How are cryptocurrencies and digital assets treated on divorce?

cryptocurrency and divorce

How are cryptocurrencies and digital assets treated on divorce?

How are cryptocurrencies and digital assets treated on divorce? Partner Fiona Wood examines the issues.

In recent months Bitcoin and other cryptocurrencies have seen a resurgence, with the value of many of these digital currencies now being worth more than ever. The value of the industry itself was worth more than $1trillion in January 2021 and is on course to double in value by the end of March. This has led to a rise in people turning to digital investments during the lockdowns, with many more investors purchasing these rather than more traditional stocks – my colleague Jim Truscott of Beyond Group‘s specialist corporate firm Beyond Corporate has recently commented on this.

So how will digital investments be treated if you are going through a divorce?

Division of assets

Despite having no physical form, there is no difference between how cryptocurrency is treated from other more traditional investments, should a couple divorce. These and the other assets owned by the couple will be divided between them, considering various factors, including the couple’s and their children’s reasonable needs, and the specific circumstances of their case.

However, due to the nature of these assets there are several potential issues that may arise, which are specific to cryptocurrencies, during a divorce. Those issues include:

Issues regarding disclosure

There are concerns that due to the relative anonymity of cryptocurrency trading that a spouse could exploit this to try to hide their assets. In divorce each spouse has a duty to provide full disclosure of their assets. Most of those who hold cryptocurrency do so via a digital exchange, also known as a digital wallet. These wallets hold ‘keys’ and these keys are a sequence of letters and numbers which then correlate to the amount held in the account ledger. The benefit of holding keys in a digital wallet is that a person is able to easily see what they hold, as well as allowing them to buy and sell as they wish. These digital wallets provide records of what cryptocurrencies a person holds, the trades they make and the value of their holdings. This is what will need to be provided in disclosure.

It should be noted that if an asset has not been disclosed, it may be obvious from the other disclosure provided. A judge has the power to infer that there are undisclosed assets, if a reasonable explanation is not provided regarding where money has gone. However, there is no guarantee that all undisclosed assets will be traced. The nature of cryptocurrencies makes these assets easier to hide for those who are not prepared to abide by the law and provide full disclosure.

Issues regarding valuation

Unlike traditional stocks, the values of cryptocurrencies are very volatile and can swing dramatically, with 500% swings within a week not uncommon. This can lead to challenges when valuing assets in divorce proceedings.

Cryptocurrencies will be considered more risky assets in divorce because of this. A judge will often consider it appropriate that both spouses receive some of the more risky assets, so that that they are both impacted by large increases or decreases in their values, thus sharing the risk.

Issues obtaining a freezing order

If one spouse is trying to get rid of an asset in order to frustrate the other’s financial claims in divorce proceedings, you can apply for a freezing order to prevent this happening. This is a difficult application to make successfully regarding cryptocurrencies, but there have been cases where the court has made a freezing order against the digital wallet and the digital exchange who operated the wallet have fully cooperated with the order.

Cryptocurrencies are potentially more problematic to deal with if you divorce. However, the world of cryptocurrencies is a growing one and is likely to feature in an increasing number of divorces.

If you are concerned about how cryptocurrencies owned by you or your spouse will be dealt with if you divorce it is important that you take specialist legal advice. Please get in touch today. We are here to help.

First published in Business Insider North West

Divorce is not your only option

divorce is not your only option Louise Redknapp

Divorce is not your only option

Louise Redknapp has been reported this weekend as saying she has regrets about divorcing her husband Jamie: “I should have paused for a minute and thought about other people and had just a bit more time to work out why I felt I couldn’t do it anymore. All I know is, I wish I’d tried [to save the marriage].”

She added: “I want to say to anybody who is thinking of running: ‘Just slow down. Don’t run.’ Because once you run too fast, you can’t make up the ground you’ve lost.”

People make decisions that they believe are right at the time, and nobody is criticising Ms Redknapp for taking the path she did. However, it is sobering to think that perhaps the Redknapp’s marriage might still be going strong today had decisions not been made so quickly. Divorce is not your only option.

Our managing partner, Amanda McAlister, explains there is another option available to those unsure as to whether or not they want press the divorce button.

“As a family lawyer of many years’ experience, and someone who has herself been divorced, I can say with certainty that although you will have heard stories of acrimony and bitterness, it doesn’t have to be that way. Being transparent about your emotions, and managing your expectations are two key areas to focus on.

“But for those couples not ready to bring an end to their marriage through a divorce or dissolution of their civil partnership, or who want to allow a period of reflection, there is the option of a Legal Separation.”

What is a Separation Agreement?

A separation agreement, entered into by both parties, is an agreement setting out how the couple’s assets should be divided and whether there should be any ongoing financial support – it can be tailor-made to the couple’s individual circumstances.  Within the document the parties commit to commencing divorce proceedings after they have been separated for two years.

Is a Separation Agreement legally binding?

In a word, no. But if it has been properly drawn up with full financial disclosure, and various safeguards have been met, then the court could hold the parties to it, unless their circumstances have changed substantially since the agreement was signed.

What are the advantages?

It can provide a sound basis for the ultimate financial consent order that should be presented to the court once the divorce or dissolution has reached the appropriate stage. And entering into a separation agreement is far less uncertain that simply deferring the question of the financial settlement until the divorce proceedings are initiated.

And the disadvantages?

In brief, a divorce brings closure, a separation agreement doesn’t. And closure can be extremely important, particularly for children who need certainty, and for the wider family who will then be able to accept that the marriage ending is final.

Remember that although the No-Fault Divorce Act received Royal Assent in June 2020, the reforms have not yet come into force. This means that your divorce petition must prove the marriage has irretrievably broken down by evidencing one of five, specific, statutory facts:

  • adultery
  • unreasonable behaviour
  • desertion (in practice, this is rare, and difficult to prove)
  • two years’ separation, with agreement by both that there should be a divorce (and it’s worth considering that this two years of separation in itself provides a “cooling-off” period – a time for reflection)
  • five years’ separation (the consent of the Respondent is not needed)

“To summarise, whist the prospect of commencing a divorce is incredibly stressful and upsetting, it does provide closure not only to the adults but also children, allowing the whole family to move on. A divorce also allows a binding financial settlement to be achieved ensuring that both parties are provided with financial certainty and security for the future.”

 

We are here to support families, whether they are making up, or breaking up. Nobody knows what the future holds, but we want to assure you that you are not alone. Come to us with your questions and our expert team of family lawyers are on hand to give you the assistance you need. We’re here to help.

How to have a respectful divorce – read Amanda McAlister’s top tips

BBC Morning Live

How to have a respectful divorce

Following our managing partner Amanda McAlister’s guest appearance on BBC Morning Live, we thought you might find it useful to read her nine essential tips on how to have a respectful divorce.

I am very often asked if it is possible to have an amicable divorce, to which I always answer yes, it is, but only if both parties want it to be. In my experience, it’s only really when both people in the marriage or civil partnership have been separated for a considerable amount of time that they’re able to get their heads around what the split means for them and all those involved. You cannot escape the fact that divorce means huge change: wanted or unwanted, it’s still an enormous life event that even for the strongest of people, can create significant worry, insecurity and an enormous hit on a normally stable equilibrium.

What do you need to do to have a respectful divorce?

1. Get professional advice, fast

Understandably you will have lots of concerns, and for many those at the top of their list are will I lose the kids, and do I have to move out of my house? An experienced family lawyer will be able to help you with all your questions and take you through the divorce process step-by-step.   This will help to ease some of the fear and panic and will often feel empowering and prepared for what lies ahead.

2. Phone a neutral friend

Speaking of asking your friends, phone someone you know well, but who is neutral. Tempting though it is to speak to family members and your best mates, these people will, understandably but inevitably, take your side and by doing so they often fuel the problem. You need someone clear-eyed and with no axe to grind who will be honest. Only hearing what you want to hear is rarely the answer.

3. Team work is key

Choose your legal team carefully. It’s not going to help you in the long term if you engage the lawyer with the best record and a top reputation if you can’t connect with them. Do you feel your lawyer is empathetic? Will they be available whenever you need them? Do you feel reassured that they genuinely understand all your concerns? Once you’ve found that lawyer, get in touch with that neutral friend, then decide if you need to consult other professionals, such as a pension actuary or a forensic accountant.

4. Positive communication

Treat your divorce as though it’s a business dealing.  No matter how tempted you are to send a highly-charged, emotional WhatsApp or email, first ask yourself – would I send this to a work colleague? Would I call my boss all the names under the sun and accuse him or her of being a terrible person? Probably not, because all actions have consequences and if you provoke the other party in this way, ultimately, you’re not going to achieve what you want. A civilised, respectful divorce.

5. Do not use social media to try to hang onto your ex

We have all seen examples of people using social media to talk about their pain and hurt as they go through a split. A very recent example is that of celebrity couple Alice Evans and Ioan Gruffudd, where Evans announced on Twitter “My husband doesn’t love me” and went on to say he had left her and their children. No matter how much pain and hurt you are feeling, this is not the way forward and rather than bring your ex back to you it is more likely to inflame an already difficult situation and may even entrench your ex’s decision to leave the marriage. And if you have children, imagine how horrible they will feel as their friends tell them they’ve read all about your parents’ arguments on social media. And this leads me to say

6. Do not badmouth your ex to your children

I can’t stress this enough. It won’t achieve anything other than pain, and studies have shown that emotional conflict can be as destructive as physical conflict. Your children love you both, and you both love your children. Why hurt them? Because that’s all that will happen. I have dealt with some heart-breaking cases where children have been alienated from one parent because the other parent has used them as an attempt to punish their ex. It’s the children who suffer and it’s your duty to do the right thing by them. Sound off to your mate over a glass of wine. Tell your solicitor how badly your ex is behaving. Write it all down in a letter and then burn it. But don’t say anything to your children. One day, when they’ve grown up as well-rounded, well-adjusted adults, you, and they, will be grateful that you behaved well. It will be worth it, I promise you.

7. Develop a routine from the very outset

Know who is doing what, and when. Children need certainty and they will be miserable if they’re always the child who hasn’t got their PE kit for school the next morning or they’ve left their homework at their Dad’s last night because they thought they would be staying there the following day. If you can’t establish this routine with your ex, then look at mediation. A skilled mediator can put together a plan that works for both of you and takes the heat out of any potential conflict.

8. Grit your teeth and work to transform your relationship with your ex

Something has ended, yes, but something new is beginning. If you have young children together you have many years of dealing with your ex ahead of you, so it’s in your interests to forge a new path. Remember, you don’t have to be friends – that’s often asking too much – but always being angry takes a great deal of energy and effort. Easier for your own mental health, and that of your children, to build new boundaries within which you are civilised partners working respectfully with each other in a way that benefits everyone.

9. Keep in mind that there is, truly, life after divorce

No matter how dark things seem or how hard the road ahead looks, it really does get better. There’s a good life ahead for you. Believe in it.

If you are thinking about getting a divorce, you should obtain advice from a specialist family lawyer. Get in touch today. We are here to help you.

Why you should consider a prenuptial agreement

prenuptial agreement

Why you should consider a prenuptial agreement

In the second in our series of blogs focusing on relationships, partner Fiona Wood looks at prenuptial agreements, and explains why they are no longer something solely for the very wealthy.

Since the Supreme Court decision in Radmacher v Granatino in 2010, which gave prenuptial agreements a legal standing in England and Wales, and as a result of the general public’s increased awareness of the potential benefits of these agreements, they are no longer something that only the rich obtain before they marry. 

Although the divorce rate in England and Wales is reducing, approximately 40% of marriages still end in divorce. In light of this, increasing numbers of people would like to put something in place which would allow them to avoid messy and expensive divorce proceedings if their marriage does end, and also to provide them with financial certainty should this happen.

Many of those considering having a prenuptial agreement have been divorced before and are bringing two families together. They are often keen to preserve their assets, if, sadly, their marriage does not work, for their children, as well as wanting financial certainty.

If there is a prenuptial agreement in place and a couple divorces, the terms of the agreement are a factor which a judge will consider when deciding what is a fair divorce settlement. Whilst the terms of the prenuptial agreement are not automatically followed by a judge, if they meet both spouses’ needs and the agreement has been entered into properly, a judge is likely to order a financial settlement in the same terms as the prenuptial agreement.

For a prenuptial agreement to be entered into properly the following must happen:

  • the couple each need to obtain independent legal advice on the agreement
  • hey both need to provide details of their assets, liabilities and income, and
  • the agreement should be negotiated and signed at least three months prior to the wedding.

This allows the couple to both obtain advice, have plenty of time to consider this advice and therefore make an informed decision about whether they want to sign the agreement.

If you are getting married and think that having a prenuptial agreement may be of benefit to you, you should obtain advice from a specialist family lawyer. Get in touch today. We are here to help you.

Is my spouse entitled to share my bonuses if we divorce?

divorce and money

Is my spouse entitled to share my bonuses if we divorce?

Many companies offer a bonus scheme to their employees; the financial sums received under these schemes by employees range enormously. For some, the bonuses they can receive are significant, and in some circumstances they can double their salary for the year. How will these bonuses be treated if a couple divorce? Partner Fiona Wood offers her advice.

Matrimonial assets

Bonuses that are acquired whilst the couple are together are usually considered matrimonial assets. This is the case if the bonus is received after separation but is for a financial period whilst the couple were together. In this scenario the bonus received will be put into the “matrimonial pot”, along with all the other matrimonial assets that are to be divided between the couple, either by agreement between them or if there is no agreement, as ordered by a judge.

If one spouse receives a bonus that relates to a period of work undertaken after the couple separated, this money will not automatically be ring-fenced and remain with the spouse who earned it. The parties’ financial needs have to be considered first when looking at what is a fair settlement. Unless there are significant matrimonial assets, a judge will not be able to ignore the bonus when looking at how the matrimonial assets should be divided, when considering the issue of need. Need is usually having money to enable you to buy somewhere suitable to live and money to meet your living expenses.

Bonuses earned in the future

What about bonuses earned in the future? Once the appropriate division of assets and pensions has been undertaken, you have to also consider whether it is appropriate for one spouse to pay spousal maintenance to the other spouse going forward. If spousal maintenance is not needed, as both spouses earn enough to meet their income needs, a clean break order will be made, preventing either spouse from making any financial claims against the other in the future. All bonuses received after the clean break will remain with the spouse who has earned them.

Whilst the law says that there should be a financial clean break between a couple if this is possible, in many cases one spouse cannot manage financially without spousal maintenance from the other going forward. In this scenario the amount paid as maintenance will depend upon the income that both spouses receive, taking into account their earing capacities, any other sources of income that they both have, and their reasonable income needs. If one spouse regularly receives large bonuses, a judge will not ignore these and can, if considered appropriate to meet reasonable need, order that a percentage of any net bonus received be paid to the other spouse, in addition to monthly payments, as part of the spousal maintenance payments.

It is worth noting that the Court of Appeal in the case of Waggott v Waggott [2018] stated that an earning capacity is not an asset that is capable of being shared on divorce. Therefore, one spouse is not entitled to half of the other’s income, even when an equal division of the assets and pensions are considered appropriate on divorce. Spousal maintenance should be calculated on a needs basis rather than on a sharing basis.

Child maintenance

With regard to child maintenance, this is governed by the Child Maintenance Service, whose calculation will take into account the payer’s previous year’s income when calculating the appropriate amount of child maintenance that should be paid. Bonus payments received will therefore be taken into account when calculating child maintenance. This can cause problems for some people who receive large bonuses some years but not in others. In this scenario they will have to be reassessed each year that their income changes, if they have not managed to agree the amount of child maintenance payable directly with their former spouse.

If you are concerned about the financial settlement that your will receive if you divorce,  please get in touch today. We are here to help you.

Does adultery make a difference to your divorce settlement?

adultery and divorce

Does adultery make a difference to your divorce settlement?

Sometimes a client comes into our offices, extremely upset as their marriage has broken down because their other half has found someone else and wants to start their life afresh with them. Sometimes that new client wants “revenge” and sees the possibility of punishing, financially, their soon-to-be-ex-spouse through the ensuing divorce.

By and large the court is not interested in why the marriage is ending

In fact, one of the most common assumptions around divorce is that there will be a financial impact if one partner has had an affair and left the marriage as a result. But this rarely makes any difference to the overall division of assets, because when it comes to money, by and large the court is not interested in why the marriage is ending, but rather what resources each party has available, and how they are to be divided fairly.

Does adultery count against me during my divorce?

No, it doesn’t.  It is one of the myths around divorce that the unfaithful party should be treated more harshly, but a marriage breaks down for many reasons and is rarely attributable only to one person’s actions.  There may be multiple problems already present in the relationship which has led one party to commit adultery, and judges understand this. In the eyes of the Court, determining how the matrimonial assets should be divided is based entirely on fairness.

In practice, this means that should you commit adultery and this is the cause of the irretrievable breakdown of the marriage, you are unlikely to receive a less favourable financial outcome because of this, nor will the person who did not commit adultery achieve a more favourable one.

The Court is under a duty to consider all the circumstances of the case and in particular the Section 25 Factors, and apply these to the facts of the particular case. The starting point when it comes to division of assets is 50/50 and the court is able to apply an element of discretion as to the award.  No two cases are identical.

The courts are not there to judge you and your marriage

It’s also worth bearing in mind that adultery in and of itself is not quite enough from a legal perspective to sue for divorce. If you want to divorce your spouse on the grounds of adultery, you must also state that you find it “intolerable” to continue living with your spouse.  Ask yourself if the adultery is the sole reason for that situation. It may only be the last, the very final, stage in the collapse of the marriage.

Finally, here’s something worth bearing in mind.  There is a six month time limit from finding out about the adultery – wait any longer than that to petition for divorce, and the family courts will take it as read that you didn’t find the adultery intolerable at all.  And despite television programmes and films encouraging us all to think you have to obtain proof of adultery and be able to name the other person, you don’t.  If your spouse won’t admit the adultery, then you can proceed on the basis of unreasonable behaviour instead.

Remember: no matter how betrayed, or how guilty, you feel, infidelity is not against the law and the courts are not there to judge you and your marriage.  They are there to try and reach as fair an outcome as possible and to ensure the welfare of any children you have with your soon-to-be-ex.  It’s different if truly appalling behaviour has taken place – domestic violence for example – but thankfully such extremes do not affect most divorcing couples.

If you are affected by any of the issues outlined here, please get in touch today. We are here to help.

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