As you consider a divorce and the division of property accumulated during your marriage, don’t overlook the value and ownership of digital assets. Because they are intangible, digital assets like frequent-flier miles, credit card points, online music accounts or downloaded music, might be overlooked when negotiating a separation agreement. But they have value, and their equitable distribution needs to be considered and made part of your separation agreement and divorce decree.
As your divorce lawyers, Charles R. Ullman & Associates will fully assess the value of your digital assets along with your other property and ensure that your separation agreement contains an equitable division of all marital assets. Your digital assets division attorney will take the steps necessary to protect your rights to property that is yours and preserve your financial well-being.
Contact a Raleigh divorce attorney at Charles R. Ullman & Associates today by calling (919) 829-1006. Our digital assets division attorneys serve clients throughout Raleigh and Wake County.
What are Digital Assets?
Anything stored in a digital or binary format on computers, smartphones, tablets or remote servers would be considered a digital asset. This encompasses an incredible range of material, from files containing text or spreadsheets to social media content, and Bitcoin.
When our attorneys speak of dividing digital assets in a divorce, we mean assets that have a definable value.
The digital assets you and your estranged spouse share or own individually may cover a wide range of property, such as:
- Money held by PayPal or a similar account
- Frequent-flier miles, credit card points, other loyalty program credits
- Bitcoin or other virtual currency
- Websites, including e-commerce sites
- Online sales /auction accounts such as Etsy or eBay
- Digital copies of music, movies or TV shows
- Computer software
- Streaming media accounts
- Family photos and videos
- Digital copies of financial documents
- Digital copies of historic documents (e.g., family genealogy or letters).
When assisting with the division of assets for inclusion in a separation agreement, we take three steps:
- Identify the assets. In the best case scenario, each spouse lays all their cards on the table, and everyone understands what must be considered. However, if we suspect there are hidden assets, we will hire an investigator with the skills needed to track down digital property. Once we have accounted for everything, we determine which are marital assets and which were acquired before marriage or received as a gift or inheritance during marriage. Only marital assets must be divided as part of a divorce.
- Assign value. Next, we determine the fair market value of each digital asset among the couple’s marital assets. In many cases, this is as simple as looking up what a digital download of an item sells for or its redemption value. In some cases, a professional appraiser may be consulted. Some items may hold no real financial value outside of your family but hold value for you and your spouse.
- Divide and distribute. Marital assets should be distributed “equitably,” or fairly though not always evenly. Division may include consideration for the needs of a custodial parent, such as for possession of child-oriented digital accounts.
Ownership and Division of Digital Assets
Many of the digital assets that you truly own can simply be copied and shared. This applies to family photos and videos, documents and historic records. In even an acrimonious divorce, a couple can agree to share easily copied files. Sometimes we are called upon to negotiate who will make and package copies and/or how one spouse will be compensated for time spent making copies for the less technically adept spouse.
Many purchased digital assets are actually licensed, not owned, and may or may not be legally copied or transferred, depending upon the licensing agreement. This applies to digital music, movies and books, as well as software. We would have to determine the value of these items.
Shared streaming services (Netflix, Spotify, etc.) would either have to be taken over by one spouse or terminated. However, content such as playlists or watchlists, or recordings on a cablevision VCR, might be considered to have some value.
Assuming such digital assets are marital assets, each spouse could agree to divide collections item by item or determine an equally valued asset to trade. However, one spouse might argue that he or she bought all the music, movies, TV shows, books and has a right to retain all such digital assets.
Disposition of an Online Business in a Divorce
Some digital assets, such as a website or a presence on sales or auction sites, are part of a business that a couple shared. If one spouse will not simply buy out the other spouse, an option is to continue to jointly own the business after the divorce. It must be kept in mind that domain names are licensed, and their transfer would be subject to the terms of agreement.
Otherwise, jointly owned digital business assets must go through valuation and division in a manner that ensures equitable distribution.
The most commonly used methods of business valuation are:
- The book value method. Value is based on assets and liabilities as listed in the company’s books.
- The market or earnings approach. The business is valued according to what an outside buyer would pay for it while factoring in capacity for future earnings.
Who’ll Decide How Your Digital Assets are Divided?
There are numerous points to be considered when dividing digital assets, and plenty of opportunity for contention.
Our family law attorneys are skilled negotiators who will work to ensure that a final agreement is equitable. You and your spouse may seek the help of a professional mediator or another neutral third-party (such as a retired family law judge) to divide your assets and develop a separation agreement.
A separation agreement contains all of the terms of your divorce. After a year of living apart, you can ask the court to grant a divorce, which makes your settlement agreement a binding legal order.
If an equitable agreement cannot be reached, this would bring the entire division of assets and separation agreement before a judge to decide. In such a case, the judge will treat digital assets like any other marital property and award them to one spouse along with a tradeoff of similarly valued assets awarded to the other spouse. The judge’s decisions may or may not be to either spouse’s liking.
To go to court and have a judge determine how your marital assets are divided, you need to file a claim for equitable distribution in your home county, such as in Wake County District Court. A judge would then decide any contested issues surrounding the identification, classification, valuation or distribution of assets. You could have witnesses, such as appraisers, testify.
If between filing a claim for equitable distribution and your court date you and your spouse come to agreement, you can seek a consent judgment. If the court agrees your plan is fair, the judge will sign off on it.
Once the judge rules, if either you or your spouse fails to follow terms of the separation agreement (and eventually your divorce), you could be held in contempt of court.