Winning the lottery but losing in the divorce

Mary Zambreno Iowa Family Law Dickinson Law Des Moines Iowa

Posted on 01/13/2016 at 01:09 PM by Mary Zambreno

The drawing for the largest lottery jackpot ever is upon us, so now might be a good time to address how such a dramatic windfall might affect divorced or currently-divorcing spouses in Iowa, however small those odds are. If you are still in the throes (or woes?) of your divorce proceedings, it is very likely that a court would divide your winnings with your soon-to-be ex-spouse because the proceeds will be considered marital property. Even if the lump sum or annuity payout had not yet been made by the time your divorce was finalized, or even if you could prove that you bought the winning ticket with $2 that you withdrew from a non-marital account  therefore arguing that the winnings themselves are also non-marital the court has equitable powers to divide that money according to Iowa Code Section 598.21, after considering such factors as the length of the marriage, the property brought to the marriage by each party, the contribution of each party to the marriage, the age and health of the parties, the earning capacities of the parties, other economic circumstances of each party, and any other factor that the court deems relevant.

For child support purposes, the court probably will not double dip and treat the lottery winnings as both an asset to be divided and income stream upon which to calculate child support guidelines. Doing so would result in the ludicrous scenario of you paying, for example, 20% of $1.5 billion every year (half of which is already earmarked for your ex-spouse in this hypothetical settlement) for a small child who certainly doesn't need lavish boats and vacations! Instead, here is where you, your spouse, and your lawyers have some wiggle room to be creative. Perhaps consider establishing a trust for each of your children that pays out a certain amount for educational, medical, extracurricular and other reasonable living expenses, in lieu of the traditional child support payments that would otherwise be calculated using your $1.5 billion windfall. Anyone seeking alimony after receiving half of a $1.5 billion windfall probably shouldn't hold their breath. That's because Iowa Code Section 598.21A requires the court to consider such factors as the financial resources of the parties and the earning capacity of the spouses when determining alimony. When such financial resources and earning capacities exceed that party's need, then the court will not award alimony.

The parties' assets and the value thereof are generally set in stone on the date of the divorce and such property divisions are non-modifiable in Iowa. Therefore, if your divorce was finalized a month ago and you win the Powerball tonight, the winnings are probably going to be yours in their entirety (except for the portion that you are forced to share with Uncle Sam).

But remember that ex-spouse who you divorced a month ago? He or she could request that child support be modified to reflect your increased income. And even if you aren't already in the throes of a divorce and if you happen to defy the very miniscule odds of winning the Powerball jackpot according to financial guru Dave Ramsey, the divorce rate among lottery winners is four times the national average and you have a 65% chance of going bankrupt within 15 years.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- Mary Zambreno

Categories: Mary Zambreno, Family Law


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