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What all divorcing parties should know about bitcoin

Despite how angry they may be with the other spouse, and the lack of trust between soon-to-be ex-spouses, settling a marital property dispute ultimately works best for both parties. Unlike protracted litigation, there is no loser in a mediated settlement. A compromise saves time, money and emotional heartache.

But before a true settlement may be achieved, the parties must be open and honest about their finances. But when it comes to disclosing assets in the form of bitcoin and other forms of cryptocurrency, some spouses may not be completely forthcoming. 

For the uninitiated, bitcoin is a form of electronic currency that is traded in cyberspace. Additionally, bitcoin is traded anonymously between users, so there is no actual receipt or transaction record that details who paid for what. With that, the transfer of bitcoin is essentially untraceable. Further, bitcoin is not taxed by states or the federal government. Given the lack of regulation and accountability, it may be easy for a disgruntled party to hide bitcoin that might be considered marital property. 

As we have noted in prior posts, marital property consists (generally) of all income earned through regular employment during the marriage, as well as assets acquired during that time. Therefore, any potential settlement must include the distribution of all marital property unless it is specifically designated as separate property.

Despite the difficulty in locating and tracing bitcoin to a particular user, it may be worth taking time to conduct some forensic accounting to see if a sneaky spouse is hiding marital property through cryptocurrency.

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