More and more of us own digital assets. Government analysis suggests around 10% of the UK adult population possesses some kind of cryptoasset (crypto currency). Many more will hold other kinds of digital asset like valuable data or artwork that’s stored in electronic form.

When you divorce, these assets – just like your other property – can form part of the matrimonial pot available to meet the needs of your spouse and children. It’s essential therefore to disclose them and be able to place a value on them. This is a developing area of family law but anyone going through divorce should be aware of the impact digital assets might have on a final settlement and how courts might approach this kind of digital property.

What Are Digital Assets?

A digital asset is something that’s both created and stored digitally. As technology develops, ownership of assets like this has become much more widespread. Well known classes of digital asset include cryptoassets like the cryptocurrency Bitcoin. But that’s not the full picture. Digital assets can include

  • Books
  • Audio and music
  • Animations
  • Photos
  • Electronic data
  • Videos
  • Content
  • Social media accounts
  • Gaming accounts

For divorce financial settlement purposes the asset must provide a spouse with some kind of value.

Digital Assets And Property Law

In 2023 The Law Commission extensively examined the way property rights interact with digital assets – an important consideration when dividing digital assets on divorce.

In its final report the Commission accepted that the common law system in England and Wales provides judges with an inherent flexibility to adapt to developments in the ownership of digital assets. So the Commission steered clear of advocating for radical changes in the law. The Commission did suggest however that legislation should be introduced to confirm formally that digital assets are capable of attracting property rights. This would clarify the position of certain digital assets that don’t meet the traditional characteristics of assets that have property rights (family homes for example, or stocks and shares). The Commission also suggested the gradual development of a legal framework to strengthen the operation and enforcement of certain cryptoasset transactions.

How Do I Disclose Digital Assets When I Divorce?

Legal discussion about digital assets and property rights may seem overly technical. But it matters because digital assets like cryptocurrency must be listed on Form E as part of the financial disclosure process when you divorce.

A failure to be upfront about your ownership could lead to any final settlement being challenged in the future. You might also be penalised by the courts by having to pay any legal fees your ex-spouse incurs in disputing the contents of your Form E.

Valuing Digital Assets During Financial Disclosure

It’s often difficult to place a value on digital assets, particularly if they consist of cryptocurrency that’s exchanged in extremely volatile markets. In many cases therefore it will be necessary to get an expert opinion on what value to attach to a particular asset. We will usually need to refresh these valuations as negotiations between spouses play out. This ensures the most accurate valuation is provided and neither side is prejudiced or is give a reason to challenge any financial settlement in the future. Any valuation should take account of the tax implications if an asset is disposed of to satisfy any financial award.

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