Cryptocurrencies have risen in popularity since Bitcoin emerged almost 11 years ago. This monetary form is quite elusive as it is money that is not tangible in the way we normally think of dollars and cents. Because of its nature and its recent emergence in modern culture, cryptocurrency can be hard to value and fairly easy to keep concealed.
For this reason, if you are one part of a couple that is planning to divorce and you want to maximize your asset protection, you might want to look into cryptocurrencies. Finding out more about how you can legally lay the groundwork to keep the majority of your assets during your divorce is a wise move. Speaking with a Miami high net worth divorce attorney will be a helpful resource to discuss your divorce situation.
What is Cryptocurrency?
This “asset” is a medium of exchange that exists solely on the internet and uses blockchain technology to offer decentralization, transparency, and stability. The most attractive aspect of cryptocurrency is that it is not managed through a centralized bureaucracy or system, making it free from government control and intrusion. Cryptocurrencies can be transferred between parties through small processing fees, which curb costs when compared to the heavy fees imposed on transfers done by traditional banks.
Both private and public keys allow the flow of the currency between entities. “Keys” are terms in the cryptographic language. Your public key is akin to the location from where you would send coins or accept coins from others. You use your private key to get into your cryptocurrency wallet. In simpler terms, think of accessing your traditional bank account online. You may use your email address or a user name to designate your account, but in order to get into your account and have full access to everything within it, you need a password. Your private key is essentially your password to your cryptocurrency wallet.
If this all seems too foreign, that is understandable. But over 5% of Americans own cryptocurrency, and the interest in this currency is growing.
Cryptocurrency and Divorce in Florida
The courts do not have a firm grasp or understanding of dealing with cryptocurrencies. As recent as this year, The Florida Third District Court of Appeal gave an appellate decision pertaining to this exchange system, but currently, no cases have tackled cryptocurrencies with regard to divorce. What this means is that there are no rules or standards to appraise one’s ownership of cryptocurrency.
In Miami-Dade County, The Estate of Kleiman v. Wright dealt with a business partnership where there was joint possession of 1.1 billion bitcoin. The partnership dissolved upon Kleiman’s death. Kleinman’s camp is arguing that because of the death, his estate is owed half of the bitcoin that was shared in the previous partnership. To cash in, Kleiman’s estate wants half of the bitcoin to be translated into U.S. dollars and then paid out by Wright.
This is an interesting case whose principles parallel that of what happens in a divorce. According to Florida Statutes Section 61.075 when two partners are legally married, the assets they share are to be divided equally when the marriage dissolves. However, to properly divide assets, it must be proved that the assets actually exist. Section 61.075(3)(b)-(c) explains that there must be facts which describe identification, valuation of assets, as well as the designation of which partner is entitled to each of the defined assets.
Bitcoin is only one of the types of cryptocurrency on the market, and there are over 2,000. It is the largest, covering about 65% of the market. Because of the volatility that is associated with cryptocurrencies, they are highly difficult to value. For this reason, courts will have a difficult time figuring out what a fair monetary value is for the shares owned by one partner in a divorce.
Cryptocurrency transactions are recorded and secured in an electronic “block.” All of these blocks connect to other blocks electronically and they form a chain, thus transactions are said to be documented in a “blockchain. The anonymity of transactions and users in the crypto sphere is such that law enforcement still struggles to find illegal bitcoin users.
In a divorce, if you want to conceal your bitcoin investments, buying them with cash might be a less traceable way to confirm that you own any. If you use a credit card, for instance, you will have a bank statement that can give the first piece of evidence proving purchase.
The IRS defines cryptocurrency as property that can be taxed through capital gains and require it to be valued in US dollars to do so. The values of cryptocurrencies are not consistent across the exchanges that are used to match up buyers and sellers. With no exchange rate for bitcoins because there is no central bank, valuing this asset is ambiguous at best. However, the IRS has been progressive in its attempt to grapple with and nail down cryptocurrency values. In 2014 and 2019 they developed guidelines. Even with these specifications, exact values are still too unclear and so they are not heavily used by family court judges.
Finding a High Net Worth Divorce Lawyer in Miami
Cryptocurrency is tough to decipher in terms of real dollar value that is required for the equitable division of assets in both business and divorce dissolutions. Cryptocurrency experts are currently, the only real professionals who can provide useful insights into what it is, the ways in which it can have a dollar amount attached, and the way to trace it. One of these experts would be an important addition to legal teams trying to fight for a fair settlement when a partnership has broken up and cryptocurrency is involved.
In Florida, cryptocurrency is looked at as a “payment instrument” that may or may not be able to be redeemed in traditional currency terms. While there is much more to learn regarding how to manage cryptocurrency, it could provide a viable option for high net worth earners to investigate with their Miami divorce attorney.
The division of marital property and assets is a complicated task. A smart and resourceful Florida marital separation attorney will evaluate your case and provide you with the guidance you need to move forward with your divorce with the best strategy for your interests. The Pazos Law Group is a Miami, Florida divorce firm and we are here to discuss your situation during a confidential, free consultation. Call us today at (954) 516-7118.