In principle, any asset can be included in a divorce settlement. This includes digital assets such as cryptocurrency. In practice, whether or not a particular asset will be included in a divorce settlement will depend on various circumstances. Here is a quick guide to what you need to know.
All divorce settlements must be overseen by a court
Couples can set up prenups but they cannot simply divide their assets according to the prenup any more than they can end their marriage just by going their separate ways. There is a legal process to be followed and that must be overseen by the court.
With that said, the level of oversight applied by the court will depend greatly on the circumstances. In an ideal scenario, the splitting couple will agree on everything between themselves and just present their agreement to the court for approval. If the couple presents an agreement the court considers reasonable, the chances are that it will just be signed off “as is”.
Please note, however, that this is not the same as a court just “rubber-stamping” an agreement. A court will check the agreement thoroughly but if the court doesn’t see it as broken, it probably won’t try to fix it. By contrast, if a court does not see an agreement as being fair, then it may well decide to fix it even if both parties have already agreed to it.
This means that prenups should be viewed more as statements of intent than as binding agreements. Per the previous comments, if a court is happy that the terms of the prenup make for a fair agreement then it will probably be allowed to stand. This is, however, definitely not guaranteed and hence should never be taken as a given.
Settlements must be fair but not necessarily equal
A court’s first priority will be to ensure the welfare of children. This will include their financial welfare. Once this is settled, a court will then look at ensuring both halves of the splitting couple have their basic needs met. Only if there are assets left over will the court start to look at who should fairly get what.
The guiding principle here is one of fairness not equity. As is often the case, this can be much easier to state in theory than to apply in practice. In the real world, there are often several major barriers to creating truly fair divorce settlements. Most of these hinge on the difficulty of making fair valuations.
For example, if one half of a couple worked but the other was a homemaker. The court would have to value the homemaker’s contribution to the marriage. This is, however, not necessarily as straightforward as looking at how much it would have cost to have hired someone else to do the homemaker’s tasks.
The court would also have to value any sacrifices the home-maker made to help the income-earner. For example, perhaps the home-maker was on a positive career path and gave that up to help the income-earner. In this case, the court would also have to look at the loss of income and loss of opportunity.
The challenge of valuing assets
In addition to all of this, courts routinely face the challenge of valuing assets fairly. How difficult this is to achieve depends on the nature of the asset. For example, although house prices do vary, they generally follow a reasonably predictable course of steady growth. Pension funds, by contrast, typically grow in line with a person’s income and that can be much harder to predict.
Other assets can be a huge challenge to value either because they are niche (e.g. collectables) or because they are known to be volatile (e.g. cryptocurrency). In these cases, courts might be very wary of awarding one half of the couple all of these assets (unless it’s unavoidable). This could leave one half of the couple with the potential for great reward – but also great risk.
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