Advice to the Spouse of a Lottery Winner

Two winners were announced earlier this month for the second largest lottery jackpot in history. Each of the winners will get up to $190 million depending on what payment option they choose. One of the winners is Holly Lahti, a mother of two who is legally separated, but not divorced, from her estranged husband. There has been no shortage of speculation as to how the husband will attempt to receive half of Ms. Lahti’s winnings.

One of my clients, who is recently married, asked me what would her husband get if she were to suddenly win the lottery. The short answer is it really depends on what her situation is.

The first thing to understand about the Mega Millions lottery is that it will be paid out to whoever purchased the ticket. In the current case, that is Ms. Lahti, so I assume my client is the only person that the money is initially being paid out to.

Marriage: As long as my client stays married and stays alive, the money is essentially under her control. She gets to decide whether it gets paid into a bank account that is jointly held by her and her husband, or she can have it paid to an account to which only she has access. Since Minnesota allows spouses to own separate property, she would be able to control all of the lottery winnings.

Divorce: Things get a little more complicated if my client and her husband were to get divorced after winning the lottery. The biggest question is whether my client comingled the money from the lottery winnings with any marital assets. Essentially, whether she would split the winnings depends on whether she ever, out of the goodness of her heart, allowed her husband any control of the money. Although the comingling of assets plays a major role in who owns the lottery winnings, it really would be up to the judge to determine other financial decisions such as spousal maintenance and child support.

Death: In the event of my client’s death, the lottery winnings become a somewhat complex affair without any sort of estate planning. If the winnings are kept in any joint accounts, her husband would receive all of the winnings. If they are not comingled, then there are several possibilities depending on how much my client’s family would fight for a share. Considering the amount of money involved, a fight would be pretty likely. Under Minnesota law, depending on a lot of circumstances, including the length of marriage and whether they have children, the husband could get anything from 5% of the winnings to all of them.

Simply because of the tax implications, it would make sense for my client to have an estate plan and a trust set up to handle the lottery winnings. If this is the case, my client would be able to choose just about anyone to receive the lottery winnings.

What all this means is that, even though my client is married, her husband would not be guaranteed any share of the lottery winnings even in the event of divorce or death unless my client made specific actions to make sure her husband was the primary beneficiary of the winnings. So, in the even my client does win the lottery, my advice to her husband is to be very nice to her and make sure she has a good estate planning attorney.