By Attorney Kenneth Reyes

Bitcoin and other cryptocurrency has become popular lately as a new store of value.  It is decentralized and not subject to regulation in any jurisdiction.  It can be stored in a digital wallet or hard drive.  Due to its lack of regulation, it is easy for one to assume that it is not necessary to disclose this in one’s divorce case specially if the other spouse has no clue of its existence.  Well, this assumption is clearly misplaced in the context of California Family Code.

Fam. Code, § 721, recognizes the confidential relationship held by spouses. That relationship is a fiduciary relationship imposing a duty of the highest good faith and fair dealing on each spouse. Also within that division, Fam. Code, § 1100, addresses management and control of community property.

The fiduciary duty spouses owe one another continues after separation, including the accurate and complete disclosure of all assets and liabilities in which the party has or may have an interest or obligation and all current earnings, accumulations, and expenses, including an immediate, full, and accurate update or augmentation to the extent there have been material changes (Fam. Code, § 2012, subd. (a)(1)). Taken together, Fam. Code, §§ 721, 1100, and 2102, impose on a managing spouse affirmative, wide-ranging duties to disclose and account for the existence, valuation, and disposition of all community assets from the date of separation through final property division. These statutes obligate a managing spouse to disclose soon after separation all the property that belongs or might belong to the community, and its value, and then to account for the management of that property, revealing any material changes in the community estate, such as the transfer or loss of assets. This strict transparency both discourages unfair dealing and empowers the nonmanaging spouse to remedy any breach of fiduciary duty by giving that spouse the information concerning the community’s business needed for the exercise of his or her rights, including the right to pursue a claim for impairment to his or her interest in the community estate.

What are the remedies available if a spouse breached his or her fiduciary duty? If a spouse breaches his or her fiduciary duty, Fam. Code, § 1101, subd. (a), affords each spouse a claim against the other for any breach of fiduciary duty that results in an impairment to his or her interest in the community estate, including, but not limited to, a single transaction or a pattern or series of transactions, which transaction or transactions have caused or will cause a detrimental impact to the claimant spouse’s interest in the community estate. Remedies for a breach of this duty that impairs another spouse’s interest in the community estate include an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney fees and court costs (§ 1101, subds. (a), (g))

In re Marriage of DeSouza, 54 Cal. App. 5th 25, a trial court properly found that a husband breached his fiduciary duty to his former wife and ordered him to transfer bitcoins and other cryptocurrency to her pursuant to the parties’ judgment of dissolution and to pay her attorney fees and costs because information he withheld about his cryptocurrency investments was material, and there was substantial evidence that his breach impaired the wife’s interest in their community estate. In re Marriage of DeSouza, 54 Cal. App. 5th 25.  To avoid the costly outcome of getting sanctioned and awarded attorney’s fees against you, it is important to provide full and complete disclosure of all your financial affairs during your divorce case including any Bitcoin and cryptocurrency which you own during and after the marriage.

Please note that this article is not legal advice and is not intended as legal advice.  The article is intended to provide only general, non-specific legal information.  This article is not intended to cover all the issues related to the topic discussed.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article does create any attorney client relationship between you and the Law Offices of Kenneth U. Reyes, APLC.  This article is not a solicitation.

Attorney Kenneth Ursua Reyes is a Certified Family Law Specialist.  He was President of the Philippine American Bar Association.  He is a member of both the Family law section and Immigration law section of the Los Angeles County Bar Association.  He is a graduate of Southwestern University Law School in Los Angeles and California State University, San Bernardino School of Business Administration.  He has extensive CPA experience prior to law practice. LAW OFFICES OF KENNETH REYES, APLC is located at 3699 Wilshire Blvd., Suite 747, Los Angeles, CA, 90010.  Tel. (213) 388-1611 or e-mail kenneth@kenreyeslaw.com.  Visit our website at Kenneth@kenreyeslaw.com.