What Happens To Cryptocurrency In A California Divorce

Cryptocurrency has become a common part of many people’s investment portfolios, but when your marriage ends, these digital assets add a layer of complexity to an already difficult process. At Attorney Bernie, we’ve helped plenty of clients figure out what happens to their Bitcoin, Ethereum, and other digital currencies when they’re going through a divorce.

California Treats Crypto Like Any Other Asset

You might think cryptocurrency operates outside normal property rules. It doesn’t. California applies the same community property laws to digital assets that it does to your bank accounts or real estate. If you bought crypto while married, it’s community property. Period.

Timing matters here. The date you acquired the cryptocurrency determines whether it’s separate or community property, not whose name is on the wallet or which spouse made the purchase. Our Alameda County family lawyer can walk you through what belongs to whom.

What about any crypto you bought before marriage? That stays yours. But if you used marital funds to buy more, or if the value grew because of efforts you made during the marriage, the lines get blurry fast.

You Can’t Hide Your Digital Assets

Both spouses have to disclose everything during divorce proceedings. Everything. That includes:

• All wallet addresses and current balances
• Every exchange account you’ve opened
• Complete transaction histories
• Private keys and how to access them

Some people think they can hide cryptocurrency because it feels anonymous. They’re wrong. Hiding assets is perjury, and California judges don’t take that lightly. You could lose the entire hidden asset to your spouse if you’re caught lying. And you probably will get caught, because blockchain technology makes transactions traceable.

The Valuation Problem

Here’s where crypto gets tricky. Values swing wildly. We’re talking thousands of dollars in a single day sometimes. So what’s fair when you’re trying to divide an asset that might be worth $50,000 today and $42,000 tomorrow?

Courts typically pick a specific date for valuation. Maybe it’s your separation date, maybe it’s the trial date. But those numbers can feel outdated almost immediately. We work with financial professionals who understand digital assets and can provide accurate assessments. Some couples decide to just split the actual cryptocurrency instead of converting it to cash. That way, each spouse takes on their own risk going forward.

Tax Consequences You Need To Know About

Transferring cryptocurrency during divorce isn’t always as clean as moving money between bank accounts. The IRS treats crypto as property, which means some transfers could trigger capital gains taxes. You don’t want to get hit with an unexpected tax bill months after your divorce finalizes.

Working with an Alameda County family lawyer who understands both family law and tax implications can save you serious money. We coordinate with tax professionals to structure your property division in ways that minimize your tax burden.

When Your Spouse Controls The Wallets

Digital currency stored in private wallets creates unique problems. If only your spouse knows the passwords or private keys, you’re stuck. Courts can’t freeze a private crypto wallet the way they can freeze a bank account. You need cooperation from the person holding the keys.

What if they won’t cooperate? Forensic accounting becomes necessary. We can subpoena exchange records, trace blockchain transactions, and bring in digital forensic specialists to locate cryptocurrency your spouse doesn’t want to share.

Don’t Forget About NFTs

Non-fungible tokens and other digital collectibles follow the same rules. If you bought them during marriage with shared funds, they’re up for division. Valuing NFTs? That’s even harder than valuing regular cryptocurrency because their worth depends on subjective factors and constantly shifting market demand.

Steps You Should Take Now

Document everything if you’re heading toward divorce and own cryptocurrency. Take screenshots. Save transaction records. Don’t transfer or sell anything without court approval or a written agreement from your spouse. Keep detailed notes about when and how you acquired each digital asset.

California courts have gotten better at handling cryptocurrency cases as these assets become more common. But they’re still legally complex, and mistakes can cost you. Getting guidance early helps you avoid problems down the road and protects what you’ve worked hard to build. Reach out to our team to talk through your situation and learn how we can help you move forward.