Understanding Cryptocurrency Assets in the Maryland Property Division Process

Published on
September 16, 2024
Written by
Angel Murphy, Esq
Category
Divorce

In all its many forms, cryptocurrency continues to fascinate the general public. Although most people in Maryland have at least some familiarity with cryptocurrencies, these items are still shrouded in a bit of mystery, something which most likely contributes to their popularity. Many Marylanders have added cryptocurrency to their portfolio, and as a consequence this asset has become involved in the property division process. In this article, we will discuss several key facts which will help Marylanders better understand cryptocurrency assets in the context of the property division process under Maryland law.

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Fact #1: Cryptocurrency Holdings are Classified as Intangible Personal Property

For a long time, many people were baffled as to the classification of cryptocurrencies for tax purposes. Since cryptocurrency is a kind of “phantom currency,” with no government backing, some people assumed that these assets could be left off a person’s “official” balance sheet and go unreported. Several years ago, the IRS brought clarity to this situation by providing a formal tax classification of cryptocurrency. According to the IRS, cryptocurrencies are a type of intangible personal property. This makes cryptocurrencies essentially the same as stocks or bonds, at least from a tax-legal standpoint. Maryland law follows this principle, which means that Maryland law will also consider your cryptocurrency holdings to be intangible personal property. This is a key fact which Marylanders should be sure to absorb.

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Fact #2: Marital Cryptocurrency Holdings are Subject to Division

The next key fact to know is that, because cryptocurrencies are like other intangible personal assets, these assets are subject to division to the extent that they are categorized as marital property. In other words, they are not really special at all in the context of the property division process here in Maryland. Of course, even though they are treated the same as other intangible personal assets, they can still present complexities which aren’t necessarily seen with other assets. Given that the cryptocurrency market is volatile, and currencies can rise and fall rapidly, cryptocurrency holdings can easily be a hybrid mix of separate and marital property. This can happen, for example, when separate cryptocurrency holdings appreciate in value during the marriage. Typically, this appreciation in value will be categorized as marital property, even if the original holdings are separate property. In this way, cryptocurrencies may be similar to real estate or stocks.

Cryptocurrencies can also present complications when it comes to valuation. Because the market is so unstable, an expert may be needed to develop a workable valuation in the event that holdings actually need to be divided between spouses.

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Fact #3: Be Aware of Hidden Cryptocurrency Holdings

By its very nature, cryptocurrency holdings are easier for spouses to hide. This means that spouses need to be a bit more “on alert” when dealing with these assets in the property division process. In some cases, spouses may even need to consult with an expert to track down and identify crypto holdings. Cryptocurrencies are held in so-called “digital wallets,” and the identity of wallet owners is anonymous. Owners are identified through passcodes, which means that tying a particular wallet to a specific owner is not easy. If your spouse tries to hide these assets, you may be swindled out of substantial sums of money. This is certainly a fact which Marylanders need to keep in mind.

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Contact the Murphy Law Firm for More Information

To learn more about cryptocurrency holdings in Maryland family law, property division in general, or another related matter, contact one of the family law attorneys at the Murphy Law Firm today by calling 240-219-5243.

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Angel Murphy

Personable. Passionate. Persistent.

Cryptocurrency, Assets, Division, Property, Maryland, Attorney, Family Law, Estate Planning

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