Twenty years ago, few people had to worry too much about digital assets during a divorce. That has all changed over the past two decades as most of us have moved our lives increasingly online.
Who doesn’t have online accounts now?
It means that we have to consider our digital lives during the divorce process, when estate planning, and in virtually every other family legal matter.
Digital Assets During Divorce
So, during a separation or divorce, are digital assets treated any differently from standard assets? What must you declare during the financial disclosure process?
The laws are constantly evolving but here’s what moms need to know right now about digital assets…
What are the different types of digital assets?
Digital assets encompass anything of value that we access online. They are intangible assets that only exist in a digital form and most of us own more of them than we first think. Whether it’s an online store or a social media account, it’s a digital asset.
Following is a quick overview of the main types of assets:
Online currencies (crypto)
This is one of the most obvious digital assets. A few years ago, few people owned cryptocurrencies but ownership has ballooned in recent times.
Names like Bitcoin, Ethereum, Ripple, and Dogecoin have entered the popular vocabulary as more people accumulate these currencies – but how are they divided in a divorce?
Increasingly, people sign up for rewards and loyalty schemes online.
Whether it’s air miles or cash-back bonus systems associated with particular stores, there is a value in these digital assets that need to be accounted for when property is divided.
Movies, music, video games, books, etc.
As more of us seek entertainment online, we accumulate significant purchased assets, such as online movie downloads, music, books, video games, and so on. Netflix and Amazon Prime accounts are good examples.
These digital assets must be counted as marital property if either spouse set an account up during the marriage and contributed to growing the collection.
Many people now have a “side business” online such as a small ecommerce store on eBay or Facebook.
If this was started or earned income during the marriage, this is also marital property that will need to be considered during a divorce.
Digital photos and videos
Every photo uploaded to Facebook or video posted on a YouTube channel is a digital asset.
Personal photos and videos may cause few arguments but what about online photos and videos of the children – who owns these during a divorce? This is an important question that can cause problems between a separating couple.
Email accounts and domain names
Email accounts are digital assets though we may not consider that they have a monetary value. The same does not apply to domain names that must be paid for with registration and hosting fees.
Some domain names attract a significant value and can be sold for a large profit.
How are digital assets divided in a divorce?
Digital assets, although intangible, are considered marital property and are generally subject to the same valuation and division process as tangible assets during divorce proceedings in the U.S.
As such, these must always be disclosed during the divorce process when finances are discussed.
While all states recognize the importance of defining marital property and separate property, the states differ in their laws for its division. Some states are “equitable distribution” states and others are “community property” states.
Equitable distribution seeks a fair division of property that might not be 50-50 down the middle. It considers many factors such as who has contributed to the homemaking or the career of the other spouse.
If your divorce proceeds in a community property state, all property acquired during the marriage is split 50-50.
In most cases, simply dividing digital assets in half is no more practical than dividing a car in half. So, when it comes to property division, each asset must be considered as part of the “whole” and then divided fairly – usually through a collaborative process, by negotiation or through mediation.
Some digital assets like photos and videos can be copied and shared in the cloud so that each partner receives a copy. Other assets like air miles can sometimes be transferred. You will need to check with the respective companies if this is allowed.
What about income generated by digital assets?
If you or your ex runs a blog, YouTube channel or online store that generated income during your marriage, this should be considered a marital asset that is subject to division.
If you both contributed to it with posts or editing services, for instance, this may also affect the associated agreement.
Can one spouse buy out or trade with another spouse?
With assets that cannot be split in half or that hold no interest for some, another way to resolve the matter is for one spouse to buy out the other spouse’s share of the asset.
For instance, if one of the spouses is a gaming fanatic and desperately wants to hold on to the virtual assets they have accrued and spent considerable money on, two options may be viable:
- Buy out the other spouse, or
- Give up something of equal value from the marriage, like the joint Netflix account or the iTunes account they both contributed to (an “equitable trade”).
Any arrangements like this are generally preferable to the matter ending up in court.
Seek legal advice if you are unclear about digital asset division
Digital assets and the challenges they present in divorce agreements and separation plans are not going away. In fact, they are likely to become more prominent as the years pass and laws are updated to catch up with the increasingly digital lives we all lead.
Meanwhile, it is recommended to seek legal assistance if you and your ex cannot agree on any aspects of property division during a divorce.