By now many of us have heard the story of the Idaho woman who won the second largest lottery jackpot in history, but may have to split her winnings with her former husband from whom she has been separated from for years. Under Idaho law, because the couple was separated and not legally divorced, the winnings may be classified as marital property and her husband may be able to claim half of the sum.
This case grabbed the attention of my clients and colleagues, many of whom have asked me about California laws regarding the division of lottery winnings and other marital assets, property, and inheritance, some of which I will answer here.
Q: How does California law treat lottery winners or recipients of substantial windfalls who are already separated?
A: California is unique in that community property ends on the date of separation. It is important, then, to make sure there is a record of the separation. When someone files for a separation or divorce, the date of separation on the court papers is the date when community property ends. If no papers are filed, and if the date of separation becomes contested, a court hearing would be necessary to determine if the couple was indeed separated. If the winner can prove the early date of separation, the lottery winner may be able to keep the jackpot.
In states where community property extends to the date of divorce, the winner should hire an attorney immediately to protect as much of their winnings as possible. In the Idaho case, the woman may be entitled to more than half of the jackpot for a number of reasons, such as the ticket was purchased with post-separation assets or the fact that the couple was separated for several years. A good lawyer can make the case that the winner is entitled to more of the winnings than their estranged spouse.
Q: Aside from lottery winnings, how does California divide other financial windfalls?
A: Inheritances and gifts are usually maintained as separate property in California, even if they are received during the marriage, as long as they are not commingled (mixed) with community funds. While inheritances and substantial gifts given either before or after a divorce can affect the rate of child or spousal support one party may have to pay after divorce, they are not counted as community property.
Q: What would you recommend to future lottery winners in similar circumstances?
A: Lottery winnings are tricky because they cannot be planned for. Consulting an attorney quickly is your best option for preserving your new found wealth, as well as your physical and emotional well-being. For example, a lawyer could recommend legal options for protecting someone who may have been in an abusive relationship and could represent the winner in court during their client’s absence. An attorney can also act as a representative to shield their client from the press and other supposed “friends” who are looking to take advantage.
Q: Can Pre-Nuptial agreements protect a spouse’s lottery winnings?
A: A Pre-Nuptial Agreement may also lend some protection to assets acquired during the marriage. There are two types of Pre-Nuptial agreements: in one the property acquired after marriage becomes jointly owned, and in the other the property is kept separate, belonging to the person who earned the funds used to acquire the property. With the first type of Pre-Nuptial Agreement, if the ticket was bought with communal funds, both spouses are entitled to half the winnings. In the latter type, the lottery winnings of one spouse would be separate property if the ticket was bought with separate funds.
If you are interested in learning more about the Idaho case, see the article in USA Today. Or if you have any questions about lottery winnings, communal property, or any other family law matter in California, please contact The Mediation and Law Offices of Vivian L. Holley or leave a comment here for a response in a future blog post.