How are digital assets divided in a divorce?

With the increase in people owning cryptocurrencies, social media accounts, online businesses and accounts, traditional assets are no longer the only possessions considered in a divorce. 

There is no legal definition of digital assets but they could include a wide range of items such as cryptocurrencies, online bank accounts, virtual currencies in gaming platforms, domain names, and intellectual property rights associated with digital content.

Treating digital assets in divorce cases can be complex and challenging due to their intangible nature. For instance, cryptocurrencies are volatile and can fluctuate in value making it difficult to determine their true value. They are ultimately considered as “property” in a divorce settlement.  Here’s how digital assets are handled in divorce proceedings:

The first step is to identify and classify the digital assets. Each party in the divorce is required to list all of their digital assets. Putting a price on digital assets can be challenging, as they can fluctuate in value. The court may consider factors such as the current market valuation and any income generated from the asset.

Just like with tangible assets, courts consider the financial contributions made by each spouse towards buying or maintaining digital assets. If one spouse can demonstrate sole ownership of the digital asset, they may treat it as separate property. However, if the assets are jointly owned, or perhaps used to support the family, it may require further negotiations to come to an agreement on how to divide them.

Having a prenuptial or postnuptial agreement that specifically addresses the division of digital assets can provide clarity. These agreements would outline the ownership, valuation, and distribution of digital assets in the event of divorce.

The government has proposed reforms and recommendations to handle digital assets during divorce proceedings. The Law Commission, an independent body in England and Wales that reviews and proposes reforms to the law, has produced a consultation on digital assets. 

The issue is that assets are split into two categories, “things in possession” (tangible assets) like money and “things in action” such as personal property. The Law Commission proposes that there should be a third category for digital assets. We are expecting that the reforms will give more clarity about digital assets and potentially change the way in which they are considered in divorce.

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