7 Key Facts About New Jersey Divorce and Cryptocurrency

Cryptocurrency remains something of a mystery to many people on a day-to-day basis. When it comes to New Jersey divorce and cryptocurrency, even more questions can arise. In this article, we take a moment to discuss seven key facts about New Jersey divorce and cryptocurrency for your consideration. In this article, we specifically look at:

• Classification as marital property
• Challenges in valuation
• Tracing and transparency issues
• Tax considerations
• Security and transfer logistics
• Hidden assets and legal remedies
• Importance of expert assistance

Before diving into these particular considerations, we briefly note the standard used in a New Jersey marriage dissolution case in regard to property division. In New Jersey, what is known as the equitable division of property standard is utilized. Assets and debts are divided in a manner that is deemed just and equitable under the specific facts and circumstances of a particular case.

Classification as Marital Property

In New Jersey divorce proceedings, cryptocurrency typically is treated the same as all other financial assets at issue in a case. For example, if cryptocurrency was acquired during marriage, it is typically considered marital property. Therefore, cryptocurrency would be subject to what is known as equitable distribution. This would be the case even if cryptocurrency was held in a digital wallet only under one spouse’s name.

Challenges in Valuation

Cryptocurrencies are notoriously volatile. Values of a particular cryptocurrency can shift dramatically in the course of a matter of hours. This makes setting a fair market value for divorce purposes an extremely challenging task in many cases. Courts often require valuation on a specific date, but rapid fluctuations can create disputes, nonetheless.

Tracing and Transparency Issues

Unlike traditional bank accounts, cryptocurrency can be stored anonymously or across multiple wallets. In some instances, spouses in a New Jersey divorce may attempt to conceal assets. This has the potential to leave courts to require:

• Detailed forensic accounting
• Blockchain analysis
• Discovery tools to ensure full disclosure

Tax Considerations

Selling or transferring cryptocurrency during divorce can trigger taxable events which must seriously be considered. The IRS treats cryptocurrency as property. What this means in the context of New Jersey divorce and cryptocurrency is that capital gains taxes may apply. In the final analysis, divorcing spouses need to coordinate carefully in order to best ensure that they avoid unintended tax liabilities when dividing digital assets.

Security and Transfer Logistics

Cryptocurrency division involves more than merely numbers scratched on paper. When it comes to transfers involving cryptocurrency, a number of elements may be required to access an account and initiate a transfer, including:

• Private keys
• Wallets
• Exchange accounts

During the course of a New Jersey marriage dissolution case, courts may need to order secure handoffs. This may necessitate the use of escrow services. The process might also involve dividing equivalent cash value if technical barriers arise in regard to making a cryptocurrency transfer during the course of a New Jersey divorce.

Hidden Assets and Legal Remedies

Because cryptocurrency can be concealed more easily than traditional assets, there is heightened risk of hidden assets. If one spouse is found to have intentionally concealed cryptocurrency, courts may be left in the position to take adverse actions against the spouse hiding assets that can include:

• Imposing penalties
• Awarding a greater share of marital property to the other spouse
• Find the concealing spouse in contempt

If found in contempt, a different array of sanctions might open to the court:

• Monetary penalties imposed against the offending spouse
• Awarding other assets to the non-offending spouse as an attempt to remedy the misconduct
• Awarding attorney fees to the non-offending spouse

Importance of Expert Assistance

Given the complexity of cryptocurrency valuation, taxation, and security, divorcing spouses often require specialized professionals to undertake asset distribution. Examples of the types of specialized professional assistance include:

• Forensic accountants
• Tax advisors
• Attorneys with cryptocurrency experience can be crucial to ensuring fairness and legal compliance

By retaining legal counsel with experience in dealing with New Jersey divorce and cryptocurrency, you place yourself in the best possible position to be able to access additional professional assistance that may prove to be necessary in your particular marriage dissolution case. If you have any questions concerning divorce and cryptocurrency in New Jersey, call the Law Offices of Peter Van Aulen at (201) 845-7400 for a free initial consultation.