Winning the lottery can be an exciting and life-changing event. However, if you win the lottery during a divorce, it can raise some complicated legal questions. Generally speaking, lottery winnings acquired during a marriage are considered marital property, which means they are subject to division in a divorce. But the specific rules vary by state.
How are lottery winnings treated in divorce?
In most states, lottery winnings are classified as marital property if they were acquired during the marriage. This is because marital property includes assets and income earned or acquired during the marriage, even if only one spouse’s name is on the asset. So if you buy a lottery ticket and win while married, those winnings are considered joint marital property.
However, a handful of states, including Florida and Mississippi, exclude lottery winnings from the marital estate. In these states, the spouse who holds the winning lottery ticket gets to keep the full amount as their separate property in a divorce.
Community property vs equitable distribution states
How lottery winnings are divided at divorce depends on whether you live in a community property state or an equitable distribution state.
- Community property states: In these states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), marital property is generally divided 50/50. So any lottery winnings acquired during the marriage would likely be split equally.
- Equitable distribution states: Most other states follow the rules of equitable distribution. Here, marital property is divided in a fair and just manner, which may or may not be equal. Factors like each spouse’s income, contributions to the marriage and needs can impact the division of assets.
Does getting a divorce impact claiming lottery winnings?
Filing for divorce typically does not affect your ability to claim lottery winnings. The lottery proceeds still belong to the marital estate and would be divided as part of the divorce. However, you may want to consider the following if you win a big lottery prize in the midst of divorce proceedings:
- Claiming as an individual or trust – Some divorcing spouses choose to claim their lottery winnings as an individual or through a trust in order to maintain control of the funds during the divorce process.
- Freezing accounts – A spouse may ask the court for an order to freeze accounts containing lottery winnings to prevent the other spouse from dissipating the funds before division.
- Changing beneficiary designations – Make sure your beneficiary designations on assets like retirement accounts are up-to-date. Lottery winnings can impact divorce negotiations and the equitable division of all marital property.
Does it matter whose name is on the winning ticket?
It usually does not matter whose name is listed as the winner on the lottery ticket. Marital property belongs to the marital estate, regardless of how it’s titled. So if one spouse purchases a winning lottery ticket, those winnings are still considered joint marital property in most cases.
The exception, again, is in states that exclude lottery winnings from marital property. In those states, the spouse who holds the winning ticket gets to keep the lottery prize as their separate property.
Can I keep my lottery winnings separate in a divorce?
In most cases, you cannot keep lottery winnings completely separate from your spouse in a divorce. As marital property, the winnings are subject to equitable division with your spouse. However, some strategies, such as the following, may help you retain more of the winnings:
- Claiming winnings as an individual or trust – As mentioned above, claiming lottery winnings in your own name or through a separate trust may allow you to maintain control during a divorce.
- Separating before claiming winnings – If spouses are separated and one spouse claims winnings before filing for divorce, the winnings may be deemed separate property in some states.
- Gifting or spending winnings – In some cases, spouses have tried to gift or spend lottery winnings before a divorce is initiated to keep the spouse from getting a share. But this tactic can backfire and courts can consider it concealing assets.
While you may not be able to avoid splitting lottery winnings in a divorce, an experienced divorce attorney can help you make the best legal arguments for retaining more of the prize.
What if I win the lottery after filing for divorce?
If you win the lottery after you have already filed for divorce, the timing could impact how the winnings are divided. Some key considerations include:
- Date of separation vs. date of divorce filing – In some states, the winnings may be deemed separate property if acquired after date of separation but before filing for divorce.
- Finalizing the divorce before claiming winnings – If the divorce is finalized first, the winnings may be considered separate property of the spouse who holds the ticket.
- Equitable factors – Even if classified as marital property, factors like custody arrangements, splitting assets and future earnings potential could lead a judge to award more of the winnings to one spouse.
An experienced divorce lawyer can provide guidance on the laws in your jurisdiction and the best strategies for handling lottery winnings won during the divorce process.
Does the kind of lottery winnings matter?
All lottery winnings acquired during the marriage are typically considered marital property. But different types of lottery winnings may impact division in a divorce case.
- Lump sum payment – A lump sum lottery prize may be easier to value and divide between spouses.
- Annuity payments – With an annuity prize paid out over many years, spouses may need to determine the present value for division. And the court may award a percentage of future payments to each spouse.
- Joint winner with others – If you share a lottery prize with other winning ticketholders, only your portion of the winnings would be marital property subject to division.
No matter what type of lottery winnings, it is wise to have an attorney review the specifics to determine the implications for your divorce case.
Should I disclose lottery winnings in a divorce?
Failing to disclose significant assets like lottery winnings in a divorce case is almost never advisable. Concealing assets is illegal and can lead to harsh penalties if discovered, including:
- Having the entire asset awarded to your spouse as a penalty;
- Being held in contempt of court;
- Paying fines or reimbursement of legal fees;
- Having the divorce settlement invalidated;
- Facing criminal charges for fraud.
Even if you live in a state where lottery winnings can be considered separate property, it is best to disclose the information and let the court make the final determination. Otherwise you risk much harsher consequences down the road.
Steps for disclosing lottery winnings
To properly disclose lottery winnings in a divorce, you should:
- Fully complete the financial disclosures, listing the winnings as an asset acquired during the marriage.
- Be prepared to provide documentation of the winnings if requested.
- Inform your divorce attorney so they can help handle the disclosure appropriately.
- Avoid spending, gifting or concealing the winnings before disclosing.
While it may be tempting to hide lottery winnings from an estranged spouse, transparency is always the safest approach. Trying to conceal assets almost never ends well.
Can I protect lottery winnings with a prenuptial agreement?
For those who are unmarried but anticipating a big lottery win, a prenuptial agreement is an option for protecting those assets in case of a future divorce. Prenups allow couples to customize the financial terms of a divorce.
Some key considerations for a prenup include:
- Make sure winnings are identified as separate property that will remain with the individual spouse.
- Consider conditions like how long you need to be married before winnings are marital property.
- Address how joint expenses may be funded if only one spouse has winnings.
- Disclose all financial assets to ensure valid contract terms.
- Consult attorneys for both parties to ensure agreement is enforceable.
With proper drafting, a prenuptial agreement can provide the clarity needed to protect future lottery winnings in a divorce.
How can a divorce attorney help with lottery winnings?
Consulting an experienced divorce attorney is crucial for understanding and protecting your rights to lottery winnings acquired during a divorce. Key ways a lawyer can help include:
- Advising you on applicable state laws and procedures for disclosing winnings.
- Recommending strategies for claiming, preserving and documenting the winnings.
- Negotiating a favorable division of assets by arguing equitable factors.
- Drafting or reviewing a prenuptial agreement that addresses lottery winnings.
- Guiding you through the disclosure process and required filings.
- Representing you in court if the division of winnings is contested.
Navigating lottery winnings in a divorce can be complex. But the right legal guidance can help minimize complications and ensure the fairest outcome.
Division of winnings example scenarios
To illustrate how lottery winnings may be divided in different divorce situations, consider these example scenarios:
Scenario 1
- Bill and Sandy live in Texas, a community property state.
- During their marriage, Bill wins a $20 million lottery jackpot.
- Bill and Sandy get divorced. Since Texas is a community property state, standard division would be a 50/50 split of all marital assets including the lottery winnings.
- Therefore, Bill and Sandy would each likely receive $10 million of the lottery winnings in the divorce.
Scenario 2
- Jennifer and Mike live in New York, an equitable distribution state.
- Mike wins $500,000 from a lottery ticket purchased during their marriage.
- Jennifer and Mike divorce. The court looks at equitable factors like their incomes, needs, and contributions to the marriage.
- The judge determines a 65/35 split of assets favors Jennifer based on those factors. So from the $500,000 lottery winnings, Jennifer is awarded $325,000 and Mike keeps $175,000.
Scenario 3
- Nicole and Tim live in Florida, where lottery winnings are not marital property.
- While married, Tim wins a jackpot of $5 million from a lottery ticket in his name only.
- When they divorce, Tim is able to keep the full $5 million prize as his personal property.
- None of Tim’s lottery winnings are subject to division with Nicole under Florida law.
These examples demonstrate how state law and specific circumstances of a case can impact division of lottery winnings at divorce. Consulting an attorney in your jurisdiction is the best way to understand your rights.
Conclusion
Winning the lottery during divorce proceedings almost always complicates the division of assets. Lottery winnings acquired during the marriage are generally considered joint marital property subject to equitable split. However, some states exempt lottery winnings from division. And the specific timing of when winnings are received as well as filing timelines can impact how they are allocated. Consulting an experienced divorce attorney is essential for protecting your rights to lottery winnings in a divorce.
