Case Study: Crypto Assets Awarded in Divorce Settlement

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Paula* had recently been divorced from her husband of more than 20 years when she contacted The Crypto Adviser needing help. The split had been relatively amicable and she’d received a portion of her ex’s crypto portfolio as part of the settlement but was unsure what to do with it.

She found herself in possession of two coins – Bitcoin and Ethereum – which had been given to her by her ex-husband on a hardware wallet, along with the password and seed phrase.

Paula explained that she wanted to sell some of the tokens to help pay for a home renovation project she was planning and keep the remainder of the coins on the wallet as an investment for a rainy day.

Her issue was that she’d never dealt with cryptocurrency before and was completely unfamiliar with wallet technology or using a crypto exchange. She was worried that she’d make a mistake and either lose the coins through her own fault or in a scam.

Hardware wallets can be complex

Using a hardware wallet to store crypto is recommended for anyone with a reasonably sized portfolio who wants to have sovereignty over the funds and protect themselves from exchange hacks and bankruptcy.

But even for experienced crypto users, keeping tokens on a decentralised wallet, such as a hardware wallet, is something that needs to be done carefully – which includes paying attention to seed phrase security – to avoid loss or theft.

When you move your funds into decentralised storage you’re effectively becoming your own bank. This gives you absolute control over your portfolio but it also means that if something goes wrong there’s no central authority that can step in and help.

We’ve spoken to many people who’ve either lost access to their assets due to user error or had them stolen because they were careless about security, often relating to the seed phrase that goes with a decentralised wallet, which effectively acts as the master key.

Advice on selling crypto assets

In Paula’s case, we talked her through moving the coins to a reputable exchange and selling them, then guided her on how to implement a series of security measures which would keep the remaining coins on her hardware wallet safe from theft or accidental loss.

Paula also wanted us to check over some paperwork relating to her ex-husband’s crypto holdings to ensure she’d received her fair share.

Although by and large she trusted him, there was a small nagging doubt in her mind that he may have moved some of the funds in the run-up to the divorce proceedings because he’d mentioned wanting to buy a larger amount in Bitcoin in the past than he claimed to own now.

We checked the information thoroughly and were able to track the purchase history to ensure it matched what was being presented to Paula, which it did. Of course he could have kept any further transactions hidden in a different way, but she was satisfied with the investigation and felt reassured that there were no further crypto holdings that she was entitled to a share of.

Before Paula sold any of her tokens, we connected her with a reputable accountancy partner who was able to assist with the tax obligations involved in the disposal of the crypto and ensure she carried out the transaction in the most tax efficient way.

Consultation instilled confidence

A month after we’d first spoken, Paula dropped us a very kind thank you note where she explained that she felt much more comfortable dealing with cryptocurrency since her consultation with us.

So much so in fact that she’d bought another coin that she’d read about and wanted to invest in without our assistance. She made her purchase on the exchange account that we’d helped her set up then transferred the funds to her hardware wallet. She said she felt “very proud” at what she’d achieved.

Crypto can be daunting to the uninitiated, especially when it comes to using hardware wallets and making on-chain transfers between accounts. But for most people it’s just a matter of being given the confidence to use the technology using easy to follow, step-by-step instructions.

We were very pleased that we were able to help Paula. Divorce can be a traumatic experience. There’s so much to think about in practical terms as well as dealing with the emotional fallout.

Throw into the mix complex financial decisions to be made and it can leave people feeling overwhelmed. This is when mistakes can happen, especially with crypto, and valuable portfolios can potentially be lost.

We can help

We can help with almost any crypto query, and we also offer guidance on buying and securely storing crypto for absolute novices.

If you’d like help with your crypto situation, contact us today.

*Not her real name