Who Gets the Cryptocurrency and NFTs in a California Divorce?

If you have questions about how cryptocurrency (sometimes called simply “crypto”) and NFTs (short for non-fungible tokens) are handled in a divorce in California, you’re not alone. These relatively new investment vehicles are increasing in popularity and that means it sometimes takes time for laws to catch up. But there are some basic principles that guide how courts decide on division of property, and those principles apply to digital assets like crypto and NFTs in the same way they apply to real property and tangible assets. 

Cryptocurrency and NFTs Are Digital Assets 

Cryptocurrency is digital or virtual currency that can be used to pay for goods and services and can even be invested. It is encrypted and decentralized using cryptography. You may have heard of Bitcoin and Ethereum, but there are thousands of other cryptocurrencies as well. Crypto is fungible, meaning each unit is exchangeable for another unit—just like one dollar bill is replaceable by and equal in value to another dollar bill. 

NFTs are unique digital assets, often collectibles like artwork or music. Like cryptocurrency, NFTs are secured using blockchain technology, but each NFT is non-fungible, which means it is unique and not exchangeable with another NFT, just as one painting is not directly exchangeable with another painting. 

There are other digital assets that you may not necessarily think of as having value, or at least not until you go through a divorce. Downloaded e-books, video games, music, movies, websites and domain names, online business, airline miles and gift cards—all of these are digital assets. Some can be duplicated so both parties get to keep a copy, while some must be split or awarded to one party in a divorce. 

I recall a friend of mine telling me about the thousands of songs she and her husband had downloaded during their marriage. When they decided to separate, she asked him to copy all of them so she could take a copy of the extensive music library with her. Luckily, he did just as she asked, but sometimes things like this can actually become a sticking point during a divorce.  

Community Property vs. Separate Property 

In short, property and assets acquired during a marriage are community property. Property that is owned by one partner before the marriage is separate property. This principle applies to both tangible and digital assets. If you own a car and then you get married, that car is your separate property. If you own cryptocurrency or NFTs and then you get married, those assets are separate property. Everything that you and your spouse acquire during your marriage is community property, whether it’s a car, a house, Bitcoin, or NFTs. 

Assessing Value of Digital Assets 

Cryptocurrency is volatile and its value can change quickly and frequently. This can make valuation challenging—certainly more difficult than assessing the value of real estate and other real property. Bringing in a cryptocurrency expert is often necessary. 

When only one person is investing in crypto and doing so on a small scale, the other partner may be willing to let them keep all of it, and that’s not just because it’s expensive to bring in an expert, but also because the volatility of crypto means the value can crash suddenly. One notable example you may have heard about is from May 2022 when cryptocurrency LUNA lost 98% of its value in just 5 days! 

Can Cryptocurrency Be Used to Hide Assets? 

Because cryptocurrency can be difficult to trace, some people may worry that a spouse is hiding assets in a digital crypto wallet...and some people may actually have the intention of hiding assets via crypto.  

So does crypto make it easy to hide assets? Yes and no. In many cases, it’s not too difficult to figure out that money has been put into a “hot” wallet (like Coinbase” which is a crypto wallet connected to the internet. It can be a little tougher to work out where crypto assets are when they’re stored in a “cold” wallet which is a crypto wallet kept on a hard drive and not connected to the internet. However, there is a record of transfers into and out of hot wallets, so it’s not impossible to figure out—but it can be expensive. Again, this is where a forensic crypto expert will need to be consulted. 

NOTE: The penalties for attempting to hide assets during a divorce are severe. Whether you are thinking of moving money to a bank in the Cayman Islands, transferring the deed to property to a third party, secretly stashing cash under your mattress, or attempting to conceal cryptocurrency in a cold wallet, any attempt to hide assets of any kind and not be completely forthcoming with your soon-to-be ex-spouse will result in serious consequences from the court. 

Again, if you’re getting divorced and cryptocurrency or NFTs are something in dispute, my recommendations are that you (1) be prepared to pay for an expert to determine valuation AND (2) be willing to have a cooperative attitude in dividing assets, and the best way to do so is to work with a mediator or a Collaborative Divorce Team to you help you work through this and other difficult issues. 

The Role of Prenuptial and Post-marital Agreements with Crypto and NFTs 

The primary reason to work with your spouse to create a prenuptial or post-marital agreement is to document your mutual understanding of the ownership of assets. My experience is that when couples have the necessary conversations to lead to creation of an agreement, they don’t feel they’re planning to separate. On the contrary, they gain understanding of one another’s values and priorities, respect for the other person’s point of view, and peace of mind about their financial security. 

When assets are acquired during a marriage, especially those of significant value or those that can dramatically increase or decrease in value, couples who update their prenuptial agreement or (if they don’t have a prenuptial agreement) create a post-marital agreement enjoy the same benefits—understanding, respect, and peace of mind. Post-marital agreements have additional requirements from Premarital agreements, so please schedule an attorney consultation before assuming that the same rules apply. Our office can help you sort these issues out with your spouse. 

The time to discuss important issues in a marriage is always ASAP. Don’t let questions, concerns, or fears linger and fester. Money can be a touchy subject even within very happy marriages, and you might feel unsure how to broach the topic with your spouse. Turn to a mediator or Collaborative Team and let us facilitate difficult conversations and provide expert legal advice during the process, whether you are planning a wedding, are happily married, or contemplating separation or divorce. We’re here to help. 

In the ideal world, this is a happy time of year, full of family, friends, food, fun, and festivities! But for those who have gone through a divorce, this season can be painful, especially if you have children. The first few Christmases after a divorce are often particularly difficult as you adjust to a new normal and mourn the loss of family gatherings and traditions that used to bring you joy. 

But even though you might be dealing with feelings of loneliness, sadness, and even fear, try to remember that this can be a season of new beginnings and the road to future happiness.  

Here are 10 tips and ideas to help you make the absolute best of the holiday season—for you, and for your kids. 

1. Feel your feelings, but don’t completely surrender to them.  

You’re going to feel a range of emotions, and it’s okay to feel all of them. Realize feelings will come in waves. Acknowledge that it’s normal to experience grief, resentment, stress, and countless other emotions. Don’t let them rule you though or you’ll miss out on all the good stuff. (There is still good stuff!) 

2. Talk to your kids honestly…and really listen to them.  

Plastering on a fake smile and pretending everything is perfect isn’t going to fool anyone, especially your children. If you’re feeling sad about the changes to life and the holidays rhythm, imagine how much more difficult and confusing it is for kids who had no say in whether their parents stayed together. Children of every age need help adjusting after divorce. Assure them that feelings of anger, sadness, and confusion are normal. Let them talk. Don’t judge. Ask them how they feel. Ask them for suggestions about what would make the holidays the most enjoyable. Listen and truly consider their point of view.  

3. Assess which traditions to hold onto and make adjustments.  

Some of your family traditions may be very important to you, perhaps because they’re rooted in your religious beliefs or because you’ve brought them from your childhood into adulthood and the family you created with your spouse. Somet traditions, however, may be more like habits and not particularly meaningful to you. It’s okay to make changes to your current traditions or even let some of them go completely to make room for new ones that make more sense for your new situation and family structure. Honor the traditions your children have with their other parent, even if you are no longer involved in them. 

4. Don’t be afraid to make new traditions. 

While it’s hard to let go of old traditions, this is actually a wonderful time to make new ones. Whether you’re on your own or you have children, think about new ways to make new memories that aren’t burdened with the echo of Christmases past when you were still married. What about passing out cookies to less fortunate people? Or bringing a care package to a struggling neighbor as a secret “caper” together? You may find you like some of your new traditions even better than the old ones! What are some things you’ve heard some people enjoy that you might like to try? This is the year to experiment with new options! 

5. Accept invitations.  

Resist the urge to isolate. You may not be in a celebratory mood, but say YES to invitations as often as you can so you can be in the company of people who love and support you. Even going out with people just for fun is a great way to shake off a funk! It might be awkward to attend someone else’s family functions, especially for Christmas Eve or Christmas Day, but you just might have a great time. And when you let someone do something nice for you, like invite you into their home for Christmas dinner, you allow them to experience the joy of giving. Accept graciously…and enjoy!  

6. Reach out to others who might be feeling lonely.  

Not sure who to spend Christmas with? Think about who you know who may also be feeling alone. You likely have friends who are single, divorced or widowed, who are estranged from their families, who have lost parents to illness, or who are new to the area. Invite them over and to share a favorite holiday meal or dessert or to do something festive like view holiday lights or go to a play or concert. 

7. Put differences aside for a whole-family event if possible.  

This may seem impossible, but have you talked to your ex-spouse about doing something together with the kids so they can experience having the whole family together, if only for a little while? Perhaps you can take one short outing or participate in one tradition that has been particularly fun or meaningful for all of you. Some families are successful in doing this, and if you can do it too, it’s worth the extra effort. Your children will thank you later. If possible, put hurt feelings away for a couple of hours and show your children that in spite of the divorce, you’re still family in the most important sense of the word. 

8. Take time to treat yourself. 

Counter the tough feelings by doing things that lift your spirits, especially if you’re spending the holidays alone. Get a massage, listen to your favorite music, take yourself to see the kind of movie your spouse didn’t enjoy, rearrange the furniture for a fresh look, buy yourself something you really want, have a meal you’ve been craving…be kind to yourself. 

9. Exercise and eat mindfully. 

Move your body. Take a walk. Go to the gym. Eat healthy food. Don’t completely overindulge with fattening meals and desserts and alcohol. Both alcohol as well as fatty and sugary foods have been shown to promote depression and anxiety after the initial high of consuming them has worn off. Exercise promotes endorphins and makes you feel good. So treat yourself a little, but remember that exercising and fueling your body with nutritious food are absolutely essential for maintaining good mental and emotional health, so make it a priority. 

10. Remind yourself of the true reason for the season. 

For all of us, Christmas is a time of giving generously and receiving graciously, and whether you are married or divorced, you can still experience all the season offers. If you are a believer, then Christmas has an even deeper meaning, and this is a time to celebrate and be grateful for the birth of our Savior. Whatever is happening or has happened with your marriage and your family, trust that today’s painful feelings will pass and that you will be okay as you trust God, the only one who truly understands all of you, and every part of your situation. Don’t let your current circumstances stop your celebration and acknowledgement of your Heavenly Father who loves you, and all the joy that comes with keeping your heart open.  

A Compassionate Divorce Process Is a Good Starting Point 

If you are preparing to go through the divorce process, I’d like to encourage you to consider mediation or a collaborative divorce. With both of these options, you and your partner have support in communicating and compromising as you come to resolutions about all the difficult issues that come with ending a marriage. Both processes allow you to work together to make decisions about what will be best for your children. In addition, a full collaborative divorce team even includes a person who speaks on behalf of the children, giving them a real voice. When you choose one of these no-court divorce processes, you and your partner will benefit from facilitated communication that often helps couples move past the bitterness sooner—sometimes enabling them to have holidays together, or at least leaving them to feel good about the arrangements they both agreed to about how to split time during these precious occasions. 

Explore your no-court divorce options and the prenuptial process in Santa Rosa and Sonoma County and schedule a confidential consultation with divorce lawyer Jeanne Browne. With more than 30 years of experience helping couples divorce without court through mediation and collaborative practice, she will give you compassionate legal advice on your issues related to family law, divorce, and prenuptial/postnuptial agreements. Click here to schedule a meeting.  

Please Note: Articles posted on this website are for general information purposes only and are not to be considered legal advice. Every situation is unique and we recommend you reach out for a private conversation about your specific circumstances and concerns by booking a consultation. 

by Jeanne Browne