Most people are surprised to learn that lottery wins acquired after separation can form part of the property pool and be available for distribution, if they have not already formalised a property settlement.
Whether a lottery win ought to be categorised as a joint contribution or sole contribution is an important consideration.
Sole or joint contribution
If categorised as a joint contribution, the property pool (including the lottery win) will be distributed accordingly. If categorised as a sole contribution, the party who acquired the winning lottery ticket is likely to retain a much greater portion of the winnings.
Case example #1
In the 2014 matter of Eufrosin & Eufrosin1 the Full Court of the Family Court considered the purchase of a winning lottery ticket by the wife, 6 months after the parties separated. The husband contended that the wife had used funds from a business operated by him, to purchase the winning lottery ticket. However, the Court found that whilst regular withdrawals were made from the business by both the husband and the wife after separation, those funds were then applied by each party to their own individual financial lives, being wholly unconnected with the former marital relationship. Accordingly, the source of funds used to purchase a lottery ticket will not by itself determine the issue of whether a lottery win after separation, will be considered a sole contribution by a party or a joint contribution of the parties to the property pool.
Living together or not
If the parties’ have separated and there is no longer a common use of property and financial resources at the time the lottery ticket was purchased, a lottery win is likely to be considered a contribution to the property pool, by the individual who obtained the ticket.
If the parties’ have separated but are not yet living separate financial lives (this might be the case if the separation is very recent), then the Court may find that the lottery win is a joint contribution to the property pool.
The court will decide
It is important to remember however, that even if a party successfully convinces a Court that the lottery win received after separation was their sole contribution to the property pool, this is a contribution (for the purpose of the contribution assessment) by that party to the property pool. Of course, the lottery win still forms part of the property pool available for distribution. Practically, this means that the lottery win (together with all other assets) will be available when the court when considering future needs adjustments. Accordingly, it is possible that the other party, should they have greater future need, may still be awarded a portion of the lottery win.
This is intended to provide a fair and equitable outcome ensuring that each party receives a fair distribution of the property having regard not only to their contributions to the property pool, but also, their future needs after separation.
To demonstrate the point, in the above matter, as a consequence of the husband’s greater financial needs after separation, the husband was awarded the sum of $500,000 of the lottery win.
Example case #2
Similarly, in the matter of Farmer & Bramley[2] the husband won the lottery 18 months after separation in the sum of five million dollars ($5,000,000). The parties lived together for 12 years, however at the time of separation there were no assets of any significance. During the relationship the wife supported the husband through a heroin addiction, whilst he studied, and the child of the relationship resided solely with the wife without any financial support from the husband. Having regard to the wife’s significant financial and non-financial contributions throughout the twelve-year relationship and the existing disparity of the parties’ financial circumstances at the time of the hearing, the Court awarded the wife in the sum of $750,000 (approximately 15% of the winnings).
Example case #3
Similarly, in the matter of Bradley & Weber[3] the husband won a lottery in the sum of $1.27 million, six months after separation.
The wife was awarded $225,000 (approximately 20% of the winnings) even though the husband had purchased the lottery ticket six months after separation, and they had been living separate financial lives.
The above cases are good examples of why parties should formalise a property settlement at the earliest possible opportunity to ensure any future property acquired by them is free from any claim from their former spouse. Had the above lottery wins been received after formalising a property settlement by a binding financial agreement, or Final Orders of the Court (including Consent Orders), the other party would not have been entitled to receive a portion of the winnings.
1 [2014] FamCAFC191.
2 [2000] FamCA 1615.
3 (1997) FLC 92-770
