You might have recently seen the sad tale of Richard Zelasko, a man who celebrated winning $30 million in a US lotto draw after being separated from his wife for more than two years (his ticket cost him only $1).
It would be safe to assume Mr Zelasko sailed off into the sunset with his millions wondering where to anchor his yacht each night and which tropical island he would like to visit next.
But I said it was a sad tale. What could possibly be sad about a cool $30 million lotto win?
I bet Mr Zelasko thinks it’s sad, given he was ordered to pay one half of the lotto win to his ex-wife, despite the lotto win being received more than two years after their separation.
The problem for Mr Zelasko was that, while he and his wife separated in 2011, their divorce was not finalised until 2018. This meant that, while it was not in dispute that Mr Zelasko had purchased the ticket himself, it was arguable that the money he used was joint property and, as such, the lotto ticket was a joint investment. The court determined that any losses incurred during the marriage would have been shared and so should any winnings. On that basis, Mary-Beth Zelasko was awarded an equal share of the lotto winnings when the property settlement was finalised. All appeals to reduce that amount failed.
Like I said … a sad tale.
We are in the midst of mega lotto jackpot bonanza in Australia at the moment – $80 million here, $60 million there and a cheeky $20 million just around the corner.
So, before you head down to grab your quick-pick, what would happen in Australia if you won the lotto and your relationship ends?
How to determine a property settlement
All property matters are determined using a predictable five step process, regardless of how much money the parties have or where the money came from:
- First, the court asks whether it is just and equitable to make an order in relation to the property of the parties.
- If the answer to the first step is yes, the next step is to determine the net value of the property pool, being the assets of both parties.
- Then the court considers what contribution each party made to the assets that make up the property pool and comes up with a percentage amount to be awarded to each party.
- The court then considers whether any adjustment to the percentage amount determined at step three is appropriate on account of any future needs of either party.
- The court then reviews the final percentage amount to be awarded to each party and considers again if the result is just and equitable.
So how do you consider the lotto win?
Where there has been a lotto win before, during or after the relationship, that is a matter considered by the court at step three outlined above.
The case that most lawyers refer to when discussing lotto wins, is a case called Zyk.1 In this case, the husband had won a lotto prize of $94,907 during the marriage. The parties were married for 13 years and had no children together. The parties could not agree on a property settlement and the matter proceeded to trial. The trial judge determined the lottery winnings were a contribution by the husband alone and assessed contributions to the property pool at 72% to the wife and 28% to the husband (step three above). That amount was then adjusted to 65% – 35% in favour of the wife after a consideration of other contributions and future needs. The wife appealed the determination that the lotto win was a contribution by the husband alone.
On appeal, the Court determined that the lotto prize was a ‘joint contribution of the parties’. The Court determined the following matters should be considered where there is a lotto win:
- The identity of the person who purchased the ticket does not of itself determine whether the lotto win is a sole or joint contribution.
- Where both parties contribute income to the relationship, the purchase of the ticket would be regarded as a purchase from joint funds and be treated accordingly.
- Where one party is working and the other is not, the same conclusion would ordinarily apply; the income of the working member is treated as joint in the same way as the non financial contributions of the other partner.
On appeal the percentage division to the wife was increased to 71.5%.
However, each matter must be considered on its individual facts. In the matter Eufrosin,2 the parties had been married for 20 years. Six months after separation the wife won $6 million after purchasing a lotto ticket. The money the wife used to purchase the ticket was from a joint bank account with the husband.
At trial, the judge placed the parties’ assets into two pools. The first pool consisted of assets of the marriage and was divided evenly between the parties. The second pool covered the assets associated with the wife’s gambling winnings (the money and anything she had purchased with those funds). The trial judge determined that the husband had not contributed to the second pool of assets. However, an adjustment of $500,000 was made in favour of the husband on account of his future needs and financial disparity between the parties.
The husband appealed the categorisation of the second pool of assets as being the sole contributions of the wife.
The Full Court of the Family Court dismissed the husband’s appeal noting that the source of funds (a joint back account with the husband) did not determine that the husband had made a contribution to the purchase of the lottery ticket.
What was relevant was the nature of the parties’ relationship at the time the lottery ticket was purchased. Specifically, the husband and wife each used funds accessed from the joint bank account for their own individual purposes and not in relation to anything connected to their former relationship. It was determined that, at the time the wife purchased the ticket, the ‘joint endeavour’ that had been the parties’ marriage had dissolved and they were each endeavouring to lead separate lives.
Therefore, the purchase of the lottery ticket was not a joint contribution. The appeal was dismissed.
So, would Mr Zelasko have been better off in Australia?
Going back to our sad tale, we can’t help but wonder what outcome Mr Zelasko would have had if his case had been decided in Australia.
Of course, we can only speculate.
But, given the lotto win came two years after separation, we can’t help but wonder whether the Court may have considered Mr Zelasko’s winnings more in line with the second case we’ve mentioned, and less with the first.
Perhaps if he was married, and separated, in Australia the outcome would have been very different.
Where there has been a lottery win and the court is asked to determine property matters, there is no single rule to apply. The court will look to all the circumstances of the relationship including:
- how the parties managed finances and bank accounts
- when in the relationship the lotto win was received
- how the parties managed the funds from the lotto after they were paid out
- whether the parties kept financial matters separate from each other through the relationship.
This last consideration is often more relevant in second or subsequent relationships than in first relationships, where parties still tend to combine finances quite early as evidence of their commitment to a shared life.
So, whether you watch the lotto draws live on TV or you anxiously check your ticket the next day wondering if you struck the jackpot, just remember that, before you go off and buy the mega yacht so you can sale off around the world, not all of the winnings may be yours and you may end up with an unhappy stowaway on that yacht, fighting for their share of the winnings.