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As cryptocurrency, digital investments, and online income streams become more common, they are increasingly appearing in family law cases. Many separating spouses in Ontario now hold assets that exist entirely online. When a marriage ends, these modern assets must still be addressed by the traditional family law principles. Understanding the treatment of crypto, digital assets, and online income during a divorce can help partners avoid costly disputes and ensure full financial disclosure.
How are Digital Assets Treated?
In Ontario, spouses are required to disclose and value all assets and debts when determining the equalization of net family property. This requirement stands regardless of the form of the asset (whether it be physical or digital). Treating digital assets as ‘property’ has not been formally or explicitly recognized at the appellate level; however, lower-level courts have treated digital assets as property in family law hearings by subjecting them to the equalization regime (see for example, Kirshenberg v Schneider).
It is important to note that if a digital asset was acquired prior to the date of marriage, it may constitute a date of marriage deduction. This would allow the spouse to subtract the net value of the asset as it was on the date of marriage from their total net worth at separation. As such, only the increase in value during the marriage would be shared by the parties, not the entire value of the asset.
Hiding Digital Assets
Because crypto wallets and digital platforms can be accessed privately, disputes can arise when one spouse suspects the other of hiding assets. Not only that, but failing to disclose these assets can lead to serious legal consequences, such as setting aside agreements and adverse credibility findings.
It is also important to consider that income earned online from these assets must be disclosed, as they may count as income for the purposes of spousal or child support.
Valuing Digital Assets
A natural challenge that accompanies the valuation of digital assets such as cryptocurrencies is that the market is highly volatile and the value of an asset can fluctuate significantly in a short period of time.
Since assets are valued on the date of separation, the value of the asset must be determined as of that specific date. This can involve obtaining transaction histories of exchanges, wallet records, or, in complex cases, expert valuation by a forensic accountant.
Dividing Digital Assets
Once the digital assets have been disclosed and valued, they need to be divided. A way that parties can go about this is for one party to directly transfer an amount of cryptocurrency to the other party. Alternatively, the asset can be sold, and the proceeds of the asset can be equally divided between the parties.
Separating spouses should remember that assets are not usually physically split, rather, they would be accounted for in the ‘owning’ party’s side of the Net Family Property (“NFP”) Statement. The party with the higher NFP would owe the party with the lower NFP an equalization payment.
Conclusion
Digital assets are quickly moving away from being characterized as niche investments to becoming an integral part of a family’s everyday financial lives. The key family law principles that apply to the disclosure, valuation, and division of physical assets apply just the same to digital assets. As digital wealth becomes more prominent, understanding these assets in the context of a divorce proceeding is increasingly imperative. When it comes to protecting your online assets during separation, consider seeking advice from a family lawyer to better understand your available rights.
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When your clients have reached an impasse in settlement discussions, Andrew Feldstein offers third-party mediation services specifically designed for cases where both parties have independent legal representation.
Why lawyers refer cases to Andrew:
- 30+ years family law litigation experience providing courtroom-informed reality testing
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Cases we handle: Negotiation stalemates, complex asset division, support calculation disputes, parenting arrangements, multi-jurisdictional matters, and post-separation modifications.
Refer your next mediation: Call Andrew directly at 905-415-1635 ext. 255 or email info@separation.ca. Virtual and in-person sessions available throughout the GTA.