You've won the lottery what does it mean for family law?

Family Law: 15 September 2021

What are the family law implications on a lotto win? Phoebe Smillie takes a look at the case law and a $6m win.

You might have heard that recently a Melbourne man who lost his job during one of Victoria's COVID-19 lockdowns won an $80 million Powerball jackpot. The Melbourne man had been working as a cleaner to support his family since he lost his job and says he wants to use the money to pay off his home mortgage, other bills and set up his children for life.

But what would happen if this lucky Melbourne man won the lottery and later separated from his partner? What would happen to his lottery winnings? Would he be entitled to keep it? Or would he have to share?

This very issue was dealt with in the interesting Full Court of the Family Court decision of Elford v Elford [2016] Fam CAFC.

The story

In this case, the parties started living together in 2003 and were married in 2007. When the parties were living together (and prior to their marriage) the Husband won $622,842 in the lottery. Of most importance, during their 9-year long relationship, the parties kept their finances largely separated. The parties separated in 2012.

The total asset pool available for division in this matter was $1.4 million, which consisted largely of the lottery winnings and subsequent investments. When the parties separated, the Court awarded the Wife 10% ($51,000) of the total asset pool available for division. The Wife appealed the decision and sought 32% of the pool.

What happened?

On appeal, the Full Court found that the Husband made the sole contribution to the lottery winnings and confirmed the trial judge's decision that the wife received 10% of the pool.

Simply put, the Court explained that lottery winnings should be treated as the fruits of joint partnership where both parties are:

'€¦in receipt of income and where their marriage is predicated upon the basis of each contributing their income towards the 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 any other purchase within that context and would be treated accordingly' 

Alternatively, the Court noted lottery winnings will not be treated as fruits of a joint partnership where it would not be appropriate. In this matter, the parties led financially separate lives and the Court, therefore, held it would not be appropriate for the lottery to be divided as a fruit of a joint partnership. The Court based its decision on the following facts:

1. The Wife had not contributed financially to the ticket;
2. The Husband had been purchasing weekly tickets with the same numbers since 1995;
3. The Wife did not pick the winning numbers;
4. At the time of winning, the parties had been together for less than a year;
5. The ticket was purchased in the Husband's sole name;
6. The winnings were deposited into a bank account held in the Husband's sole name.

What if you win the lottery after separation?

This issue was dealt with in the Full Court decision of Eufrosin & Eufrosin (2014). In this matter, the Wife purchased a lottery ticket 6 months after separation and won $6,000,000.

The Husband argued the Wife purchased the lottery ticket from joint funds and should therefore be entitled to a share of the winnings. The Court found that the source of funds should not determine how lottery winnings should be treated. Rather, the nature of the parties' relationship at the time the lottery ticket was purchased is of the most relevance.

In this matter, at the time the Wife purchased the lottery ticket, the parties' marriage had, for all intents and purposes, dissolved. There was no longer common use of property, rather the parties were applying their funds towards their own personal and individual lives. Accordingly, the Court ruled in the Wife's favour.

What does all that mean?

The above decisions highlight that the Court will always look to the facts of each case to determine what happens to lottery winnings.

If a lottery ticket was purchased during the relationship and the winnings were applied towards the parties' joint life, it is likely the winnings will be treated as joint property. If, however, parties live separate financial lives, then it is likely the lottery winnings will be considered as a sole contribution by the party who purchased the winning ticket.

For more information regarding the division of assets in property settlements post-separation, please contact a member of our family law team.