A recent case decided by the Family Court in Sydney is a timely reminder for separating couples to legally formalise their financial and property matters after separating. In the case, the wife had a $6 million win six months after separating from her husband. The parties had been married for 20 years and had not legally formalised a property settlement at the time of the win.
The husband brought a Court application, seeking half of the lotto win. He argued that the wife had purchased the $59.45 winning ticket from “joint funds” and that throughout the marriage, the wife bought weekly lotto tickets from joint funds which increased her chances of winning the major prize.
The Court rejected the husband’s argument, finding that the husband had made no contribution to either the funds used to buy the ticket or the lotto win.
However, the Judge made orders giving the husband an additional $500,000 from the parties’ property settlement to take into account the disparity between the husband and wife’s individual financial circumstances and the husband’s limited future working capacity. When making orders for property distribution at the end of a relationship, the Court considers the asset pool, the contributions by each party to that asset pool (both financial and non-financial) and the future needs of each person. The Court must make orders that are just and equitable in all of the circumstances. In this case, the husband received an additional payment to take into consideration his future needs relative to the needs of the wife.
Some might think that the wife was not hardly done by in forfeiting $500,000 from $6 million. However, had the parties legally formalised a property settlement before the lottery win, the Wife’s lottery win would have been safe from the husband’s claim and the winnings would have remained entirely hers – instead making it a case of bad luck for him. Once a property settlement has been formalised by way of Court Orders or a Binding Financial Agreement, it is final. The orders or agreement can only be set aside in limited circumstances, dramatically reducing the risk of a former spouse being able to make a claim against newly acquired assets or windfalls. Similarly, for those operating a business or thinking of starting up a business after the end of a relationship, formalising a property settlement with a former spouse is an important risk management consideration.
The “take-home message” for separated couples is to get your financial and property affairs in order in a timely fashion and to legally formalise any agreement you may reach with your former spouse. You never know what tomorrow may bring.