Bitcoins: The Latest Method for Hiding Assets in Divorce (2024)

FAQs

Did a husband hid $500,000 in bitcoin during a divorce? ›

In one such recent case, a woman in New York discovered that her husband had stored 12 bitcoins worth $500,000 in a previously undisclosed crypto wallet, The revelation came a few months into her divorce proceedings.

In general, any crypto asset acquired during the marriage is considered part of the marital estate. Hence, it is subject to division upon divorce.

Bitcoin is treated the same as any other asset in a divorce. If the bitcoin transaction was before the marriage, was given as a gift or through an inheritance, it is not marital property and usually cannot be divided. Therefore, if the transaction was during the marriage, it is marital property and can be divided.

The key term here is “leading up to.” Emptying an account years before a divorce is not a punishable offense, but doing so within a reasonable timeframe of a divorce can lead to consequences for the spouse making the withdrawal.

Trusts and gifts to friends – A common method of hiding money for those who don't own a business is to set up a trust or “gift” money to someone who will return the money after the divorce is finalized.

Because each party is required to divulge all assets, hiding assets during a divorce amounts to contempt of court. A judge may issue sanctions and require the spouse who is found to have hidden assets to pay the other's legal fees. The judge can even grant higher alimony payments.

Bitcoin and other cryptocurrencies have become a central tool in the arsenal of cybercriminals, with fraudsters increasingly using these coins to launder money. Criminals use various methods to take advantage of the anonymity cryptocurrencies provide to cover up the origin of illicit funds.

Do you have to disclose crypto in a divorce? ›

Understanding Cryptocurrency and Divorce

Cryptocurrency is considered an asset and not income. As such, it should be listed on your financial disclosures when you are going through the divorce process. Most cryptocurrency holdings have a current value which is listed when you log into your account.

Use TOR To Hide IP

Tor is a web browser that anonymizes your online traffic making it easy to protect your identity. This tool hides your IP address and helps to connect with the Bitcoin network anonymously. For crypto payments over the Tor there is no way to identify where they originated.

According to IRS Notice 2014-21, the IRS considers cryptocurrencies as “property,” and are given the same treatment as stocks, bonds or gold. If you sold crypto you likely need to file crypto taxes, also known as capital gains or losses. You'll report these on Schedule D and Form 8949 if necessary.

Do you need to report taxes on crypto you don't sell? If you buy crypto, there's nothing to report until you sell. If you earned crypto through staking, a hard fork, an airdrop or via any method other than buying it, you'll likely need to report it, even if you haven't sold it.

Red Flags That a Spouse Is Hiding Money

Secret credit cards, bank accounts, or investment accounts that the other spouse doesn't know about. Sudden changes in spending patterns or financial behavior, such as withdrawing large sums or making unusual purchases without explaining the reason.

Criminal Penalties

In California, a spouse can be charged with perjury for failing to disclose all of his or her financial assets in the required financial disclosure documents. A perjury charge can carry up to four years of jail time.

Financial infidelity occurs when couples lie to each other about money matters. It can include things like hiding debt, hiding big purchases, and lying about income. Financial infidelity can drastically affect trust between partners and the financial stability of the relationship.

From a legal standpoint, there is nothing wrong with having a secret fund even though you are married. The law certainly does not require that married couples keep joint accounts, or that a spouse gives full disclosure to the other spouse regarding finances – that is until you start divorce proceedings.

Some actions an attorney might take include subpoenaing payroll records, bank statements, and other financial account information that might document your ex's actual income. They can also subpoena your ex to testify about his or her income in a deposition.

How do I find hidden bank accounts? ›

In most cases, a 401(k) balance will be considered a joint asset that must be included in a final divorce settlement. While it may be tempting to take money out of such an account prior to the end of a marriage, it's typically not in your best interest to do so.

Separate & freeze joint accounts

This can be accomplished by paying those debts off in their entirety, transferring the balance to a card held solely be either you or your spouse, or at the very least, placing a freeze on those accounts to prevent future charges from being incurred.

You can go off and freeze a joint bank account quite easily. If you contact your bank, tell them you're separated, you want to freeze the account, they will do that quite readily. Or make it a dual signatory account. So, that's easy to do.

Penalties for Hiding Assets

If a spouse is caught hiding assets, the court may require them to pay the spouse's share of the assets to them. For example, if $10,000 in marital assets were hidden, the judge may order the spouse who hid the assets to pay $5,000 to the other spouse.

According to various studies, the financial impact of a divorce is typically less severe for men compared to women. One report from the US Government Accountability Office found that men's household income fell by just 23% after divorcing past the age of 50.

PayPal accounts are another opportunity to hide cash. Even though a PayPal account is linked to a traditional bank or credit card account, lawyers need to be mindful that an individual can transfer significant amounts of cash to a PayPal account in anticipation of drawing on it in the future.

Hidden assets can be found in many different ways: By looking at bank records, tax returns, and other financial documents. For example, suppose your spouse has multiple accounts but hasn't reported them as part of their asset inventory.

What are Hidden Bank Accounts? A hidden bank account is one that is not declared on a financial statement or is unknown to an individual or organization. Hidden accounts can be used to conceal assets, transactions, or income from a spouse, business partner, creditor, or the government.

How to be anonymous on Bitcoin? ›

When bitcoins are considered marital property, the easiest way to divide them is to split the determined value 50/50. Since most bitcoins can be cashed out in full, splitting the value 50/50 means each spouse would simply get half. Another way to divide bitcoins is by negotiating other marital property in exchange.

The IRS has made it clear that they expect people to report their cryptocurrency holdings on their taxes along with all capital assets. Failing to do so could result in a number of penalties, including fines and even jail time.

Yes, the IRS can track cryptocurrency, including Bitcoin, Ether and a huge variety of other cryptocurrencies. The IRS does this by collecting KYC data from centralized exchanges.

If, after the deadline to report and any extensions have passed, you still have not properly reported your crypto gains on Form 8938, you can face additional fines and penalties. After an initial failure to file, the IRS will notify any taxpayer who hasn't completed their annual return or reports.

Bitcoin, contrary to popular belief, is traceable. While your identity is not directly linked to your Bitcoin address, all transactions are public and recorded on the blockchain. So, while your name is not attached to your address, your address is attached to your transaction history.

Are Bitcoin transactions traceable? Since Bitcoin uses blockchain technology, there is complete transparency, and all the transactions are recorded on a distributed ledger. These ledgers are open to the public, and anyone can access them. This makes Bitcoin transactions traceable.

At the basis of cryptocurrencies like Bitcoin (BTC) stands blockchain technology. A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain.

Cold storage is the most secure way to store cryptocurrencies, as it involves keeping the private keys offline. This means that the keys are not connected to the internet, reducing the risk of hacking or theft.

The annual fee for storing your cryptocurrency in Custody is 0.40% (40bps) with an additional fee of $125 per withdrawal. What is Gemini Custody? How do I sign up for a Gemini Custody account? What cryptos are supported on Gemini Custody?

How much does crypto custody cost? ›

Third-party custodians typically charge a yearly fee for managing your crypto assets. The cost varies between platforms, but most custodians charge less than 1% of the total value of your assets. You may have to pay a fee to set up your account with a custodian.

Do you pay taxes on crypto? People might refer to cryptocurrency as a virtual currency, but it's not a true currency in the eyes of the IRS. According to IRS Notice 2014–21, the IRS considers cryptocurrency to be property, and capital gains and losses need to be reported on Schedule D and Form 8949 if necessary.

Taxpayers are required to report all cryptocurrency transactions, including buying, selling, and trading, on their tax returns. Failure to report these transactions can result in penalties and interest.

Take out a cryptocurrency loan

Instead of cashing out your cryptocurrency, consider taking out a cryptocurrency loan. In general, loans are considered tax-free. If you need liquidity immediately, you should consider using your cryptocurrency as collateral to take a loan through a decentralized protocol.

Once the exchange has received your bitcoin, you can request a withdrawal in the currency of your choice. The withdrawal will be paid into your bank account. Brokers are restricted by money laundering laws, so you will need to withdraw to the same bank account that you deposited with.

However, you still need to report your earnings to the IRS even if you earned less than $600, the company says. The IRS can also see your cryptocurrency activity when it subpoenas virtual trading platforms, Chandrasekera says.

Yes, Coinbase reports to the IRS. It sends Forms 1099-MISC to the IRS for U.S. traders who made more than $600 in crypto rewards or staking. $600 is the Coinbase IRS reporting threshold for tax year 2022.

A Dutch family that sold all its assets to buy bitcoin in 2017 has settled down in Portugal for tax reasons. Didi Taihuttu told CNBC they settled there after traveling for five years because Portugal has 0% tax on bitcoin.

Under California law, a marital relationship is a confidential relationship requiring the highest good faith and fair dealing. Accordingly, California law provides that all spouses have a duty to make a full disclosure of all their assets and provide equal access to all information related to their finances at divorce.

During the divorce proceedings, you are required to provide full disclosures of your finances, including the names of all bank accounts, the account balances, the date they were opened, and actual statements, among other information. In other words, you will have to disclose your secret divorce fund.

What is dissipation of marital assets? ›

Generally, the dissipation of assets in a divorce is when a spouse wastes, squanders, gifts, or hides money or property that belongs to the marriage.

20% of Americans–which would constitute over 50 million people–own crypto. Despite the tumultuous events of 2022, crypto ownership has remained largely unchanged since early 2022, which has been the historic high water mark for crypto ownership in America.

The largest holder of Bitcoin is believed to be Satoshi Nakamoto, the pseudonymous founder of Bitcoin. Nakamoto is estimated to own approximately 1,000,000 BTC, worth around $27.13 billion.

Of course, Finman is biased: The teen crypto phenom used $1,000 his grandmother gave him when he was 12 years old to buy his first bitcoin when the little-known virtual currency was just $12 a token. By age 18, Finman had become a millionaire. (See more: Who is Erik Finman, the Bitcoin Millionaire Teenager?)

There are no real repercussions when a spouse empties a bank account of proceeds that are solely theirs — the money belongs to them by right and therefore isn't subject to division in the divorce proceedings. Unfortunately, it's not uncommon for spouses to empty marital bank accounts leading up to or during a divorce.

Concealing Marital Assets is Illegal

Each does so by signing legal documents under oath, subject to penalties for perjury (lying). When the Petitioner, the spouse filing for divorce, files their Petition for Dissolution of Marriage with the court, they must list all of their assets with an approximate value.

Yes, the IRS can track cryptocurrency, including Bitcoin, Ether and a huge variety of other cryptocurrencies. The IRS does this by collecting KYC data from centralized exchanges.