Lottery winnings: who gets to keep the cash?

And the lottery winner is…

We hear a lot of stories about lotteries bringing nothing but trouble.  Remember the case of Gary Baron, the Geelong worker who was one of three lottery winners of the $50 million Powerball jackpot in October, 2014?

He was the organiser for his work syndicate but claimed he purchased the winning ticket privately. His 14 co-workers claimed the ticket was purchased for the syndicate and that they should share in the winnings of $16.7 million. The case made headlines and ended up in the Supreme Court. And by all accounts, he’s no longer on the invitee list to the work Christmas party.

If a husband or a wife purchases a winning lottery ticket, should the winnings go to the buyer or should they be shared jointly when it comes to a property settlement?

Until the Full Court of the Family Court of Australia handed down its decision in March 2016*, lawyers felt confident in advising clients that in a property settlement following a divorce, lottery winnings received during the marriage should be seen as jointly benefiting the parties, irrespective of who paid for the ticket. In a well-known case decided 21 years ago, a husband won a lottery about two years into the marriage. The court said that in the ordinary run of marriages lottery winnings should be seen to be equally contributed to the pool of assets, irrespective of who happened to pay for the ticket.

In the 2016 case, the husband won nearly $623,000 in the first year of a 10 year marriage. The court decided that the contribution was solely his and not a joint contribution.

From now on family lawyers are going to think carefully about lottery winnings and how the circumstances of each case may affect the outcome for their clients. There are some things that made this case quite different to the ordinary run of family law cases and some of these things might be borne in mind by parties wishing to protect themselves in the event of a future relationship breakdown. They include:

• the parties kept their assets quite separate;
• to a large extent they kept their finances separate, including separate bank accounts;
• the husband paid the winnings directly to his bank account and there they remained; they were never used for joint purposes;
• the wife had no involvement in the purchase: she did not contribute financially, she did not join in picking the winning numbers and the ticket was purchased in the husband’s sole name;
• the husband had been purchasing weekly tickets long before the relationship started.

Legal principles have not changed. But the Court’s decision demonstrates that conclusions about spouse contributions to property through lottery winnings will vary with the facts of each case.

It is likely that in many second marriages, particularly where one or both of the parties experienced a financial dispute first time round, there will be greater emphasis on keeping assets and financial affairs separate.

*The case, Elford & Elford was reported by Nine News on 5 April 2016.

By Stephen Rees