Asset division is often highly complex, especially when couples have unique financial situations. For couples who own cryptocurrency, the asset division process becomes even more challenging.
Dividing digital assets, like Bitcoin, is typically complicated because these assets are not held or managed using conventional methods. While financial situations can vary greatly from couple to couple, here are a few things to keep in mind.
Transfer of assets
Accessing cryptocurrency requires a private key, which only the account holder will have. Sharing the key is problematic, as whoever has it can access and move funds as they see fit. Additionally, many of the firms that handle cryptocurrency lack the experience or knowledge to tackle a transfer of assets during divorce. This highlights working with a financial professional who has knowledge of crypto and is aware of the common considerations during a divorce.
Taxes
Tax considerations are another crucial factor when splitting crypto investments. The spouse who receives a portion of these assets must report it as income to the IRS. As for the person selling the assets, they might face long-term capital gain taxes depending on how long they have owned the assets.
Volatility
Digital currency is constantly losing and gaining value. As a result, valuing cryptocurrency holdings correctly for asset division is usually difficult. Many couples include terms in their divorce agreements that dictate asset division in the event the value of cryptocurrency changes. For instance, if the assets lose value, spouses may agree to split other assets differently to ensure they are fairly distributed.
Asset division is complex, but taking the right approach can help you navigate the issue with as little stress as possible. By making the right decisions, you can rest assured of a reliable financial future at the end of the process.