Should Bitcoin and Cryptocurrencies be Written into a Prenup in case of Divorce?

Bitcoin prenuptial agreement

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With a rapidly growing number of people now holding cryptocurrency, the asset is a growing source of acrimony in divorce cases.

Whether it be spouses hiding it from each other from the outset or attempting to conceal it during the breakdown of a relationship, solicitors are increasingly being engaged to handle crypto-related disputes.

One way that couples can attempt to alleviate a protracted row over Bitcoin if their marriage or civil partnership doesn’t last is by drawing up a prenuptial agreement, otherwise known as a prenup.

Prenups have been around for donkey’s years (around 2,000 to be precise!) and have been used as a way of either safeguarding assets or deciding how assets will be divided up in the event of divorce.

But there are certain rules you have to follow in order for the prenup to be effective at doing its job and for it to be recognised by the courts.

What do I need to consider when have a prenup drawn up?

Bitcoin, along with all other assets, has to be fully disclosed in the prenup before the document is signed for it to become a binding document.

The divorce court will take a dim view of anyone who deliberately fails to disclose all their assets at the time of drawing up the document.

The court’s role is to ensure a fair settlement is made and will include all current assets held by the people involved when reaching its decision.

How does it protect my assets and what happens if I don’t want to sell my Bitcoin?

Professionally written prenups will factor in any growth involved in the assets, including Bitcoin, no matter how meteoric it may be.

It can also ring-fence assets meaning they’re protected from being shared in the event of divorce.

However, in the case of assets that haven’t been ring-fenced, individuals may negotiate between each other if one party is reluctant to split a specific asset, such as Bitcoin.

It may be the case that one person agrees that the other can keep their cryptocurrency in return for taking a greater share of another asset, or even cash.

However, it’s important that the true value of the assets involved – including the potential for future growth – are properly understood as it could turn out to be a costly decision if there was significant appreciation or depreciation in the assets.

If you and your partner can’t agree on the split of assets, the court will make the decision for you in the way it feels is the fairest to both parties.

How the divorce court may view your crypto and prenup

In the case of Bitcoin, if the crypto was bought by your partner before you met them, and the original amount has sat there with no further investment, it’s possible that the court will decide they have a right to keep it as long as a fair and equivalent share of all other assets can be given to you.

However, if your spouse has been actively investing in crypto during your marriage and it’s not ring-fenced in a prenup, then the court is more likely to rule that the crypto has to be either sold and the cash distributed, or the coins need to be split equally into two separate wallets, one for each of you.

Are you technically capable of managing Bitcoin if you’re awarded crypto in a divorce settlement?

This raises an important issue and one which you should consider when pressing for a share of Bitcoin – are you technically competent enough to manage a crypto wallet and use an exchange if you wish to sell the asset?

If one partner in a marriage has been the one investing in crypto and you have no knowledge of the technology involved, it may be simpler in the long run to try to negotiate a cash (or asset) equivalent.

If you’ve never used a Bitcoin wallet before you may find it confusing, however major cryptocurrency exchanges such as Coinbase make the process pretty simple, even for complete beginners.

You could always ask a friend or relative who you know dabbles with cryptocurrency to help you, after all there are more than 2.3million Brits who now hold cryptocurrency (source: the Financial Conduct Authority).

The Crypto Adviser offers online tutorials where we can talk you through the process of creating a Bitcoin wallet or opening an account where you can buy, sell or store Bitcoin and a range of other popular cryptocurrencies. Find out more about our services.

Remember, cryptocurrencies are not covered by the Financial Services Compensation Scheme so if Bitcoin were to plunge in value you could lose your money.

You may also like: Is my Bitcoin and cryptocurrency covered by the Financial Services Compensation Scheme

Bitcoin prenuptial agreement

What is a prenuptial agreement?

In the UK, prenuptial agreements are incredibly commonplace, especially given that 1 in 5 marriages now end in divorce.

A prenup is simply a document drawn up before a couple get married detailing how their respective assets should be divided if their marriage doesn’t last.

They act as a guide to the divorce court when considering the split of assets.

Prenups cover everything that can be considered an asset, such as Bitcoin as we’ve already mentioned, cash, property, stocks and salary.

Joint and individual assets are also taken into account, as are any debts.

What is the purpose of a prenuptial agreement?

A prenup is designed to avoid any ambiguity when it comes to dividing up assets if a couple divorces.

As I’ve mentioned, it can also protect an asset from being shared if both parties have agreed this when drawing up the original prenup document. This is called ring-fencing an asset.

Prenups can give couples piece of mind when getting married that their assets will be distributed in a certain way if it doesn’t last.

This can be particularly important if one party’s assets are significantly higher than their partner’s.

How much does a prenuptial agreement cost?

The price of a prenup in the UK can vary significantly and will depend on the complexity of your financial situation and whether you are looking to ring fence certain assets.

Online services start at around £500 but are limited in their scope and may not be suitable if you have more complex needs.

A prenuptial agreement drawn up by a firm of solicitors will start in the region of £1,500 and could well exceed £3,000 if your needs are more complex.

It’s worth shopping around and even asking if your preferred solicitor will price match a cheaper deal seen elsewhere.

Are prenups a legally binding document and enforceable by the courts?

In the UK prenuptial agreements are not necessarily a legally binding document.

However, UK divorce courts will follow the wishes contained in the prenup as long as they’ve been drawn up in accordance with the law.

This may not be the case if your divorce occurs many years into the future.

Prenups that are decades old may not take into account significant life events that have affected your finances since then and hence the courts may ignore the original agreement.

The most important thing to remember when considering if a prenup is legally binding is that both parties involved must have received independent legal advice before signing the agreement.

Also, the prenup must be signed before your marriage takes place and witnessed by two people, otherwise it will be invalid.

What if I want to protect my Bitcoin and other assets after I’m married?

If you are already married or have entered into a civil partnership and want a similar form of protection to a prenup you should draw up a postnuptial agreement.

The rules and costs surrounding postnups are broadly similar to prenups.

Again, although they’re not legally binding as such, they offer couples a high degree of security as divorce courts in the UK will generally follow the instructions contained within.

Like prenups, it’s crucial that both parties receive legal advice before proceeding, and that they disclose all assets at the time the document is drawn up.

Related links:

Do I have to pay Inheritance Tax on my Bitcoin and can my cryptoassets be inherited?

What happens to my cryptocurrency when I die?

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Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.

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