Overview of Cryptocurrency in New Jersey Divorce

Cryptocurrency (including Bitcoin, Ethereum, and altcoins) has surged in popularity in the past several years. The reality is that the decentralized, anonymous nature of crypto introduces unique hurdles to equitable distribution in a New Jersey divorce. There are some specific points ​that are essential to understand when it comes to cryptocurrency in New Jersey divorce. These include everything from a discussion of marital versus separate cryptocurrency, challenges of discovering crypto in some instances, and the vital importance of retaining the services of seasoned, qualified professionals.

Marital Versus Separate Property

New Jersey follows equitable distribution, not community property. Equitable division of property – including cryptocurrency – must be divided in a fair manner based on the facts and circumstances of a New Jersey divorce case. Crypto purchased during marriage with marital funds is marital; crypto acquired before marriage or purchased with separate funds and not commingled may be deemed separate

Discovery Challenge

Cryptocurrency can be hidden token-by-token. This may include:

• Private wallets
• Offshore exchanges
• Hardware devices

Court forms don’t always list crypto explicitly. Therefore, cryptocurrency in New Jersey divorce transparency often falls to spouses and lawyers to disclose and even uncover holdings of this nature.  

Valuation: When Should You Value Crypto?

Cryptocurrency prices swing wildly. The parties, or the court if they cannot agree, must select a valuation date. Examples of valuation dates for cryptocurrency in New Jersey divorce are:

• Case filing date
• Separation date
• Distribution date
• Average over time

Ways to Divide Crypto

Once categorized and valued, crypto can be divided between parties to a New Jersey divorce several ways:

• Direct transfer: One spouse sends tokens to the other’s wallet.
• Asset offset: One spouse keeps the crypto and compensates the other with other marital assets.
• Liquidation and split: The tokens are sold, and proceeds divided

Choice of method depends on a number of factors that include:

• Tech comfort of a party
• Risk tolerance of a party
• Tax implications to parties

Tax Implications

As noted a moment ago, there can be tax implications to the parties to a marriage dissolution proceeding associated with addressing cryptocurrency. The Internal Revenue Service or IRS treats cryptocurrency as property. This means cryptocurrency in New Jersey divorce sales can trigger capital gains or losses. In divorce, transferring crypto may not immediately trigger tax, but selling it often does.

Child Support and Crypto Income

Keep in mind that crypto isn’t just property. The reality is that cryptocurrency can generate income. Wages paid in crypto or profits from frequent trading count as income under New Jersey guidelines and may influence child support calculations.

Protecting a Crypto Position

There are some important tactics to consider employing in order to best protect your position when it comes to crypto in a New Jersey divorce:

• Keep detailed records: wallet addresses, trade logs, funding sources, and dates.
• Maintain separate wallets for premarital or inherited crypto.
• Hire specialized forensic accountants and family lawyers experienced with digital assets.
• Consider prenuptial or postnuptial agreements addressing cryptocurrency specifically

Work with Professionals

Keep in mind that you absolutely do not need to navigate cryptocurrency issues in your New Jersey divorce case alone. There are a number of avenues that you should consider if crypto is going to be part of your marriage dissolution proceedings:

• Forensic accountants: to trace hidden assets and value volatile holdings
• Crypto-savvy divorce attorneys: to guide equitable division, asset tracing, and tax strategy
• Financial advisors: to interpret long-term effects and integrate crypto into broader client planning

When it comes to a New Jersey divorce case, creating a coordinated team ensures your rights are protected, including in regard to cryptocurrency.

Navigating the intersection of cryptocurrency and divorce in New Jersey presents complex challenges that demand clarity, transparency, and strategic planning. In marriage dissolution proceedings, it​ is vital that crypto be treated with the same seriousness as any other asset. As noted, divorcing parties are best served by working with legal counsel and financial professionals who are well-versed in cryptocurrency. Taking this recommended course of action best ensures equitable distribution, reduces the risk of future disputes, and protects each party’s financial interests. As digital assets become more common, so too must be the informed and proactive approach to handling cryptocurrency in divorce proceedings. Call the Law Offices of Peter Van Aulen at (201) 845-7400 for a free divorce consultation today.