Spend, Spend, Spend it?
The recent death of Pools winner Viv Nicholson prompted us to consider how the family court deals with a windfall such as a lottery win in the context of a divorce. Whilst the chances of such a win happening in the first place are pretty slim, the principal of how the court deals with assets that fall into the marital pot from ‘outside the marriage’ is something that comes into play quite often. It’s not just a lottery win, it can be a large gift from one party’s family or an inheritance that can be the cause of friction on divorce.
How does the family court approach ‘non-matrimonial’ assets?
The first place to look for guidance is the Matrimonial Causes Act 1973 and specifically the factors contained in Section 25. These principal ones as between divorcing couples are set out as follows:
(a)the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b)the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c)the standard of living enjoyed by the family before the breakdown of the marriage;
(d)the age of each party to the marriage and the duration of the marriage;
(e)any physical or mental disability of either of the parties to the marriage;
(f)the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
(g)the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
(h)in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
If the court is asked to determine the respective financial claims on divorce, it will apply the factors set out in S.25 above. Each case is looked at individually and on its own facts. The Judge will consider all the circumstances of the case and aims to achieve a fair outcome with the interests of any children being the first priority.
The court has over time come to set down 3 principles by which all divorce cases are considered:
Here, we are considering needs and sharing in the context of non matrimonial assets.
Marriage is a partnership. Therefore as a starting point fairness means that the assets should be divided equally. This applies to all assets built up during the marriage. What of gifts, inheritance and lottery wins though? These are ‘non-matrimonial’ and as such the court has discretion to take a different approach to this class of asset. However, if needs must, the court can use non matrimonial assets and distribute them between the parties.
On divorce, a family is most likely to be forming into two separate households. The resources they had when they lived together will be stretched and have to meet the needs of two households not one. As such, the needs for accommodation and income become very important. The needs of any children will always come first. Therefore, the needs of the party with whom the children are to live for the majority of the time will trump all other factors, including the ‘sharing’ principle.
What about the lottery winnings – can they be ring fenced?
Each case will be determined on its own facts. However, where needs must, the notion that non matrimonial property can be completely excluded falls by the wayside. The court will use such assets to meet the needs of the parties, especially if there are children.
But I won on the lottery after we separated – does that mean its mine?
The simple answer is ‘not necessarily’. The fact that the winnings came in after separation but before divorce, does not automatically exclude them from the matrimonial pot. Even if the court finds that the lottery win is non-matrimonial, then the court can still use the funds to assist the party who needs capital to provide for their housing and/or capital needs. In the case of S v AG (Financial Remedy: Lottery Prize)  EWHC 2637 (Fam) 2012 1 FLR 651 Mostyn J considered a lottery win and whether it was matrimonial or non matrimonial property. He found that on the facts of that case, whilst the lottery win was non matrimonial, it could still be used to meet the needs of the other party. He applied both the principles of need and sharing and awarded the husband a lump sum from the lottery funds. The facts and decision make for interesting reading, and whilst each case turns on its own specific circumstances the principles applied are universal.
Don’t let it become a lottery
So, if you play the lottery or football pools, be aware. Any winnings can potentially be brought into the matrimonial pot for the purposes of meeting needs on divorce. It may make little difference that you have paid for the ticket from your own resources, or that you won after you separated – on divorce the court can still take the winnings into account and divide them where needs justify a departure from the equality of sharing.
If you have won the lottery or play the pools and might need some guidance on how the winnings will be dealt with on divorce Paradigm Family Law can help. If you have any queries on this or any other aspect of divorce or separation and finances call us on 0845 6020422 or email us at [email protected].