CLIENT PAGE
Bitcoin Battles
Is your spouse hiding assets via cryptocurrency?
By Bryce Hopson
Cryptocurrency began in 2009, gained popularity since, and now plays an
important role in the financial lives of many couples. Bitcoin is a type
of crypto-currency, the first decentralized “digital currency” for
direct transactions between users with no intermediary—essentially a
line of computer code that holds monetary value. Think of it like this:
Cryptocurrency has no physical form (like a dollar bill or a nickel),
nor is it controlled by any government agency, but is instead maintained
virtually.
Even though cryptocurrency is different than standard currency, bitcoin
can be distributed during property division in a divorce as if it were
any other asset. Texas is a community property state—when a divorce
occurs, the marital assets are divided equitably. This process becomes
more complicated when stocks, bonds, and virtual currencies are
involved, as each will fluctuate in price. The general approach is for
the judge to determine the date these types of assets will be “valued,”
which could be the date of divorce, the date a mediation agreement is
signed, or even the date the bitcoin was first distributed—and from
there, the division is made accordingly.
How is
cryptocurrency typically divided?
Often parties will come to a
decision about bitcoin holdings division as part of a settlement or
during mediation. There are several ways to handle this process: one
party receives the entirety of this type of asset and the other obtains
an asset of the same value; virtual currency can be divided or sold,
then re-divided evenly; or one party maintains possession of the bitcoin
as an investment but agrees to split the proceeds of any future sales.
This can all be handled fairly easily.
What is
the concern with cryptocurrency in divorce?
Though it certainly
doesn’t have to, digitization of funds can make the equitable division
of assets in a divorce more complicated. While bitcoin can be stored on
an owner’s computer and kept reasonably safe, this can also make it
easier for a spouse to transfer or hide funds from the other. A spouse
might be keenly aware of their imminent divorce long before the partner;
when this is the case, he or she will often begin planning for divorce,
which unfortunately, could include manipulating funds. In Texas,
particularly with moneyed spouses, oil leases can be an issue; spouses
might conceal a leasing deal in a trust, for example. Not surprisingly,
parties have found any number of ways to hide what they consider “their”
money—from trusts, joint partnerships, offshore accounts, and gold coins
to enlisting the aid of family members for fund storage. Divorcing
spouses, therefore, are wise to be aware of any conversions of “real”
marital assets: for example, a bank account turned into bitcoin. This
type of activity will create a paper trail, but a party may need to take
specific action to uncover any missing assets.
Repercussions of Attempting to Hide Funds Via
Cryptocurrency
The truth is, anonymity comes with
cryptocurrency, and its somewhat new popularity means enforcing
disclosure can be difficult. However, if a party proves contrary, courts
can revise property divisions when hidden assets are found and will not
hesitate to do so. If you believe your spouse may be masking assets,
make your family law attorney aware immediately; often, retaining a
forensic CPA will be recommended to uncover any unlawful behavior. A
forensic CPA scrutinizes personal or corporate financial books to reveal
whether it appears funds are indeed being hidden. Assets offshore in
particular require an expert CPA and likely court orders. While
frustrating and time consuming, if you have true suspicion that your
soon-to-be ex is hiding assets, do not ignore the gut instinct or allow
yourself to be intimidated. It is vital to take measures to reveal funds
that rightfully belong to you. Additionally, a spouse covering assets
who is caught will answer to a judge, who can order that the innocent
party receive a greater share of community property, sometimes splitting
assets to as much as 70/30 instead of the traditional Texas 50/50. And
depending on what method was used to hide funds, the guilty party could
face charges from the IRS.
Bottom line: While not fun
to contemplate, spouses in a divorce situation must be cognizant of all
financial possibilities and require and provide complete transparency to
remain informed about communal property.TBJ
BRYCE HOPSON
is an associate of the Hance Law Group. He breaks down complicated
legal issues and examines them with his clients in a clear and concise
manner in matters such as divorce, property division, child custody, and
pre-marital agreements. To learn more, go to hancelaw.com.
