There is no more trending topic in personal finance than Bitcoin and digital currency in general. Whether you consider it to be the biggest and newest addition to the world of global finance or just another fad, bitcoin is certainly never far from the headlines. Just about everyone who spends time online has an opinion about Bitcoin. Like it or love it, bitcoin seems like it is here to stay as far as being a relevant topic in our country.
Whether you or your spouse own bitcoin it is important to understand just how bitcoin functions within the world of divorce. As more and more people purchase bitcoin it will become more prevalent to see these coins in divorce cases. Since a single bitcoin can be worth thousands of dollars you can imagine that it would be tempting to hide these coins to avoid having to disclose them in a divorce inventory of property. That the coins are not physical but digital makes it even simpler to hide them and otherwise keep them out of sight of your spouse. This is marital fraud and is a huge no-no in a divorce case.
Some people in a divorce will look for any opportunity that they can to avoid telling the truth and playing fair. There is a big gap between someone being a pushover and someone hiding assets and being untruthful. You need to be able to defend your rights and protect yourself while not violating the law simultaneously. With that said, we at the Law Office of Bryan Fagan wanted to take some time today to discuss a situation involving the hiding of Bitcoin as a major asset in divorce cases. While this news story that we are about to discuss involves Bitcoin, it is a situation that any of you could find yourselves in if you are going through a divorce. The instinct to hide property is a strong one in many people and is something that you need to be vigilant about as you begin a divorce case.
A whole lot of Bitcoin and a whole lot of divorce problems
This is a case that caught the attention of the attorneys with the Law Office of Bryan Fagan. A woman going through a divorce case in recent months could not shake the feeling that it was odd how her husband, who earned $3 million per year in income, had very few assets. No fancy cars, no collection of expensive firearms, no jewelry, etc. What she did next is a common step to perform in almost any divorce case- not only those where the primary breadwinner earns a salary of $3 million annually. She sent out discovery requests to her husband and hired a forensic accountant to help her determine if there was any financial funny business that was going on.
Discovery is a process whereby you can send requests to your spouse for information with a deadline attached to those requests. Examples of discovery requests include interrogatories, requests for disclosure, and requests for production. These requests are filed with the court. Objections or responses must be submitted within thirty days of the requests being sent out. Your spouse can and probably will make the same requests of you. Be prepared to spend some time reviewing those requests and submitting answers and objections. This is a basic way to obtain information and documents about your spouse's case to prepare for mediation and the possibility of a trial.
The other method that this wife used was to hire someone who works as a forensic accountant. A forensic accountant is a professional who can dig beneath the numbers of a bank account and find trends, hidden assets, and other financial issues that may be relevant to a divorce. Sometimes looking through a checking account online is not going to be able to be enough to help you identify financial wrongdoing or other impropriety. As a result, you may need to dig a little deeper when you suspect that your spouse is up to no good with their financial habits. The woman in this story believed that something was off, and she decided to do something about it.
How well do you know your spouse?
Without a doubt, the woman in the story we have linked to felt like she was hit with a ton of bricks when she found out about her husband hiding half a million dollars worth of cryptocurrency in a digital wallet that she knew nothing about this. Movies and television shows have been based around the idea of someone hiding something important from their spouse. However, in these stories, there is a way to find out what was hidden. A secret life, a secret job, etc. Even buying compulsively from a big box store is sure to be turned up eventually when the spouse finds bags and bags of clothing in the trunk of the car or underneath the bed.
Cryptocurrency is another matter altogether. Not only is this an online product but it is a difficult-to-understand one, as well. You would have to know what you are looking for to find the cryptocurrency that your spouse had purchased. This is why having a forensic accountant on board for this woman was so important. He or she could look through bank records, transaction logs, and internet browsing history to find evidence of these massive cryptocurrency purchases. However, if you did not know what you were looking for it may be harder to find. Yet another reason why having a team around you in a divorce is so crucial to the success of you and your children.
What the woman in our story discussed next is of vital importance. She mentioned that, while she knew what cryptocurrency was, she had no idea that her husband had been investing so heavily in the coins and then keeping it a secret. From what she said it appears that she and her husband were not on the same page with their family finances and certainly not with their investments. There was a lack of communication regarding some of the most important subject matters possible in a marriage. Your money is where your heart is, an old saying goes. If that saying is true, then it is obvious that the hearts of these two married people could not have been further apart. Not only was the husband here willing to invest in something risky but he was willing to hide those huge investments from his spouse. When the time came to fess up and be honest about his investments during the divorce he still refused to do so.
Even if the husband was the finance expert and the wife was a stay-at-home spouse, that does not provide an excuse for the husband to not share his plans and ideas with his wife. Sharing secrets and not feeling the need to consult with a spouse on matters like this is a gateway to bad decision-making. By the same token, just because you are not a financial guru does not mean that you cannot pay any attention to this subject matter. You have a duty to yourself, your family and your children to be involved. Sure- these bitcoins were worth half a million dollars, but we don’t know how much they were worth before. What if the bitcoins originally were worth a million dollars and have since lost a ton of value due to dips in the market price for bitcoin? That is entirely possible and could have led to the family's net worth declining by a significant amount. Even if the wife in the news story wasn't a crypto expert, she has common sense. She could tell that something was "off" with the finances without even really knowing what was going on. Odds are good that her sense of what was right and wrong with the finances could have tipped her husband off to the risky nature of Bitcoin before he ever made an initial investment.
All of this is to say that there is no role for one spouse in a marriage to be the money manager and the other spouse to be the money spender. If you are married and believe that your spouse has been engaging in risky financial investments or is otherwise handling your money inappropriately then you must speak up. This will come back to haunt you if you do not seize the moment and speak up now. Do you think that the woman in the news story would like to go back in time and speak up when she may have had a feeling that something was wrong? I am willing to go out on a limb and say the answer to that question is definitive: yes.
Being more involved in the family finances will also help prepare you for a divorce if that is to come down the road. It’s not that you would plan on a divorce at any point in your marriage, but it is a possibility and something to think about- especially if you see a divorce on your horizon. Preparing for a divorce does not mean being underhanded or devious. Rather, it just means having your finger on the pulse of your family. If you are a mother, it can be tempting to think that your role in the family is just a caretaker and possibly a financial provider, as well. This is a mistake. Your input is needed in the family finances, as well. You do not have to be an investing whiz to be able to understand that your input is helpful when making investment choices.
For example, simply asking your spouse about the investments the family is in will allow you to learn more about types of investments and what your family is geared towards as far as money growth is concerned. Simple conversations like these can help you not only learn something but also keep on top of what is going on with the finances of your family. Allow your spouse to talk and notice how willing he or she is to share information with you. The more suspicious, angry, or controlling your spouse tries to be in these conversations is a good indication of whether something is wrong or if your spouse is engaging in behavior that is not right.
Searching for cryptocurrency in a divorce
Back to the situation with our wealthy couple going through a divorce. The tough part of this situation is that it is hard to find cryptocurrency if you do not know what you are looking for. Stumbling upon a crypto wallet is going to be near impossible. Forensic accountants and investigators have a whole new line of work in store for them given the proliferation of crypto investing these past few years. Hiding assets is easy if you are not aware of what is going on with your family investments. If you are not tech-savvy on top of being out of the loop on investments, then this is a double whammy for your family.
What’s more, it is not as if you can try to use legal means to contact the holder of the cryptocurrency to see if that institution will turn over information about the crypto investments of your spouse. Since the whole point of cryptocurrency is to be decentralized and deregulated, there is a danger for spouses who do not know the full extent of the investments ongoing into digital currency.
It may be necessary to hire a forensic investigator to be able to determine the full extent of the cryptocurrency holdings of your spouse. Determining purchase and sale dates, initial levels of the investment and other details are what these professionals can provide you with in a divorce. Cryptocurrency brokers keep track of these elements just like a more traditional investment house would for your mutual funds or 401K investments. It is just a matter of getting your hands on that information which is what you need to focus on. Without a forensic investigator, this can be easier said than done.
It is interesting to note that cryptocurrency can be held in online wallets which allow owners to access the currency with ease and to use the coins as they see fit. While online wallets make spending the currency easier, it is also easier to find for people like forensic investigators. There are also places to store a digital coin on an actual computer like a laptop. These are trickier to locate because you cannot just search for a crypto wallet using the find or search option on the laptop.
How is cryptocurrency valued in a divorce case?
In a situation where you and your spouse are being honest with one another on your investments in cryptocurrency, there is still the issue of coming up with a value for the cryptocurrency in your divorce. What many spouses choose to do in a situation involving divorce and cryptocurrency is to get bought out of their community property share of the cryptocurrency. This is done to manage the risk of investing in cryptocurrency. Past years have seen cryptocurrency value increase and then decrease by significant amounts. Whereas it seemed like a few years ago that cryptocurrency could only increase in value, now the bloom has come off the crypto-rose, so to speak.
Where does this leave you in your divorce?
If you are not yet at the stage of your marriage where divorce is on the horizon, that means that you have time to consider your options and get involved in the family finances. Even if it is not something that you are naturally interested in it should be something that you take to willingly given the importance of staying abreast of these issues for the betterment of your family. Not having financial discussions with your spouse should not be an option for you. The less you know about the family finances the more likely you are to be hurt if a divorce happens. The pain may be worse if you stay married and a bad investment ends up costing you and your spouse a great deal of money.
Planning for a divorce is something that means having an understanding of where your family finances are. If you are concerned about your spouse hiding income, assets, or investments then working with an experienced family law attorney is the best place to start your journey. The attorneys with the Law Office of Bryan Fagan can help you walk through the situation you are facing and determine a course of action that can help you prepare for your divorce and end up in the best place possible when the case is all said and done.
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