With Donna Hart
Partner and Head of the Family department at Everys Solicitors.
If you are divorcing, you will need to have a financial order made in respect of the division of your matrimonial assets. With an estimated one in ten individuals having some type of crypto holding, digital assets are a new class of asset to be taken into account when making financial arrangements.
During a divorce, couples need to make full financial disclosure to each other of all of their assets and liabilities. Their solicitors can then negotiate to try and agree on how these will be divided. If they are able to reach an agreement, this is put into a consent order for approval by the court.
If an agreement cannot be reached, alternative dispute resolution can be used to try and find an acceptable compromise. Examples include mediation, collaborative law and arbitration. If it is not possible to find a solution, then the court can be asked to decide the matter and make an order.
The first part of the process of dividing assets on divorce is for each party to make a full disclosure of all of their holdings. Where necessary, these will need to be valued. This includes assets such as property, shares and pensions.
The courts have legally recognised that crypto assets are a type of property and as such, they will form part of the pot of matrimonial assets to be split on divorce. This could include crypto currency, NFTs or other tokens or assets. Evidence of the holding will be needed, together with a valuation.
Because of the rapidly fluctuating nature of cryptocurrencies, valuations may need to be carried out at intervals during the divorce process.
You are advised to consider whether you want a large share of crypto assets as part of your divorce settlement, given their volatility.
The tax position will also need to be taken into account. Cryptocurrencies are subject to Capital Gains Tax. Income Tax may be payable on income from trading in digital assets.
Proposed changes to the law
The Law Commission has carried out a public consultation looking at the way in which digital assets are treated by the courts.
It has proposed that a new category of assets be created specifically for digital assets. This will help courts understand how to deal with them when making financial orders on divorce.
It is also the case that as from 2024/25, self-assessed tax returns will have a section for gains made from crypto asset holdings.
If you would like to speak to one of our expert family lawyers, call us free on 0800 8840 640 or email us at [email protected].
Everys Solicitors have offices in Taunton, Crewkerne, Exeter, Exmouth, Seaton, Sidmouth and London.