LS Legal News Bulletin
Lottery Winnings and Financial Settlement on Divorce. Our Family Law Expert discusses a recent case on assets disposal after separation.
Monday 24th January 2022
Stella Marat
You have won the lottery but would like to divorce? The excitement of a lottery win may vanish when divorce is involved and there is the prospect of sharing it with a previous partner. If there is a significant win, the resulting financial settlement will likely comprise an ultra-high net worth one. Does a lottery win always get shared as part of a financial settlement?
Could you wait until the divorce is finalised between the parties before claiming your win to steer clear of having to share with someone you no longer want to be with?
Although it has no legal basis, the generally held belief is that if you are married, then, when your numbers add up, your spouse is entitled to half of the winnings.
During the divorce procedure, all assets owned by two parties must be duly disclosed and considered. This might include lottery winnings, even if won by the undertakings of only one of the parties. The family courts, albeit with much discretion, will divide matrimonial property equally in the name of fairness. Where required, however, the judges can turn to divide non-matrimonial assets, where this is necessary to accommodate the other party's needs.
Matrimonial property usually includes any property jointly owned by the parties or otherwise generated or accrued during their marriage. Non-matrimonial property constitutes that attained prior or post-separation. This often includes inherited assets or gifts.
The recent case of J v J [2021] CSOH 67 came into consideration by Lady Wise. One of the key questions was whether the assets and funds derived from lottery winnings were matrimonial property.
A fundamental concept in determining what represents matrimonial property is whether the asset was derived from the efforts or income of both parties during the time they were married.
In the ongoing case of J v J, the husband bought the lottery ticket with cash he took from the till of the shop owned by his parents. The husband's parents were also parties to the court action. The parents argued that the funds used to purchase the lottery ticket belonged to them. Hence, the lottery winnings belonged to them, not their son. Therefore, it was argued that the husband acted as an agent for his parents when purchasing the lottery ticket, and the funds were not considered matrimonial property. The husband argued that the winnings were to be considered 'family money' belonging to his and his parents as one family unit.
Whilst on-the-face-of-it, the lottery winnings may not seem to have been derived from the 'income or efforts of the parties to the marriage', further exploration of the facts of the case is required. Although the husband worked in the shop his mother and father owned, he was not on the payroll. He instead would take money from the till for his various daily living expenses, including his lunch and the purchase of lottery tickets.
Lady Wise held that the money taken from the till was a benefit the husband obtained through his employment on delivering her judgment. This benefit was instead of receiving a formal wage. There was no evidence of an agency arrangement between the parents and the son. There was adequate evidence to show that the lottery winnings belonged to the husband rather than his parents' family unit. Lady Wise held that the funds and assets derived from the lottery winnings were matrimonial property and therefore were to be considered when making orders concerning financial settlement.
A thought-provoking aspect of this case is the evidence from several professional witnesses, including a bank relationship manager employed by HSBC. There was concern that the husband was moving the assets to avoid his wife's claim for financial provision on divorce. After the correspondence from the wife's solicitor, the husband began transferring assets into his mother's name to divest himself of his assets.
Even with an interim interdict granted by the court to prevent money from being transferred out of many accounts held by the husband and his parents, the husband's mother tried to breach the court order. She was corresponding with the relationship manager at HSBC in doing so. Substantial evidence was provided on their communication, but of particular significance to this case was a statement made by the husband's mother to the manager at HSBC when she disclosed that the funds in her account actually belonged to her son. However, they wanted to hide the money as he went through a chaotic divorce.
It is essential to note the courts' broad discretion in financial proceedings, notably when it comes to making needs assessments in regard to the parties. Keeping that in mind, it is critical that you obtain legal advice about your options, whether you are the winning party or their partner. If you win the lottery while you are married, you may wish to consider a post-nuptial agreement that would dictate how to divide the winnings in the future. This would assure a level of protection and certainty that you would not otherwise achieve (subject to an assessment of needs), no matter whether you decide to ring-fence the winnings by keeping them in your bank account.
You might be liable to allocate some of your winnings to an ex-spouse, who may still be able to claim after the divorce. This is the case where an ongoing maintenance agreement exists, which entitles an ex-spouse to make a claim should the party making the maintenance payments acquire newfound wealth. Therefore, it is advisable in any situation where there is a significant change in a party's financial situation (be that via a lottery win or inheritance) that they take expert legal advice on the best way to ensure it remains protected in the future.
Our Family Law team includes experienced solicitors who believe in a constructive and non-confrontational approach to family law matters. LS Legal Solicitors are also well versed and highly experienced in providing advice and assistance on family matters to family businesses and high net worth individuals. We appreciate that many of the requirements may seem overly complex and onerous. However, we guarantee to make your experience as smooth and stress-free as possible.
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