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This AI-generated podcast reviews a blog by attorney Sydney M. Halloran of Lynch & Owens entitled, Handling Cryptocurrency in Divorce: Challenges and Strategies.
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What is Lynch & Owens Podcast - A Massachusetts Divorce & Family Law Podcast?
We are a podcast focused on Massachusetts divorce and family law issues, brought to you by the attorneys of Lynch & Owens, PC.
Our podcasts are generated by Google NotebookLM, an artificial intelligence platform, based on blogs created by the attorneys of Lynch & Owens, P.C. of Hingham, Massachusetts. Note that the opinions offered in the show are generated by artificial intelligence and may differ from the source material. Neither our blogs nor our podcasts are legal advice.
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Okay. So you know how we were talking about that, that blog post you sent me
Host 2:Mhmm.
Host 1:About cryptocurrency and divorce cases?
Host 2:Yeah. Yeah.
Host 1:It was written by an attorney, Sydney m Halloran, from the firm Lynch and Owens.
Host 2:Oh, yeah. Right.
Host 1:And, you know, it really got me thinking, like, you know, cryptocurrency is kinda everywhere these days. Right?
Host 2:It's getting more and more mainstream.
Host 1:And it's only gonna get it's only gonna get it's only gonna get more complicated, I think, when it when it comes to divorce.
Host 2:Totally. Especially because divorce is already so, you know, so tricky.
Host 1:Exactly.
Host 2:Legally, financially, emotionally, all of it.
Host 1:And Halloran's blog, she really dives deep into, you know, how crypto is treated like any other asset in court, which makes sense.
Host 2:Right. Because it is an asset.
Host 1:But it's got all these quirks and, you know, these unique qualities that make it a lot harder to deal with.
Host 2:Yeah. For sure. Like, way more than just stocks or a house or something like that. Yeah. It's way more complicated than traditional assets.
Host 1:So we're gonna dig into this a bit, kind of pull out the key points from Sydney's blog, Halloran's blog, and explore these challenges. Right?
Host 2:Yeah. Let's break it down.
Host 1:And what are the strategies that she suggests for, you know, dealing with it all?
Host 2:Absolutely.
Host 1:But before we get started, just a quick disclaimer. We're not giving legal advice here.
Host 2:Okay? Right.
Host 1:Of course. That's just informational, you know, based on her blog posts.
Host 2:This is just for your entertainment.
Host 1:Yeah. Exactly. Yep. Alright. So right off the bat, Halloran points out that cryptocurrency is kinda hard to track.
Host 1:Like it's kinda slippery.
Host 2:Yeah. She really hits on that right away. And it's really it comes down to the decentralized nature of cryptocurrency, you know, and the whole blockchain technology behind it.
Host 1:It's not like your regular bank account where you get statements every month.
Host 2:Right. Exactly. It's not it's not as easy to track. You're not dealing with, like, a central authority.
Host 1:Exactly. It's more like Halloran describes it as, you know, these digital wallets. Right. That are identified by, you know, long complex cryptographic keys.
Host 2:Yeah. It's basically like like a super long password Yeah. To a digital safe. And so if, you know, if one spouse isn't being open about it, it's almost impossible to even know how much crypto there is.
Host 1:Right. You can't even get to step one. Right. Which is like how much is there?
Host 2:Yeah. But Halloran does have some some ideas about how to approach this.
Host 1:Oh, yeah. She's got some strategies.
Host 2:Put some tips.
Host 1:Yep. For sure.
Host 2:She talks about looking for indirect evidence. Right. Like, you know, credit card purchases, bank transfers, you know, things that might show that someone's been buying cryptocurrency.
Host 1:Yeah. Or moving money around, like, maybe to these online platforms called cryptocurrency exchanges.
Host 2:Right. Because those exchanges are how a lot of people get into crypto in the first place.
Host 1:Exactly. They're kinda like the on ramp to cryptocurrency.
Host 2:Yeah. It's like putting together a puzzle, you know, try to figure out what's going on with the crypto.
Host 1:Yeah. Exactly. And another thing that she mentions, is really, really interesting, is this idea of pseudo anonymity.
Host 2:Pseudo anonymity. Yeah. So it's like every transaction on the blockchain is recorded.
Host 1:Okay.
Host 2:But it's not always super clear who's behind those transactions.
Host 1:Oh, I see.
Host 2:You need some serious tech skills to kinda connect those dots.
Host 1:Right. Not just anyone could do that.
Host 2:Not just anyone. You need a specialist. You need someone who really understands the blockchain and how to analyze these transactions.
Host 1:Okay.
Host 2:You can't just look at a bank statement.
Host 1:Gotcha. Alright. So that's one big hurdle. Right? Yeah.
Host 1:Finding it in the first place. But then Howaran brings up this whole other issue. The fact that the value of cryptocurrency can just be so volatile.
Host 2:Oh my gosh. Yeah. I mean, we've all seen, you know, Bitcoin go up and down like crazy.
Host 1:Yeah. It's all over the news.
Host 2:All the time. It's unpredictable.
Host 1:So how does that how does that play out in a divorce case? Like, how does Halloran see that affecting things?
Host 2:Well, it makes things really tough to value. You
Host 1:know? Right.
Host 2:Like, if you're trying to divide assets fairly, it's like, well, what bait do you use for the value? The date of separation, the date of the trial, or, like, some other date that everyone agrees on.
Host 1:Right. Because it could be worth, like, a fortune one day and then, like, practically nothing the next.
Host 2:Exactly. And that makes it so hard to figure out, like, what's a fair split?
Host 1:And Halloran actually points out that the choice of that valuation date can have a huge impact. Yeah. Like, one person could end up with way more or way less depending on when you decide to take that snapshot.
Host 2:Yeah. For sure.
Host 1:Right. It's like a moving target.
Host 2:And it's not like dividing something predictable like a retirement account, you know? Right. Where you kinda have an idea of how it's gonna grow. Crypto could go up. It could go down.
Host 2:It could just who knows?
Host 1:It's unpredictable.
Host 2:It's a total gamble.
Host 1:And that makes it so much harder to, you know, to divide things equitably.
Host 2:Yeah. For
Host 1:sure. Okay. So those are two major challenges, just finding it and figuring out how much it's worth.
Host 2:Right.
Host 1:But then there's the actual dividing it up. Halloran spends a good chunk of her blog post talking about that too.
Host 2:Yeah. Because even if you can figure out where the crypto and what it's worth, actually splitting it is a whole other problem.
Host 1:Yeah. I mean, legally, it might be considered divisible, but it's not like you could just cut a Bitcoin in half.
Host 2:Right. Exactly. And it's not even as easy as transferring money from one bank account to another.
Host 1:Right. Like, there's no, like, central authority to handle it.
Host 2:It's a whole different ballgame. You're dealing with digital wallets, private keys. Yeah. And if you mess up, it's gone. There's no getting it back.
Host 1:Oh gosh. That's scary. And then what if, you know, someone loses those keys?
Host 2:Oh, yeah. She mentions that too. The idea of lost crypto. Like, if you lose your private key, it's like losing the combination to a safe. You're locked out.
Host 1:Forever.
Host 2:Forever. And it's like, how do you even account for that in a divorce?
Host 1:Right. Because technically it exists, but it's inaccessible.
Host 2:Right. And then the question becomes, is it really lost or is someone trying to hide it? Oh. So that gets really tricky.
Host 1:And just to make things even more interesting, she brings up NFTs too.
Host 2:Oh, yeah. Those are a whole other beast.
Host 1:Right. Because they're not like regular cryptocurrencies.
Host 2:They're unique. Each one is different.
Host 1:Yeah. They're like digital collectibles, I guess.
Host 2:Yeah. And some of them can be worth a lot.
Host 1:And she says they're really hard to divide. Like, just splitting them up isn't usually an option.
Host 2:You often end up having to get them appraised. Oh, wow. Or one person buys the other out or they co own them, which again can be really messy.
Host 1:Right. That sounds complicated.
Host 2:But, yeah, her main point is that when it comes to crypto and divorce, the hardest part is often just figuring out what's there and how much it's worth.
Host 1:Right. That makes sense. Okay. So let's say you're facing this situation. Like, you're going through a divorce and there's crypto involved.
Host 1:What does Halloran suggest you do?
Host 2:She talks about this legal rule in Massachusetts called Rule four ten, which is all about mandatory self disclosure.
Host 1:Mandatory self disclosure. Okay. So what does that mean?
Host 2:Basically, it means both parties in a divorce have to share certain financial documents right
Host 1:Oh, okay. To be transparent.
Host 2:Exactly. So everyone knows what's what. And even though these documents might not specifically list cryptocurrency, they can give you clues.
Host 1:Like what kinds of clues?
Host 2:Well, Halloran mentions bank statements, for example. You might see transfers to or from a crypto exchange.
Host 1:Okay. So you're looking for those connections to the crypto world.
Host 2:Yeah. You're following the money trail even if it's indirect. And she also brings up tax documents, which I thought was really smart.
Host 1:Oh, yeah. Because the IRS is getting much more involved with crypto these days.
Host 2:Totally. In fact, on the main tax form, the ten forty, there's now a specific question about virtual currency. Wow. So you can't really hide it anymore. And then there are other forms, schedules they're called, that can show if someone has been buying and selling crypto.
Host 1:So you can see their trading activity, how much they made or lost.
Host 2:Exactly. And she also mentions these ten ninety nine forms that some exchanges send out if you make a certain amount of money from them.
Host 1:So the IRS is really trying to keep track of all this.
Host 2:For sure. And Halloran's point is that tax documents can be a gold mine for uncovering crypto holdings.
Host 1:And then there's the obvious one. Just looking at bank and investment statements for any signs of transfers to crypto exchanges.
Host 2:Yeah, I mean, someone's trying to be sneaky, they still had to get that money into the crypto world somehow.
Host 1:Right. The money trail has to start somewhere. Okay. Now here's where it gets even more interesting. Halloran talks about subpoenaing those exchanges.
Host 2:Yeah. That's where the legal system can really help. You can't really subpoena a personal crypto wallet.
Host 1:Because it's decentralized. Right.
Host 2:Right. But these exchanges, they're businesses, they keep records.
Host 1:So they can be forced to turn over information.
Host 2:Exactly. If you have a court order, they'll usually comply.
Host 1:But what if someone's using multiple exchanges or moving crypto around?
Host 2:Halloran cautions that you might need multiple subpoenas in those cases. It can get complicated.
Host 1:Right. And then there's the issue of exchanges that are outside The US, like international ones or ones that aren't regulated.
Host 2:Yeah. Those can be really tough because US courts don't have much power over them.
Host 1:But it's not a foolproof strategy.
Host 2:But it can still be really effective for getting information, you know, transaction histories, account balances.
Host 1:Okay. And then finally, Halloran stresses the importance of bringing in specialists.
Host 2:Oh, yeah. You almost always need experts in these cases.
Host 1:Because it's just so technical.
Host 2:Exactly. Like, you know, forensic accountants who can trace transactions on the blockchain.
Host 1:And crypto experts who really understand the technology and how everything works.
Host 2:Yeah. They can help you find the crypto, figure out how much it's worth, all that.
Host 1:And Halloran mentions this new kind of investigator that's emerging, specialists in finding hidden crypto.
Host 2:Yeah. It's a whole new field, like digital detectives.
Host 1:It's fascinating. Right.
Host 2:It's so interesting how the legal system is adapting to this new technology.
Host 1:Okay. So it sounds like discovering cryptocurrency is a combination of traditional methods and these newer tech driven approaches.
Host 2:It's definitely a hybrid approach. You gotta be creative.
Host 1:Okay. So we've talked about the challenges, how to find the crypto. Now what about best practices? Like once you know it's there, what does Halloran suggest you do?
Host 2:Well, her big thing is being really thorough and informed.
Host 1:That makes sense given everything we've talked about.
Host 2:Yeah. Like, with all the complexities and the volatility
Host 1:Right.
Host 2:She really emphasizes the importance of full disclosure from both parties.
Host 1:Yeah. You can't divide things fairly if you don't know what you're dividing.
Host 2:Exactly. And she also stresses the importance of those experts we were talking about.
Host 1:The forensic accountants, crypto experts. Yeah.
Host 2:They're essential for navigating all the technical stuff.
Host 1:And she says it's crucial to stay up to date on the legal side of things.
Host 2:Right. Because the laws around crypto are still evolving, and there are tax implications too.
Host 1:Which can be really complicated. Right?
Host 2:Extreme.
Host 1:No. Basically, you need to be transparent. You need to have the right expertise, and you need to understand the legal and financial ramifications.
Host 2:Exactly. That's how you ensure a fair outcome.
Host 1:And she makes a great point about protecting the assets. Like in Massachusetts when you file for divorce, there's this automatic financial restraining order. And she makes it clear that that applies to crypto too.
Host 2:You can't just go selling it off or hiding it.
Host 1:The courts are taking crypto seriously.
Host 2:For sure, It's just like any other asset.
Host 1:Okay. So now we get to the really practical part. How do you actually divide the crypto? Halloran little out several different strategies in her blog, which is super helpful.
Host 2:Yeah. She has a great table that summarizes the different options.
Host 1:And she points out that you need to think about taxes and, you know, what each person wants.
Host 2:Because some people might wanna cash out right away while others might wanna hold on and see what happens.
Host 1:So the first option she discusses is a direct transfer.
Host 2:Yeah. Basically, you split the crypto into two separate wallets, one for each spouse.
Host 1:Okay. What are the pros and cons of that?
Host 2:Well, the good thing is both parties keep the asset.
Host 1:Okay.
Host 2:And they don't have to sell it right away. But the downside is they both have to learn how to manage their own wallets.
Host 1:Right. And they're still exposed to the volatility.
Host 2:Exactly. And from a tax standpoint, it's usually not a taxable event.
Host 1:Okay. Then there's liquidation?
Host 2:Yeah. That's where you convert the crypto to cash and then divide the money.
Host 1:Which seems a lot simpler.
Host 2:It is in terms of having a stable asset that's easy to divide, but you lose out on any potential future gains.
Host 1:Right. Because you're selling it at whatever the current price is.
Host 2:And there might be capital gains taxes to consider.
Host 1:Okay. And then there's offsetting assets.
Host 2:Yeah. That's where one person keeps the crypto and the other gets something else of equal value.
Host 1:Like a house or a car or something like that.
Host 2:Exactly. So it works well if one person doesn't wanna deal with crypto at all.
Host 1:Right. But the key is making sure those assets are actually equal in value.
Host 2:Yeah. That's the challenge. And the tax implications would depend on what that other asset is.
Host 1:Okay. Then there's co ownership.
Host 2:Which sounds messy to me.
Host 1:Yeah. That's where both people keep owning the crypto together.
Host 2:After the divorce, which means they have to agree on how to manage it.
Host 1:Which could lead to more arguments. Totally.
Host 2:And you only pay taxes when you eventually sell it.
Host 1:Okay. And finally, there's the idea of using a third party custodian.
Host 2:Yeah. That's where a neutral party holds on to the crypto for a while.
Host 1:Like, the market is really volatile or the couple can't agree on what to do?
Host 2:Exactly. But it usually costs money and it's not always a good long term solution.
Host 1:Right. And taxes come into play when the crypto is finally distributed. Right. It's really interesting to see all these different options laid out.
Host 2:Yeah. And it shows that there's no one size fits all answer.
Host 1:Right. And Halloran's final point in this section is that crypto might be new, but the same rules of fairness apply.
Host 2:You can't just treat it differently because it's digital.
Host 1:Right. So to wrap up, it's clear from Sydney Halloran's blog that cryptocurrency is a big challenge in divorce cases.
Host 2:Absolutely.
Host 1:It's hard to find, it's hard to value, and it's hard to divide.
Host 2:But she offers some really good strategies for dealing with it all.
Host 1:Yeah, like being transparent, getting expert help, and being smart about how you divide the assets. Right. And just to remind everyone, this was just a general overview based on Halloran's blog.
Host 2:Not legal advice.
Host 1:So if you're going through a divorce and there's crypto involved, definitely talk to a lawyer.
Host 2:For sure, get professional help.
Host 1:But it's definitely something to think about, you know, how this technology is changing everything.
Host 2:Oh yeah, I mean even if you're not getting divorced, it's something to consider.
Host 1:Right, like how is the legal system gonna keep up with all these digital assets?
Host 2:It's a big question. And it's gonna get even more complicated as things evolve.
Host 1:That's a fascinating time.
Host 2:Totally.
Host 1:Okay. So if anyone wants to read Halloran's blog post for themselves, can find it on the Lynch and Owens website.
Host 2:Yeah. It's really informative.
Host 1:Contact information is there too if you want to reach out to her directly.
Host 2:She's a great resource.
Host 1:Okay. Thanks for joining us for this deep dive into cryptocurrency and Yeah.
Host 2:This was a good one.
Host 1:It's a topic we'll definitely be revisiting as things develop.
Host 2:For sure. It's not going away anytime soon.
Host 1:Yeah. Until next time.
Host 2:See you.