Everyone dreams of winning the lottery – what could be better? You’ve just received a significant sum – tax-free! But what happens when you come into a large amount of money, called a ‘windfall’ when you break up with your partner?
What is a windfall?
A windfall is a sum of money that you have received, sometimes unexpectedly, but which you have not earned, per se. Examples of a windfall include a lotto or other gambling win but can also include things like inheritances and compensation payments.
We often use the term windfall to help differentiate between assets received by one party without any nexus to any contribution by the other, from other assets that are the result of the parties’ combined (whether direct or indirect) effort, or contribution.
To the regular person, you may think this means your lotto win is yours to keep, but it is actually a little more complicated than that.
The type of windfall and its timing can make a difference in determining how it will be treated by the Family Court.
What the law says
Under the Family Law Act 1975 (Cth) (“the Act”), the Family Court is able to make decisions about the property of the parties or either of them and defines property in s 4(1) as “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion”.
In order to determine a just and equitable outcome, the Court will identify the property of the parties and assess their contributions, holistically over the entire period from the commencement of the relationship until the date of the hearing.
The bad news is, from the Court’s perspective, windfalls are not a special category of contribution and they must be included in the asset pool and considered in the same manner as all of the other contributions made, financial, non-financial homemaker and parenting. The court is very unlikely to “quarantine” an asset on the basis that you consider the other party has not contributed to it.
The timing of receipt of your lotto win, can make a difference in how it is effectively, ‘shared’ between the parties as was made clear in Eufrosin and Eufrosin  FamCAFC 191.
In general, if you receive the windfall before you separate, it will usually be considered a financial contribution to the relationship. If this means you have made a greater financial contribution than the other party, it may result in a view contributions in your favour. However, any financial contribution is balanced against non-financial and homemaker contributions and neither is considered more or less important than the other.
With that said, when it comes to lotto winnings specifically, the Court has held that a lotto ticket bought during the relationship is a windfall and a contribution of both parties (Zyk v Zyk (1995) FLC 92-644). This will not be the case in every set of circumstances and in family law it always depends on the dynamics of your particular relationship.
You may think that any win after you separate means, it is yours alone. However, it is important to remember that in family law property settlement, the asset pool and contributions are determined up to the time of hearing. With that said, post-separation windfalls are sometimes excluded by the Court – but it all depends on the particular circumstances of the case!
It is important to remember in family law that each case is unique and will turn on its own set of particular facts, which can result in a range of outcomes in relation to your lotto winnings, including:
- The inclusion of the windfall in the pool without any regard to where it came from (especially if it was received early in the relationship);
- The inclusion of the windfall in the pool, with an adjustment in favour of the party who made the contribution; and
- The isolation of the windfall.