4 Must-Have Clauses for Your Crypto Divorce Settlement
As cryptocurrency, NFTs, and DeFi positions transition from niche hobbies to significant components of the marital estate, standard settlement boilerplates are failing family law attorneys. Unlike a bank account or a 401(k), digital assets (Bitcoin, Ethereum, etc.) are volatile can easily concealed
If your marriage settlement agreement treats Bitcoin or other digital assets like a brokerage account, you’re likely leaving yourself exposed to hidden liabilities and future litigation. Standard financial discovery often fails to capture the nuances of these assets, and without specific language, the final decree may be unenforceable.
To protect yourself, you need to get specific.
Below are four tactical clauses that we recommend integrating into any divorce settlement where crypto assets are a factor.
1. The Undisclosed Digital Assets Clause
The primary challenge we see in crypto-involved divorces is concealment. Because digital assets are often secured by non-custodial wallets (controlled solely by a private key or seed phrase), a spouse can easily deny their existence or claim access was "lost." Standard non-disclosure clauses often lack the teeth to deter this specific type of hiding.
The Fix: You need a poison pill clause. We recommend language that makes non-disclosure financially catastrophic. If assets are found later (via forensic tracing), the penalty shouldn’t just be a split—it should be forfeiture.
Drafting Insight: Include a provision stating that if any Digital Asset (crypto, NFTs, stablecoins, etc.) held as of the Valuation Date is discovered to have been undisclosed, that asset shall be subject to 100% forfeiture to the non-concealing party. Furthermore, the concealing party should be solely liable for all forensic and legal fees incurred in discovering and recovering said asset.
2. The Valuation Date & Method Clause
Crypto markets never sleep, and volatility is a feature, not a bug. A portfolio worth $500,000 on the date of mediation could be worth $350,000 (or $700,000) by the time the decree is signed. If your agreement simply states, "assets shall be divided 50/50," you are inviting a post-judgment dispute over which dollar amount applies.
The Fix: Lock in a specific date and, crucially, a data source. Prices for the same token can vary slightly between exchanges (e.g., Coinbase vs. Binance).
Drafting Insight: Specify that for equitable distribution, all Digital Assets shall be valued in USD as of a specific time and date (the ‘Valuation Date’). Crucially, name the reference source (e.g., CoinMarketCap or a specific expert’s forensic report) to prevent cherry-picking prices later.
3. The Tax Liability Clause
In the eyes of the IRS, crypto is property, not currency. Every purchase and sale is a taxable event; even sending Bitcoin to someone else triggers a tax consequence. Divorcing spouses also might not realize they are inheriting the cost basis of Bitcoin or other digital assets received in the settlement. If the other spouse purchased Bitcoin while it was $1,000, your client is walking into a massive future capital gains tax bill that was likely not factored into the equitable distribution.
The Fix: Explicitly assign the tax burden. Ensure your client isn't left holding the bag for gains that accrued during the marriage.
Drafting Insight: The agreement should explicitly state that the party receiving the digital assets assumes all future tax liability, but the transferor must provide accurate records establishing the cost basis and acquisition date. Clarify that any tax penalties arising from prior failure to report crypto activity remain the liability of the original holder.
4. The Warranty of Access Clause
The boating accident defense—claiming private keys, seed phrases, or hardware wallets have been lost or corrupted—is the modern version of a dog eating your homework. If a spouse claims they cannot access the funds after the settlement is signed, the court cannot force a blockchain to unlock the wallet. Without this clause, you could be left with a judgment for 50% of a wallet that is effectively zero.
The Fix: You must shift the risk of lost keys entirely to the holder. If they cannot produce the crypto, they must produce the cash equivalent.
Drafting Insight: Include a warranty stating that the Transferor Party possesses the necessary private keys, passwords, and 2FA (Two Factor Authentication) devices to effectuate the transfer. Crucially, add an indemnification: "In the event the Transferor Party is unable to access or transfer the specific Digital Assets due to lost keys, forgotten passwords, or technical failure, they shall immediately owe the Recipient Party the full USD cash equivalent of the assets as of the Valuation Date, payable from other marital assets.”
Drafting for crypto requires a shift in mindset. You aren't just dividing value; you are managing access, volatility, and technical risk.
If you suspect a spouse is under-reporting their holdings to avoid these clauses entirely, a simple document request isn't enough. BlockSquared Forensics specializes in on-chain analysis to verify disclosures and trace hidden funds.
Contact Us today to ensure your settlement is built on facts, not omissions.