How are lottery winnings treated in family law property settlements?

When altering property interests and determining what percentage of the total pool of property each party receives, part of the four-step approach that the Court takes is looking at the contributions of each of the parties. So, if you were lucky enough to win the lottery at one point, does the Court see that as a contribution on your behalf?

Prior to 1995, the Court interpreted lottery winnings as “windfalls” rather than a contribution by either of the parties.

In a case named Zyk in [1995], the Court reviewed these earlier cases on lottery wins and determined that lottery winnings should be referred to as a “contribution” rather than a “windfall” because it forms party of the property pool.

In this case the Court found that there was a joint contribution to the savings of the husband and the wife and that the parties dealt with their finances together. Therefore, the purchase of the winning ticket came from the shared joint incomes and the winnings were treated as an equal contribution.

The case of Zyk has meant that the court has considered a lottery wins a contribution, but has usually found that due to the joint efforts of a relationship, even if the lottery ticket was purchased by one party it is usually a joint contribution rather than the contribution of one party only.

An interesting case is Elford v Elford [2016] Fam CAFC 45 where the parties kept their finances separate throughout the relationship. The winning of the lottery ticket was in the husband’s individual bank account and was treated as his winnings by the parties. The Court found that the parties lived financially separate lives and therefore the lottery winnings were a contribution made solely by the husband.

However, when altering property interests the Court takes into account all the financial and non-financial contributions of each of the parties, along with the future needs of the parties. As lottery wins are included in the pool of assets, the Court can still make an order for an alteration of property interests that sees a division of the lottery winnings. It is also important to note that it is very rare for parties to have separate financial lives.

If the winning lottery ticket is purchased during the relationship, the Court will most likely interpret as an equal contribution by both parties as it was a sudden increase in the property pool that is unrelated to the efforts of the parties. However as outlined above, in particular circumstances the winnings can be seen as a contribution made by only one party.