Cryptocurrency is a digital asset that serves as a form of payment and operates using blockchain technology. It has become an increasingly popular asset class because of its potential for significant growth and decentralization. While it is becoming more widely accepted, cryptocurrency is still relatively new and complex, which makes it difficult to assess its value during a divorce.
California stands out from the rest of the United States with its innovative regulations targeted toward dividing cryptocurrency during a divorce. Here’s a breakdown of these laws for The Golden State residents.
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California Property Division
In California, the court can split the assets and debts of a married couple into two distinct categories: Community Property and Separate Property. Community Property encompasses anything acquired during the marriage, while what belongs to the couple before or through inheritance is deemed as Separate Property. When couples are divorcing amicably, they must divide their possessions equitably in an event called ‘property division’. It provides both parties with fairness and equity when splitting up marital items.
Cryptocurrency Value Determination
When cryptocurrency enters a divorce settlement, the court must assess its current worth and consider other vital elements, such as how long it belongs to the couple or potential future price increases. It will assign an appropriate value for division in the divorce proceedings.
California’s Cryptocurrency Division
When dividing cryptocurrency between two parties, courts must assess the value of crypto assets to make a fair allocation. Converting them into cash or assigning an equivalent amount is one way. It’s also important to note that any taxes due on these digital funds are solely held responsible by the party granted possession during this process. As such, both sides will receive their rightful share without worrying about additional financial strain since capital gains tax does not apply when divvying up crypto assets.
Qualified Domestic Relations Order In California
Through Qualified Domestic Relations Orders (QDROs), courts may direct one spouse to transfer a specific amount of cryptocurrency to the other. QDRO is a court-issued mandate that commands retirement plan administrators to extend benefits, like money or assets from their funds, directly to an alternative payee, such as a husband or wife.
Cryptocurrency Classification in California
Cryptocurrency is now increasingly subject to division in divorce proceedings, with legal considerations such as how it should be categorized. The crucial determination lies between whether cryptocurrency belongs to real estate (land and buildings) or personal property (everything else). The distinction between these two categories is necessary since they are each regulated by varying laws which could have significant implications for those dealing with cryptocurrencies.
California Property – Marital or Separate
When tackling a divorce involving cryptocurrency, it is essential to determine whether it should be marital or separate property. In California, community assets are those obtained throughout the marriage, whereas separate ones consist of those acquired pre-marriage or through inheritance/gifting. Nevertheless, classifying crypto as either one can sometimes prove exceedingly complex in certain situations.
Cryptocurrency Tracing and Valuation
As you go through the divorce process, cryptocurrency can present a unique problem. Its decentralized and digital nature makes it difficult to trace its actual value during asset division – leaving courts needing help to divide your assets accurately. Hiring an experienced financial expert who understands the worth of crypto holdings should be strongly considered to ensure that no one finds themselves in an unfair situation. This professional will help both parties receive their rightful share throughout the proceedings.