Even the most amicable divorce is rarely simple, but when significant or high-value assets are at stake, it becomes a much more multifaceted process. Considerations involving financial forensics, negotiation, and strategic forward planning are often involved. Furthermore, high-net-worth divorces today often involve more than just property portfolios, family money, shareholdings and pension pots. Cryptocurrencies, NFTs, and complex business structures are increasingly becoming issues that courts and divorce lawyers have to deal with. Here is what you should know.
Divorce and The Rise of Digital Assets
Traditionally, a high-net-worth divorce settlement would often revolve around more conventional assets, including family houses, heirlooms, investment portfolios and business holdings. Today, in the digital era, a new type of wealth has emerged, involving cryptocurrency and NFTs. Therefore, these valuable ‘digital assets’ are now being added to the equation. What are they?
- Cryptocurrency (Bitcoin, Ethereum, etc.): Cryptocurrency is extremely volatile, typically saved in individual wallets, and can sometimes be anonymous, making it a challenging asset to track and value. Courts demand complete financial disclosure, but anonymous wallets and unstable price valuations can make fair division complicated.
- NFTs (Non-Fungible Tokens): Non-Fungible Tokens are a form of digital asset that can represent artworks, music, or collectables. The value of some NFTs has increased rapidly while others have crashed, making valuation a fluid goal. As opposed to a painting on a wall or a collectable car, where valuation remains relatively stable, the value of an NFT relies on a highly speculative market.
Valuation and Division of Businesses
For an entrepreneur or investor, businesses tend to be the most valuable marital property. Figuring out how to split them includes:
Valuation: A valuation of a business will require the involvement of an independent expert who will determine the value of the company, taking into consideration current business assets along with potential future earnings.
Liquidity: Even a successful company can appear profitable on paper. However, cash may not be easily accessible when it comes to a buyout.
Continuity: In cases where the spouses are jointly running a business, divorce raises complex questions surrounding who remains in the business and how the departing spouse will be compensated.
Typically, one partner will keep the business, and the other will be awarded a higher percentage of the liquid assets, but bespoke solutions are often required.
The Challenges in High Net Worth Divorce Cases
- Tracing the Money: Crypto can be transferred anywhere in the world within a few seconds, which poses a question of anonymity. In modern divorce cases involving digital assets, forensic accountants and blockchain analysis software play an integral role in the process.
- Valuation Volatility: The valuation of digital currency such as Bitcoin can jump from being worth £50,000 today to £70,000, or £30,000 next month. Courts have to strike a balance between fairness and market uncertainty.
- Jurisdictional Problems: Cross-border assets are a common aspect of high-net-worth couples, and crypto can be held anywhere in the world. Jurisdiction choice can have a significant impact on asset division.
- Tax Implications: Capital gains tax may be incurred when transferring shares, selling or liquidating crypto or NFTs. Strategic planning is required to avoid unnecessary tax exposure.
How Do the Courts Approach Division?
Much like traditional property, digital assets and businesses are treated by the courts as part of the “marital pot” to be divided fairly. However, fair does not always mean equal. Contributions, future needs and liquidity are all contributing factors. In some cases, division may be deferred till a later date, allowing one spouse to retain crypto or NFTs, while balancing the other spouse with more stable assets.
Practical Steps for Divorcing Couples
- Full Disclosure: Be honest. Deliberately hiding assets can lead to harsh penalties and adverse findings.
- Seek Specialist Guidance: Speak with experienced professionals who have specialist expertise in dealing with digital assets and complex valuations.
- Get Independent Valuations: For both business and digital holdings.
- Don’t Forget About Tax Planning: Structuring a settlement wisely can mitigate tax liabilities.
- Think About Long–Term: Cryptocurrency can either boom or bust. Companies can either grow or become bankrupt. Therefore, settlements should focus on financial security and not be speculative.
High-Net-Worth Divorce Solicitors
Today, high-net-worth divorces are more than house and bank account splits. With the increasing involvement of crypto assets and complex business structures, a couple’s financial framework is becoming much more intricate. The key to success lies in transparency, professional advice, and well-designed settlements that strike a balance between fairness and practicality.
For information on the involvement of digital assets in a divorce settlement, speak with one of our specialist divorce solicitors today to discuss how we can help you.
Related articles:
Update on Standish v Standish and Non-Matrimonial Property in Divorce
Outdated Fairness? Rethinking How Courts Weigh Conduct in Financial Settlements
How are Complex Assets or Businesses Handled in a High-net-worth Divorce?
Why a Prenuptial Agreement Could Be a Smart Choice for Your Marriage
This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please contact our team of solicitors
