Winning the lottery is very exciting and life-changing. But, it can also cause a lot of disagreements and bring out the worst in people, particularly where the situation is complicated by a separation or divorce In such cases, many questions arise. Who is the winner- the couple, or the person who bought the ticket? Do they have to share the winnings? What if the ticket was purchased while they were already separated? The answer to these questions, as is often the case in family law, is the same: it depends.
A Case Study
In September, a common law couple won a $6.1 million lottery prize in Chatham, Ontario. The winnings quickly led to a legal dispute.
The parties had been together for approximately two and a half years and regularly played the lottery, alternating who bought the tickets.
In September 2016, it was reported that someone in the Chatham area had won the lottery. Curious, the female partner texted the male partner asking him if they had won. He told her that they had not, and moved out 5 days later. It turns out that he had lied and the female partner did not find out until after she heard from mutual friends that he had quit his job.
The female partner quickly went to court and filed an emergency court injunction to prevent him from getting the money.
In response to the injunction, the Ontario Liquor and Gaming Corporation (“OLG”) froze the winning funds ($6,146,722.60) until the matter is resolved. Interestingly, the injunction may not have been necessary (though is always a good idea in such cases), as OLG best practices dictate that lottery winnings are put on hold as soon as the agency becomes aware that there is any dispute regarding ownership of a lottery ticket.
Last month, the female partner filed a lawsuit against the male partner. She alleges a breach of trust and unjust enrichment. These are claims often made by common law spouses following a separation, in which they argue that one person in the relationship was enriched at the expense of the other.
She is seeking half of the $6.1 million, and $1 million in aggravated damages. She is also seeking to have this matter heard before a jury.
The crux of the woman’s argument is the former couple’s long-standing tradition of buying lottery tickets and the understanding was that if they won, they would split the winnings.
The man’s lawyer claims that no agreement or understanding was ever in place and he has a right to the entire prize. The OLG has handed over the man’s half of the winnings, but the other half remains at issue.
What May Happen Going Forward?
Since the couple was common law, the property division rules that could split the winnings would not apply, hence the woman’s claim of unjust enrichment. If the matter ends up going to court, any final decision will come down to the specific circumstances of the case.
The woman has the best chance of success if she can actually establish that the couple had a regular practice of buying tickets together with the expectation that winnings would be split evenly. This would best be evidenced by texts, emails, or any other written communications.
How to Protect Your Lottery Winnings
There is not much you can do to protect your lottery winnings in the event of a separation or a divorce.
If you are common law, like the couple in our case study, a cohabitation agreement may be able to help you avoid a situation like this woman finds herself in. Such agreements allow unmarried couples to agree, in advance, on how to deal with property division in the event that they separate later on. Winning the lottery is not common, but these agreements can be used to address such an eventuality. A clause could be put into the agreement outlining what should happen in the event one of you buys a lottery ticket and wins a prize, or if you gamble and win a prize.
It is important to remember that even if you are married, disputes over lottery winnings are not straightforward and there is not a standard procedure that people can refer back to. In Canada, the Canada Revenue Agency considers lottery winnings (as well as other gambling winnings) to be a “windfall”. Windfalls are not subject to tax for a variety of reasons, including the fact that the money earned was not from a customary source of income for the lottery player, the lottery player has no reason to expect that they will win again, the lottery player took a risk buying a ticket with the potential of not winning anything, and similar reasons. This may affect how lottery earnings are ultimately treated in a separation or divorce. Every case will depend on their individual circumstances.
At Borden Family Law, we have been helping clients with their family law needs for over 17 years. In this time we have seen it all. We have the experience and knowledge necessary to help you and your partner come to arrangements that are agreeable for both of you, regardless of what stage your relationship is in or what your legal dispute is about. Call us at 905-597-6090, or contact us online. Ask about our bundled services and flat fees.