, depending on the value at the time of transfer. Consulting with a tax professional who understands the nuances of cryptocurrency is vital to avoid unexpected tax liabilities and to make informed decisions regarding asset division.

Contact Our Wheaton, IL Divorce Attorney

Given the complexities surrounding cryptocurrency and divorce, it is hugely important for individuals in Illinois to seek professional legal and financial guidance. If cryptocurrency is relevant to your divorce, contact the DuPage County, IL divorce lawyers with The Stogsdill Law Firm, P.C. Call 630-462-9500 for a private consultation.