Divorcing millennials present new challenges for divorce professionals, who are faced with the tough task of assessing new and evolving types of digital assets and digital income streams.

Divorce and the New Generation (Millennials)

Divorcing millennials present new challenges for divorce professionals.  There has been a generational shift in the way that millennials acquire their wealth, think about marriage, and approach divorce. This younger generation continues to seek divorce advice and legal representation – albeit in smaller doses than their predecessors.

Meanwhile, divorce professionals are faced with the tough task of assessing new and evolving types of digital assets and digital income streams. NFTs (Non-Fungible Tokens), cryptocurrencies, and social media influence are some of the more popular ways that people can increase their net worth. And if these individuals are married and considering divorce after amassing wealth from the fruits of their digital labor, then we, as divorce professionals, must be able to accurately identify and evaluate these assets and income streams as part of the dynamic divorce process.

Digital Assets and Divorce

Digital assets – like NFTs and cryptocurrency – are becoming ever more prevalent, increasingly complex, and immensely profitable. Since they have been newly introduced into society, they are not heavily regulated. And because they yield such volatile returns on investment, they are tough to value. Understanding how these digital assets should be considered at divorce is imperative.

Ultimately, cryptocurrency is to the $100-dollar bill what NFTs are to the Mona Lisa – a digital reinvention of an established, tangibly valuable concept.

“Non-fungible tokens or NFTs are cryptographic assets on blockchain with unique identification codes and metadata that distinguish them from each other. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. This differs from fungible tokens like cryptocurrencies, which are identical to each other and, therefore, can be used as a medium for commercial transactions.”^[1] In other words, NFTs are uniquely one-of-a-kind. While “much of the current market for NFTs is centered around collectibles, such as digital artwork, sports cards, and rarities”, much of the current cryptocurrency market is centered around investments and day-to-day transactions.^[2] Ultimately, cryptocurrency is to the $100-dollar bill what NFTs are to the Mona Lisa – a digital reinvention of an established, tangibly valuable concept.

When appraising these digital assets at divorce, the fluctuating market makes it difficult to accurately assess the current values of cryptocurrencies and NFTs. The values of these digital assets are changing by the minute; as such, market volatility tremendously complicates the valuation process.

Whether the law in your state calls for equitable distribution or an equal division of the marital property, the difficult task with dividing digital assets at divorce is pinpointing their value at the point of division of the marital estate. Should the divorcing parties wish to offload the digital assets for the sake of simplifying the distribution process, that would make the valuation process significantly easier.

NFTs cannot be divided because they are unique; only the proceeds generated from the sale of the NFT can be divided amongst the parties at distribution.

But many eager individuals will want to continue riding the prosperous crypto waves, thus choosing to retain their digital assets. Therefore, enlisting a digital asset expert may be the most prudent way to handle the process of valuing cryptocurrency and NFTs at divorce.

On the other hand, the distribution process for cryptocurrency is not necessarily difficult to accomplish. Because the transfer of cryptocurrency between wallets is not currently taxable, cryptocurrency can be easily transferred at divorce (assuming that the parties reach an agreement about how the cryptocurrency will be divided). Generally, it is advisable to divide the cryptocurrency similar to how some Courts divide stocks at distribution – utilizing an “in-kind” analysis. On the contrary, NFTs cannot be divided because they are unique; only the proceeds generated from the sale of the NFT can be divided amongst the parties at distribution.

Digital Income Streams and Divorce

Many individuals – especially young adults – are now earning income from their relevance on social media. Social media accounts possess more value than ever before. “As social media expands throughout society, many individuals have turned their social media presence into a source of income through their influence over others who follow that individual on social media. These individuals, labeled “social media influencers,” use their social media personas to create both tangible and intangible value.” ^[3] Determining whether the social media presence of a divorcing spouse is marital property, personal separate property, or a hybrid needs consideration in each jurisdiction.

Marketing agencies and global consumer brands will often enlist social media influencers to broadcast their product or service on the influencer’s social media account, page, or channel. This marketing technique generates revenue for the marketer while providing the influencer with a steady income stream. Some of the most high-profile celebrities can make upwards of $500,000 on just one sponsored Instagram post. And though goodwill and societal influence do contribute to an individual’s ability to earn a living as a social media influencer, the income earned from such activity is most certainly attributable to a divorcing couple’s income available for spousal or child support, and the income stream itself could be marital property.

Where this income stream becomes especially difficult to assess is when the marital couple shares the social media account, or where one spouse either actively or passively contributed to the influencer spouse’s influencer status. In these cases, the social media account’s goodwill flows through the marital union. While the case law on this topic is scarce, it is logical to look to divorce cases that assess celebrity status and goodwill in order to figure out the best practices for assisting a social media influencer couple with valuing one or both parties’ goodwill during the divorce process.

The question remains: is a social media influencer’s earning capacity determined by past or future earnings when such celebrity can wane so suddenly?

Ultimately, the issue herein lies with the classification of the goodwill stemming from the social media account. Should the goodwill linked to the account be treated as enterprise goodwill or personal goodwill? While this debate is oddly reminiscent of the timeless “chicken or the egg” quandary, the equation is such that social media influencers will often utilize their social media presence to bolster their personal goodwill, thus flooding their income streams and generating more enterprise goodwill. Given this hybrid approach, attorneys must have a complete understanding of the nature of the influence so that the nature of the property interest is presented properly to the court. Generally, Courts have treated enterprise goodwill as marital property, but personal goodwill as non-marital property.^[4]

However, the question remains as follows: is a social media influencer’s earning capacity determined by past or future earnings when such celebrity can wane so suddenly? While future earnings from digital income streams might be too speculative to calculate at times, one or both parties’ reputations may have been bolstered by the presence of the other party in the marriage. Therefore, one or both spouse’s earning capacities might have been dramatically affected by the other spouse’s influencer status throughout the marriage.

As divorce processionals, we must strongly consider one spouse’s involvement in the other spouse’s success when determining how to divide the property at divorce. In turn, if a married couple finds themselves accumulating joint wealth by way of their social media influencer status, then each spouse (and their attorneys) should be careful not to compromise their client’s income stream during the adversarial divorce process.

Assessing Everchanging Types of Digital Assets and Income Streams

New digital income streams and assets are being introduced into society every day. Family lawyers must consider such innovations in the context of the legal process – especially when they impact the day-to-day lives of our clients. NFTs, cryptocurrencies, and social media influence are some of the more popular ways that people have relied on contemporary innovations to generate wealth for themselves and their families. And these contemporary innovations are increasingly impacting the day-to-day lives of our clientele.

Ultimately, as divorce professionals, we understand that the divorce process is part emotional and part financial. Therefore, when focusing on the financial aspects of the divorce process, we must pay careful attention to the everchanging ways in which our divorcing clients are acquiring their wealth, and we must do so accordingly.

^[1] Sharma, R. (2021, March 18). Non-Fungible Token (NFT) Definition. Investopedia.

^[2] Id.

^[3] Hamilton Leiser, Unfollowed: Examining the Property Rights of Social Media Influence in Divorce Proceedings, SMU Sci. & Tech. L. Rev. Blog (2019).

^[4] See May v. May, 589 S.E.2d 536, 544 (W. Va. 2003).

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