In the Lone Star State, navigating the legal intricacies of divorce for a lay person can be as unpredictable as the roll of a dice or, more fittingly, the drawing of lottery numbers. Even as a family lawyer, having practiced for more than 30 years, some issues remain complex and difficult.
One question that occasionally arises in Texas divorce proceedings is whether lottery winnings by a married person are considered community property and thus subject to division by the Court upon divorce.
While winning the lottery, or experiencing a similar financial windfall like the selling of a valuable business or other asset, isn’t an everyday occurrence, when it does happen, it can have significant financial implications during a divorce proceeding.
Understanding Community Property Law in Texas
Texas is a community property state, which means that most property acquired by either spouse during the marriage is considered community property and is subject to division upon divorce.
The fundamental principle behind this law is the notion of marriage as a partnership where both partners contribute (either directly or indirectly) to the accumulation of assets, and thus, both should share in the division of those assets if the marriage ends.
Lottery Winnings During Marriage
When it comes to lottery winnings during the marriage, Texas law is clear: these winnings are considered community property if the winning ticket was purchased with community funds—that is, money earned or acquired by either spouse during the marriage.
This applies irrespective of which spouse purchased the ticket or whose name is on the ticket. The rationale is that any assets acquired during the marriage, regardless of the source, are the product of the marital partnership's joint efforts and should be shared accordingly.
As an aside, if you are purchasing lottery tickets with separate property (for example, property or money you had before you got married), you should keep very careful records of the transaction. It will be your burden of proof in any future divorce action to establish your claim that any portion of the winnings are separate property, otherwise, according to Texas Family Law, they will be presumed to be community property.
Division of Lottery Winnings Upon Divorce
Upon divorce, the Court is tasked with dividing community property in a manner that is “just and right,” considering the rights of both parties and any children of the marriage. This does not necessarily mean an equal (50/50) split but rather a fair division based on various factors, including each spouse's earning capacity, fault in the breakup of the marriage, custody of children, and any separate property owned by either spouse.
In the case of lottery winnings, the Court will consider these winnings as part of the marital estate and will divide them according to the same principles.
If the winnings are significant, this can lead to complex negotiations and legal arguments about what constitutes a fair division. An experienced family lawyer will be crucial to these negotiations and, if necessary, presenting the appropriate legal arguments. Factors such as the timing of the winnings, the use of the winnings during the marriage, and contributions by either spouse to the winning (e.g., purchasing the ticket) can all influence the Court's decision.
Protecting Lottery Winnings
For those lucky enough to win the lottery during marriage, there are measures that can potentially protect these winnings from division.
One common approach is through a prenuptial or postnuptial agreement, in which spouses can agree on how to treat such winnings in the event of a divorce.
However, for such agreements to be enforceable, they must meet specific legal requirements, including full disclosure and fair terms. At Coker, Robb & Cannon, we help clients with premarital and marital property agreements all the time. Similar to how having a well-drafted Will allows you to control what happens to your property upon your death, these marital property agreements are absolutely essential if YOU want to control what happens to YOUR property in the event of the divorce. Without such an agreement, then Texas Community Property Law will likely control what happens to your property upon divorce.
Conclusion
In summary, lottery winnings by a married person in Texas are generally considered community property and are subject to division by the Court upon divorce. However, the exact division of these winnings will depend on a multitude of factors, making each case unique.
If you find yourself navigating this complex terrain, or if you have any issues or questions regarding what would happen to your assets in the event of divorce, you should seek the guidance of a skilled Texas family lawyer who can advise you based on the specifics of your situation and help ensure a fair resolution. Contact Coker, Robb & Cannon to talk with one of our family lawyers about your questions.