Massachusetts is an “equitable distribution” state. This means that in divorce, marital property is supposed to be divided equitably between both spouses (which isn’t always the same as equally). Marital property is generally anything acquired by either spouse during the marriage, but even that has some gray areas. If an asset was brought into the marriage by one spouse but greatly appreciated in value during the marriage, it might be considered marital property. On the other hand, a gift/inheritance given solely to one spouse during the marriage would likely be categorized as separate property (and not subject to division).
Assets don’t always fit neatly into one category or the other, and for most small-value assets, the classification isn’t a huge deal to either spouse. But for big-ticket items, the fight over classification can be lengthy and acrimonious. A recent news story is a good example.
In 2013, a Michigan man was two years into a separation from his wife and in the process of divorce when he won the lottery. After taxes and other costs, his take-home was about $38.8 million.
The couple had agreed to resolve their divorce through binding arbitration, and the arbitrator decided that the lottery proceeds should be considered marital property and therefore subject to division. Even so, it wasn’t a 50-50 split. The wife was awarded $15 million. The husband was not happy about that decision.
It took another 5 years to finalize their divorce, and even that didn’t end the feud. The husband’s attorney appealed the arbitrator’s decision, which was upheld by the appellate court. The attorney told news sources that appeals to higher courts will continue.
So how should lottery winnings be classified when the ticket was purchased during the divorce? On one hand, the man presumably purchased the ticket without consulting his estranged wife (so the winnings could be considered his alone). On the other hand, this probably wasn’t the first lottery ticket the man had purchased. He may have been playing the lottery for years during his marriage with no luck. Had he won earlier, those winnings surely would have been marital assets.
Whether you have significant assets or modest ones, it is important to be efficient and reasonable in the asset division process. Otherwise, even a major stroke of good luck can begin to feel like a burden that takes years to resolve.
