A crypto wallet is a digital wallet that contains crypto assets, from currency in forms like Bitcoin to utility tokens such as Golem. The crypto assets in a digital wallet can be divided following a divorce. Yet certain crypto assets in a digital wallet may not be considered for equitable distribution.
In Alabama, assets acquired during the marriage are subject to equitable distribution. Items like a house that the parties bought together while they were married are marital property. Assets that a party had before marriage or received via a gift or inheritance, even during the marriage, are separate property. The court will not divide separate property between the spouses. Income earned during the marriage is marital property. If a spouse bought a crypto asset from earnings from a job that they held during the marriage, the asset is subject to equitable distribution.
A division of property must be fair. Crypto assets are very volatile. It can be difficult to estimate their value day to day. Spouses may need to seek the advice of a mediator or crypto asset specialist to understand the worth of a particular asset. In some cases, splitting the value of the asset will involve selling it. In other cases, the spouses may form a contract where one spouse “buys out” the other. They can take ownership of another asset, crypto or not. This asset should be worth as much as the crypto asset at the time of estimation.
Traditionally, property that can be considered for equitable distribution in a divorce includes jewelry, vehicles, clothing, artwork, houses, and investments. The value or amount of crypto tokens for any of these items can be divided. Other property that can be considered in a divorce includes bank accounts, pensions, retirement accounts, gifts from one spouse to another, and family-owned businesses. Crypto assets in these accounts or entities can be divided as well.
If one spouse has separate property but then the other spouse invests their time and money into it, the court may consider that property marital property.. For example, say a husband inherited a certain amount of Bitcoin. The wife sold some, with his permission, and bought an amount of Dogecoin. The court would consider the amount of Dogecoin marital property.
If property was used for the benefit of the marriage, it can be deemed marital property. This is true even if the property was separate at the beginning. For example, say one husband owned a certain amount of Litecoin before the marriage. If the other husband sold the Litecoin and put it into a boat that the couple owned jointly, the value of the improvement or the boat itself would be divided between the spouses in an uncontested divorce in Madison County or anywhere else in Alabama.
When a couple engages in a full disclosure of assets during divorce proceedings, a spouse can determine what crypto assets are in their partner’s digital wallet. They can understand the origin of these assets. They can also learn whether the circumstances of acquisition of each asset warrant equitable distribution. A spouse may have multiple digital wallets, some of which may be hidden. Their partner may want to hire a forensic accountant if they suspect their spouse has secret crypto assets.