Dividing Digital Assets in a South Carolina Divorce

The landscape of marital property has changed profoundly. Decades ago, divorce settlements focused on tangible items: the house, the cars, bank accounts, and physical investment records. Today, some of the most valuable properties a couple owns may not exist in the physical world at all. It may be a string of code, a digital wallet, or a login credential.

The rise of digital assets has introduced a significant layer of complexity to divorce proceedings. 

What Is a Digital Asset in a Divorce?

A digital asset is any form of digital file, account, or property that has a determinable value. The South Carolina Family Court is less concerned with the form of the asset and more concerned with its value and when it was acquired.

These assets can be broadly categorized, and many couples are surprised to find how many they possess. Examples include:

• Cryptocurrencies: Bitcoin, Ethereum, and thousands of other “altcoins” held on exchanges or in private wallets.
• Non-Fungible Tokens (NFTs): Digital art, collectibles, or access passes registered on a blockchain.
• Digital Wallets and Accounts: Balances held in accounts like PayPal, Venmo, or Cash App.
• Online Businesses: E-commerce stores (like Shopify or Etsy shops), Amazon seller accounts, and related inventory.
• Intellectual Property: Copyrights to e-books, software code, digital photography portfolios, or patents.
• Website Assets: Domain names that have resale value.
• Social Media Accounts: Influencer accounts with high follower counts that generate income through brand deals or monetization.
• Reward Points: High-value collections of frequent flyer miles, credit card points, or hotel loyalty points.
• Digital Subscriptions and Licenses: Valuable software licenses or other digital entitlements.
• Online Gaming Accounts: Accounts with valuable in-game items, currency, or “skins” that can be sold.

Are Digital Assets Considered Marital Property in South Carolina?

Yes, if they are acquired during the marriage, they are almost always considered marital property.

The foundation of property division in South Carolina is the “marital estate.” This estate includes nearly all assets and debts acquired by either spouse from the date of marriage until the date one spouse files a complaint for separation or divorce. It does not matter whose name is on the account or which spouse’s computer holds the file. If it was obtained during the marriage, it is generally presumed to be marital property.

This means:

• It is Marital: Cryptocurrency purchased with a paycheck earned during the marriage is marital property.
• It is Marital: An NFT collection built by one spouse as a hobby during the marriage is marital property.
• It is Marital: Airline miles earned on a credit card used for family expenses or during the marriage are marital property.

The marital estate is subject to “equitable distribution.” This does not mean a 50/50 split. It means the Family Court will divide the property in a way it deems fair based on many factors, including each spouse’s contributions.

When Does a Digital Asset Remain Separate Property?

An asset may be classified as “separate property” and not be subject to division if it was:

• Acquired before the marriage: If you owned 10 Bitcoin before your wedding day, those 10 Bitcoin (and their appreciation in value) are likely your separate property.
• Acquired as a gift or inheritance: If your relative left you a domain name in their will, it is likely your separate property.

However, separate property can become marital property through “commingling.” If you put those 10 pre-marital Bitcoin into a joint wallet and then bought and sold more crypto using marital funds, you may have turned the entire wallet into marital property.

The Challenge: Identifying and Disclosing Digital Assets

The greatest hurdle with digital assets is their invisibility. You cannot see a Bitcoin wallet in a driveway or get a paper statement for an offline “cold” storage wallet. These assets are easy to hide, and a spouse may be tempted to “forget” about a crypto exchange account or a valuable domain name.

Full Disclosure is Required: In any South Carolina divorce, both parties are required to provide a full and accurate financial disclosure. Hiding assets is illegal and can result in severe penalties from the court.

The Discovery Process: Attorneys use legal tools to uncover these assets. This can include:

• Financial Declarations: Requiring a sworn list of all assets.
• Interrogatories: Written questions asking about specific assets, such as “Do you own any cryptocurrency?”
• Subpoenas: Demanding records from banks, credit card companies, and known crypto exchanges (like Coinbase or Kraken).

Forensic Investigation: In cases involving substantial or well-hidden assets, a forensic accountant may be needed. They can trace bank transfers to exchanges, analyze blockchain transactions, or recover data from computers and phones to find hidden wallets.

How Is Cryptocurrency (Bitcoin, Ethereum) Handled?

Cryptocurrency is the most common and often most valuable digital asset in modern divorces. It presents unique challenges.

Classification: As established, if purchased with marital funds, it is marital property.

Valuation: This is a major issue. Crypto prices are extremely volatile. South Carolina law generally values assets as of the date the divorce litigation is filed. An attorney must be precise about securing this valuation.

Division: The court has options. It can order the spouses to:

• Sell the crypto: Sell the assets on an exchange and divide the cash proceeds.
• Divide it “in-kind”: Transfer half of the Bitcoin, Ethereum, etc., to a new wallet owned by the other spouse.
• Award it: One spouse keeps the crypto and the other spouse receives an asset of equal value (e.g., more of the retirement account).

What About NFTs, Social Media, and Online Businesses?

Valuing and dividing other digital assets requires a specific approach for each type.

• NFTs and Digital Collectibles: These are valued like art or rare cars. An appraiser with knowledge of the specific NFT market may be needed to determine a fair market value. Division is often accomplished by selling the NFT or having one spouse buy out the other’s interest.
• Monetized Social Media Accounts: This is a complex area. The “value” may be tied to the spouse’s personal brand (personal goodwill, which may not be divisible) or it may be tied to the business itself (enterprise goodwill, which is divisible). A valuation expert is almost always needed to separate the two.
• E-commerce Stores and Domain Names: These are treated like any other business. A business valuation professional can determine their fair market value based on revenue, inventory, and assets (like customer lists or domain value). The business itself may be classified as a marital asset, and its value is subject to division.

What Happens to Frequent Flyer Miles and Reward Points?

Many people overlook reward points, but they can be worth thousands of dollars.

• They Are Assets: Courts have consistently ruled that these points are property subject to division.
• Valuation: Their value can be determined by checking the “cash-out” value or the value per point when used for travel.
• Division: Transferring points can be difficult or prohibited by the program’s terms. More often, the court will assign a cash value to the points and award that value to one spouse, or order the spouse holding the points to use them to book travel for the other spouse.

What if My Spouse Wasted or Hid Digital Assets?

This is unfortunately common. A spouse may see the divorce coming and “gamble” away crypto or transfer it to an unknown wallet.

This is known as dissipation of marital assets.

If your spouse intentionally wasted or hid assets, the court has the power to make you whole. For example, if your spouse dissipated $50,000 in marital funds by “losing” it in a bad crypto investment right before filing, the judge can add that $50,000 back to their side of the ledger during property division. This means they receive $50,000 less of the remaining assets to make up for what they wasted.

How Can I Protect My Interests Regarding Digital Assets?

If you are entering a divorce and suspect digital assets are involved, taking proactive steps is important.

• Do Not Engage in Self-Help: Do not try to hack your spouse’s accounts or transfer assets to your own name. This can backfire and harm your case.
• Gather Information: Compile a list of all known accounts, passwords (that you have legal access to), and usernames. Look through bank and credit card statements for transfers to exchanges or purchases of digital goods.
• Inventory Everything: Make a list of all digital possibilities, from reward points to old domain names. No asset is too small to list.
• Be Transparent with Your Attorney: Provide your legal team with all the information you have. The more they know, the better they can advise you and conduct effective discovery to protect your interests.

Contact Our South Carolina Family Law Team

Launching a business, managing cryptocurrency, or building an online brand while navigating a divorce adds a significant dimension of complexity to the legal process. Protecting your hard work and your future requires a thoughtful strategy grounded in a thorough knowledge of South Carolina’s equitable distribution laws. The legal team at Nowell Law Firm is dedicated to helping clients manage these intricate financial matters with diligence and foresight. We are committed to protecting your interests and helping you build a secure foundation for your next chapter. 

If you are considering starting a business during your separation or have questions about how a business or other digital assets will be handled in your divorce, we are here to provide the detailed legal guidance you need. To discuss your situation, schedule a confidential consultation by calling us at 864-707-1785 or by reaching out to our team online.