As digital assets become mainstream, New Jersey divorce proceedings increasingly involve cryptocurrencies, NFTs, online businesses, and virtual property. These assets present unique challenges in identification, valuation, and division, sometimes being plainly disclosed on investment account statements but sometimes requiring specialized legal and financial expertise.
Digital assets subject to equitable distribution may include:
- Digital payment accounts (PayPal, Venmo, Stripe);
- Online businesses (e-commerce, subscription services);
- Digital creator income (YouTube, Instagram, TikTok, ad revenue);
- Virtual property (metaverse real estate, in-game assets);
- Cryptocurrency (Bitcoin, Ethereum, Solana, etc.);
- Stablecoins and tokens in digital wallets or exchanges; and
- NFTs (art, music, collectibles, gaming assets).
Digital assets are not treated differently due to their technological nature; standard principles apply, though practical challenges are greater. If an asset exists online and has monetary value, it may be subject to New Jersey’s equitable distribution laws. That classification depends on multiple factors:
- Acquisition date: Assets acquired during marriage are typically marital, regardless of whose name they’re in.
- Funding source: Crypto purchased with marital earnings is marital property; assets acquired before marriage or by gift/inheritance may be exempt unless commingled.
- Marital effort: Growth in value of online businesses or monetized accounts during marriage may be divisible, even if the account existed beforehand.
Like more traditional assets, attorneys may use all available discovery tools to determine the existence and value of digital assets. We start with review of bank and credit card statements for crypto activity, then may use interrogatories and document requests for all digital wallets and exchanges, subpoenas to major exchanges, requests for transaction histories and wallet documentation. Digital wallets may lack statements, and crypto can be transferred anonymously or stored offline. Then, it may become necessary to consult a forensic accountant to assist with tracing of the specific transactions.
Once identified, we address the challenges of valuing and dividing digital assets. The value of any asset includes its volatility, and some digital assets are known to rapidly fluctuate in value, which complicates settlement. For online businesses, valuation considers revenue, sponsorships, intellectual property, projected growth, and operating costs. Engaging a valuation expert is likely essential.
Depending on the asset, division may involve in-kind division, so that each spouse receives a portion of holdings. If not possible or desirable, one spouse might retain the asset and the other might receive equivalent value in cash or other property. Assets which generate ongoing revenue might be held for continued division of that income.
If you think your spouse may be hiding digital assets, notify your attorney promptly. This enables early collection of financial records, discovery, and asset preservation. Digital assets require skilled handling, so accurate identification, disclosure, tracing, and valuation are key. The family law team at Cohn Lifland includes attorneys experienced in complex online assets who can offer guidance.