Crypto, NFTs, Social Media Accounts, and Domain Portfolios: They’re Assets in a Prenup, Too

Crypto NFTs Prenup

By Jen Rakhimov

Any prenuptial or postnuptial agreement is only as good as both partners’ integrity in the financial disclosure process. Before signing any marital agreement that pertains to property, both parties need an accounting of what assets they lose when they sign the prenup, as the prenup (or postnup) removes access to what would have otherwise been marital assets. It’s unfair to the future spouses to sign a contract that addresses properties, wealth, and debts that are not fully known to both sides.

Consider the process as something analogous to the informed consent doctrine in medicine: before surgery, your surgeon will disclose all the benefits and problems that may result from your surgery. After knowing the worst scenario, you can choose to proceed with surgery or to find other options. Likewise, disclosure between fiancés enable both to see what problems may be ahead (e.g., one partner is being sued) and the range of assets that they will give up through signing the prenup.

If a partner is not forthcoming in providing accurate, thorough disclosure, the prenuptial or postnuptial agreement may no longer be enforceable if it is challenged in divorce court. While someone might intentionally engage in fraud and/or hiding assets, a partner may not realize something is an asset requiring disclosure, or the partner may simply forget. At JustPrenups, our process is designed to help you avoid this problem. or the partner

The items covered in this post are much more volatile than traditional assets, such as property. Both partners should be aware of this reality: the person who is a paper millionaire in bitcoin at the time of the wedding may have bitcoin that is barely worth anything at the time of the divorce.

While the list below is not exhaustive, the following four assets may be forgotten, as they are not the typical items that most people have in mind when approaching a prenup or postnup. In other words, this ain’t your parents’ prenup, and neither is your disclosure.

1. Crypto (cryptocurrency) should be disclosed.

Maybe it’s an asset. Maybe it’s a liability. Hard to know until you check a headline, or Elon Musk’s Twitter, or Lex Fridman’s podcast that day.

Either way, crypto should be disclosed to your partner for your prenup (or postnuptial contract). Follow the baseline that JustPrenups encourages as the best practice: be honest, accurate, and specific. When disclosing the value of your crypto, do the following:

a) For our purpose with a prenup, we are most concerned with the fair market value of assets at the time of your disclosure process. List the fair market value of your total holdings and include the date of valuation, unless you have a reason that you want to list different units/coins individually for your records or at the request of your partner, who may make demands during the disclosure process for types of information, additional information, translations, etc. Look at your platform(s) and/or wallet(s) to assess your holdings, and then check another exchange or some reliable market data to validate your findings.

b) List the date and time of the above valuation and the sources used in valuation. Your partner can conduct research as well with this information, especially given that the value of cryptocurrencies can fluctuate wildly. For your peace of mind, your prenup can include a reminder that the value of any asset at the time of financial disclosure may not be the same value at the time of a divorce, but assets will nonetheless remain non-marital property.

c) For additional clarity and transparency, identify the type of crypto and the number of coins/units. We realize that you will continue to buy and sell, just as you may buy another home, a boat, more stock, etc. after the prenup is signed. That’s okay because life goes on. Financial disclosure is designed to give the best financial picture possible at the time of signing the marital contract.

For those with an interest in creating your own crypto, either currently or in the future, your prenup should cover this business so that you hold all intellectual property (“IP”), including the coin itself. You might be the next Dogecoin maker, but your divorce can impair your financial success unless your prenup offers specific protection.

2. NFTs (non-fungible tokens) should be disclosed.

A client recently asked how to value a portfolio of NFTs. Much of the advice above for crypto applies to NFTs as well.

An NFT is a digital asset that can include, for example, visual art and music. Each NFT is verified via a blockchain, which is a decentralized digital ledger or “database” that indexes the NFT as unique, meaning that there isn’t any other digital asset exactly comparable to that particular NFT. For example, you can exchange three dollars for three different dollars, and the value is still the same because dollars are a fungible asset. In contrast, each NFT is uniquely valued depending on its popularity and history, among other factors. The blockchain verification stops people from replicating an NFT and trying to sell it or to use it as an original. Once the NFT is sold to a buyer, the buyer is identifiable and recorded via the blockchain.

a) The first step in listing any asset in disclosure is to determine the fair market value: look at the current sale price of comparable NFTs at more than one reliable marketplace.

b) Describe the NFT as clearly as possible in plain language so that there is no confusion in the event of divorce. Remember, you need to consider that you may face a judge who needs you to make the assets easily identifiable so that time isn’t wasted in any disputes. Generally, the NFT will have a name and some unique identifier(s) that set it apart.

c) Always provide the date of valuation for your assets. When did you research and find the value of the NFT(s) that will be listed as assets in your prenup? Include that information in your disclosure worksheets that we provide as part of our process.

If you are an NFT creator, even as a hobby that happens to make income occasionally, you are a business owner, and your prenup should be drafted as such. If you are an NFT creator who has not profited, you have still created IP that may be potentially lucrative even if it isn’t right now. Your prenup should address these actual and potential NFTs as well as any other IP you may have, such as that script sitting in your drawer, your plan for a future business that is sitting in your desktop, and your application for patent. While these items are not what you traditionally think of as “prenup worthy,” they are just as important as your home and your 401(k) since they hold current and future value.

3. Business-related and/or income-producing social media accounts and handles are intellectual property that require protection as assets.

Your social media holds value as an asset. Your LLC might have several accounts across different types of social media using the same handle on all of them: make sure your hard work pays off so that these items remain yours both during and after the marriage. Any business interest, all business inventory, all business assets, and all business-related IP should be protected in your prenup (or postnup) as much as the business itself.

Additionally, you may have a personal social media account that has enough followers to interest advertisers. If you accept payment for promoting on any of your social media accounts, those accounts are now business accounts, as you are using them to produce income, and you are a business owner. These accounts, personas, and handles need the same protections in a prenup as those associated with a corporation, even if you didn’t set out to make your social media a money-making endeavor. Enjoy your success, build it, and make sure it stays yours.

a) As above, provide a valuation of your social media account(s) and handle(s), and list your method of reaching that value. Are you finding an average revenue over recent years from sales or advertising? Do you translate the number of followers into a fair market value for your social media account? Does the value include the amount of website traffic generated or leads generated? Should the value include something that’s harder to quantify such as brand awareness?

There isn’t a right answer among the methods listed above. But there is a right answer for your financial disclosure for the prenup: what is satisfactory to your partner, who needs to know exactly what assets or what value will be omitted from marital property holdings? Think about which valuation method fits your social media and handle(s) and think about why it fits so that you can articulate why that valuation method yields the most accurate result. Record this information and your date of valuation in the disclosure worksheet that JustPrenups provides.

b) Identify the social media types and the handles associated with your accounts. If you have been changing the presented name or other identifiers, claim those as well.

c) Remember that your prenup can include provisions that punish your partner for bad behavior on the internet pertaining to you, your business(es), your reputation, and your social media. Nothing is worse than ugly drama left on someone’s wall by an angry ex. Prenups can be drafted to address such potential bad behavior before it happens and to provide incentives to avoid acting out.

4.Domain Name Portfolios should be disclosed as an asset.

This asset, like the others above, may be difficult to value accurately. Prenups and postnups are invalidated when there is a lack of good-faith disclosure or the failure to name an item, whether tangible or intangible. Your best bet for complicated assets is transparency. If needed, check in with your financial advisor or CPA for advice on any of the items that you disclose.

a) State how you valued your domains and what they are. Consider the fair market value listed on reputable sites. Evaluate the uniqueness, potential revenue generation, and market demand for a particular domain name. Would the domain make a great brand name? Is it short and easy to remember? Is it a clever pun? Research the market demand for comparable domain names and the pricing; try using websites such as NameBio or DNJournal to assist.

b) Remember the value can happen in more than one way. There is the sale value of the domain name, but you can also generate revenue through leasing or licensing the domain name. You might start a website and/or business relevant to a domain name that is trending and then sell the whole package. Be clear about how (i.e., the method and why you’re choosing that method) you’re valuing your domain portfolio once you have totaled your numbers.

c) Consult your attorney, mediator, or financial professional to see how much detail should be included in your disclosures. Check with your partner to see what is satisfactory disclosure. When you have greater detail, you have greater transparency; as a result, the disclosure is more robust, which means your marital contract has strong enforceability if challenged in divorce court.

d) When all else fails, or when valuation seems too ambiguous, ask if your partner wants a professional appraisal on this or any item. Document such requests for more information and offers of additional information related to disclosure, and document how these requests were resolved.

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Warning: All posts on this website and its partner website, DADvocacy.com, contain general information about legal matters for broad educational purposes only. This information is not legal advice and should not be treated as such. This blog post does not create any attorney-client relationship between the reader and the DADvocacy™ Law Firm or between the reader and JustPrenups.com.