Dividing Digital Assets in a Divorce (e.g., NFTs, Cryptocurrency)

Dividing assets in a divorce has always been complex, but in today’s digital age, couples are increasingly dealing with cryptocurrency, NFTs, and other digital assets. These assets can be valuable, volatile, and difficult to trace, making them a crucial yet challenging part of divorce settlements.

At Magnuson Lowell, P.S., we help Washington clients navigate the division of digital property, ensuring they receive their fair share. If you or your spouse own Bitcoin, Ethereum, NFTs, or other digital investments, here are some things to know.

1.  Understanding Digital Assets in Divorce
Digital assets can include a variety of holdings, such as:

• Cryptocurrency (Bitcoin, Ethereum, Solana, etc.)
  
  
• Non-Fungible Tokens (NFTs) (digital artwork, collectibles, music rights)
  
  
• Online businesses and domain names
  
  
• Virtual real estate or gaming assets (Metaverse, video game skins, etc.)
  
  
• Digital royalties (YouTube, TikTok, e-books, music streaming)

Under Washington’s community property laws, assets acquired during the marriage are often subject to an equitable division. However, proving the existence and value of digital assets can be challenging.

2.  Identifying and Valuing Digital Assets
One of the biggest hurdles in dividing digital property is tracking ownership and assessing value. Unlike traditional bank accounts, crypto and NFTs are often stored in digital wallets that may not be easily visible in financial records.

To uncover hidden digital assets, you may need:

• Financial statements showing transactions (Coinbase, Binance, Kraken, etc.)
  
  
• Tax filings listing cryptocurrency gains/losses
  
  
• Blockchain transaction history
  
  
• NFT purchase records (OpenSea, Rarible, etc.)

Since digital assets fluctuate in value, it’s important to obtain a current appraisal before finalizing any division.

3.  Dividing Cryptocurrency and NFTs in Divorce
There are multiple ways to fairly divide digital assets in divorce:

• Direct Transfer: If both parties agree, cryptocurrency can be split by transferring half of the holdings to a separate digital wallet.
  
  
• Offset with Other Assets: One spouse may keep the digital assets while the other receives an equivalent amount in traditional assets (e.g., real estate, retirement accounts).
  
  
• Liquidation and Equal Distribution: The assets are sold, and the proceeds are divided between both spouses.

The best approach depends on tax implications, volatility, and the willingness of both parties to retain crypto investments.

4.  Protecting Yourself from Hidden Digital Assets
Because crypto can be easily transferred or hidden in anonymous wallets, spouses may attempt to conceal digital assets during divorce. Signs your spouse may be hiding cryptocurrency include:

• Unexplained withdrawals or large transfers from joint bank accounts
  
  
• Sudden decreases in reported income or financial resources
  
  
• Mentions of crypto investments that are absent from financial disclosures

A divorce attorney can work with forensic accountants to attempt to trace blockchain transactions and uncover missing assets.

5.  Tax Considerations for Digital Assets in Divorce
Cryptocurrency may be subject to capital gains taxes, meaning the timing and method of division can significantly impact tax liability. Always work with your accountant to determine potential tax liabilities before finalizing a divorce to avoid unexpected taxable situations.

6.  Work with a Divorce Attorney Experienced in Digital Assets
Digital assets bring unique challenges to divorce proceedings, but you don’t have to navigate them alone. At Magnuson Lowell, P.S., we help clients understand their rights, uncover hidden digital property, and work towards fair asset divisions. We offer free telephone case evaluations, so if you’re dealing with cryptocurrency, NFTs, or other complex digital assets in your divorce, contact us today 425-800-0576

Share this post!