Lottery Winnings (PART 1) – A one in 292 Million Chance, and How Winning Might Affect Your Family Law Case

With the recent Powerball jackpot reaching $1.5 billion, it’s no surprise that people were flocking to convenience stores across the country to get their hands on what could be the golden ticket.  Although the chances of winning the huge payout were a measly one in 292 million, sales skyrlottoocketed and drove the jackpot to its all-time record high.

Despite the tiny chance of a big payout, the lottery inevitably got people talking about how they would spend the money…buy an island, quit their day jobs, travel the world, and completely reinvent their lives.
What would you do if you were that that lucky one in 292 million winner?  What implications would a win like that have on your personal life?  What if you happened to be going through a divorce or had gone through one even years ago? What if you or your ex was the new billionaire? Most of these questions can be answered by looking at the relevant Minnesota laws and cases.

In this three part series we will explore:

  1. How lottery winnings might be divided during a divorce;
  2. How lottery winnings might affect a child support obligation; and
  3. How lottery winnings might affect a spousal maintenance award.

 

PART 1 – How are a Lottery Winning Divided under Minnesota Law?

Are the lottery winnings considered marital or non-marital property?

Whether a lottery winning is divided between the parties in a divorce proceeding depends on whether the winnings are characterized as “marital” or “non-marital”.  Gambling winnings such as a lottery jackpot can be deemed as income and/or property under Minnesota Law and may be subject to division in a divorce proceeding if characterized as marital property. To determine whether the winning is “marital” Minnesota courts focus on when the property was acquired, giving special attention to two dates: the date of the marriage, and the valuation date.

First, Minnesota law says that property acquired after the date of marriage is presumed marital, regardless of whether the asset is held individually or jointly between spouses, and is subject to division in a divorce proceeding.  This presumption is based on the idea that each spouse makes a substantial contribution to the acquisition of the property while living together as husband and wife, and seeks to promote the economic partnership aspect of marriage.[1]

However, if one party shows that the property was a gift or inheritance intended for one but not both spouses, was acquired before the marriage or after the valuation date, or is excluded by a valid prenuptial clause, then the presumption may be defeated. Where the presumption is defeated, the property would be non-marital and not subject to division in a divorce proceeding.

Second, for property that is deemed marital, Minnesota law says these assets are valued on the date of the Initial Case Management Conference (ICMC), unless (1) the parties agree on a different date or (2) the court determines “that another date of valuation is fair and equitable.”[2]  The ICMC is the first court hearing of a divorce proceeding and marks the endpoint upon which property acquisitions are to be considered marital.

So, if one spouse wins the lottery, the implications seem rather straightforward: If the prize is won after marriage but before the ICMC or other valuation date, then it is marital property and subject to division between the parties. But if the lottery prize is won before the marriage or after the ICMC, it will likely not be considered marital property and not subject to division.[3]

How is a lottery winning divided during a divorce, if deemed marital?

Minnesota Courts seek to make just and equitable divisions when issuing decisions on how property is divided in a divorce.  But what does equitable mean?  It means seeking a division that is fair under the circumstances of the parties.  Minnesota law requires courts to consider a number of factors when determining what is fair under the circumstances such the length of the marriage, the age, health, station, occupation, amount and sources of income, vocational skills, estate, liabilities, needs, opportunity for future acquisition of capital assets, the contribution of each party to the acquisition, preservation, depreciation or appreciation in the amount or value of the marital property, etc.   In most cases, what the court deems to be fair and equitable is an equal division of the parties’ property.  In the instance of a lottery winning by one or both of the parties, that is deemed marital, the parties might expect to have it split equally by the Court.

Are there other potential implications of a lottery winning if it is found to be non-marital and not subject to division in the divorce proceeding?

Just because a lottery winning may not be marital and divided between the parties, doesn’t mean that it won’t impact other areas of a family law matter.  There may still be implications with respect to child support calculations and/or spousal maintenance awards.  We address those implications in Part 2 and 3 of this series.  Stay tuned.

[1] Minn. Stat. §518.58 subd. 1.

[2] Minn. Stat. §518.58 subd. 1

[3] Non-marital property commingled with marital property (i.e. non-marital income/monies commingled in marital accounts containing marital income/monies) may dilute and/or defeat the presumption that the property is non-marital, thereby making the non-marital property subject to division in a divorce proceeding- but that is an article for another day.

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