Lottery Winnings & Property Settlements – Who gets the winnings?

If you win a lottery, are the lottery winnings an asset that the Family Court should adjust between you and your spouse post separation?

The answer is generally “yes”…

In the 1995 case of Zyk & Zyk the Full Court reviewed the way that lottery wins were presided upon by the Court. Prior to this case lottery winnings were viewed as a windfall and may not have been viewed as an asset that the Court would have adjusted. The Court in Zyk however amended its position and noted lottery winnings should be viewed as a contribution.

As a consequence, the lottery winnings should form part of the asset pool which could be distributed in accordance with the Family Law Act.

When discussing the lottery winnings, the Full Court stated:

“In the ordinary run of marriages, a ticket is purchased by one or either of the parties from money which he or she happens to have at that particular time. That fact should not determine the issue. Where both parties are in receipt of an income and where the marriage is predicated on the basis of each contributing their income towards a joint partnership constituted by their marriage, the purchase of the ticket would be regarded as a purchase from joint funds in the same way as the purchase of any other within that context and should be treated accordingly. Where one party is working and the other party is not, the same conclusion would ordinarily apply because that is the mode of partnership selected by the parties”.

If you win a lottery after you separate, are the lottery winnings still an asset that the Family Court should adjust between you and your spouse post separation?

A recent Full Court decision of Eufrosin & Eufrosin from 2 October 2014 has held that this question will be determined largely by the circumstances of the relationship when the ticket was purchased…

In Eufrosin & Eufrosin a significant focus in the trial and appeal was the source of funds used by the wife to purchase the winning ticket. The husband’s primary contention was that the winning ticket had been purchased using “joint funds” and, thus, he had contributed to the winnings.

Ultimately, the trial Judge and the Full Court determined that the husband made no contribution to the wife’s lottery winnings.

The husband contended that the wife used funds from a business that had been run primarily by him (and other of his family members) during the course of the marital relationship to purchase the lottery ticket. The court held that even if that is accepted, the argument which proceeds from it ignores the reality of the parties’ post-separation lives.

The parties had put in place a system whereby regular withdrawals of funds were made by each of them from what was formerly a joint asset, and those funds were applied by each of the parties individually to purposes wholly unconnected with the former marital relationship. At the time the wife purchased the ticket, some six months after separation, the parties had commenced the process of leading “separate lives”, including separate financial lives.

The Court held that the source of funds should not “determine the issue” of how a lottery win should be treated. What is relevant, is the nature of the parties’ relationship at the time the lottery ticket was purchased. At the time the wife purchased the ticket, regardless of the source of the funds, the “joint endeavour” that had been the parties’ marriage had dissolved; there was no longer a “common use” of property. Rather, the parties were applying funds for their respective individual purposes

The husbands appeal therefore failed and it was upheld that he had made no contribution to the lottery winnings.

However, as a consequence of the husband’s greater financial needs post separation notwithstanding the court making a finding that he made no contribution to the lottery winnings an adjustment of $500,000 was made in his favour.

The case of Eufrosin & Eufrosin can be contrasted to earlier cases such as Farmer & Bramley where a lottery winning of $5 million was won by the husband 18 months after separation. The parties had lived together for 12 years, however, at the time of separation, there were no assets of any significance.

Throughout the 12 years of the relationship, the wife provided for the husband when he was suffering from a heroin addiction, supported the husband financially during the relationship whilst he studied and, at the time of the Hearing the child of the relationship resided with the wife solely and was not supported by the husband.

Taking into consideration the wife’s significant financial and non-financial contributions throughout the marriage, the disparity in the parties’ financial circumstances, the wife’s ongoing care of the child without any financial assistance or support from the husband and the future needs of the wife, the Court made an adjustment and ordered that $750,000, or 15% of the winnings, be made payable to the wife.

This matter also reflected upon the case of Bradley & Webber, whereby an order was made that the wife receive 20% or $225,000 of the winnings. In the case of Bradley & Webber, the lottery winning was $1.27 million and was received only six months post separation and there was a larger property pool of the relationship to distribute between the parties.

When discussing the contribution to the lottery winnings, Justice Finn stated “For the wife had made a contribution generally to the marriage, even though no direct contribution to the lotto win”.

It is important to note that, if the hearing of the above cases occurred immediately post separation, there would have been lottery winnings to distribute between the parties. In both cases, one party benefited significantly, by chance, by not formalising the distribution of assets at the time of separation when there were no assets to distribute.

Whilst there will be few people that will be fortunate enough to win the lottery, these cases serve as an important reminder to formalise property settlements as soon as possible to provide certainty and finality into the future.