Texas is a community property state. This means that property that you own at the time of your death or divorce will be presumed to be part of your community estate owned both by you and your spouse. It does not matter whose income was utilized to purchase or acquire the property. It does not matter whose name appears on the title or receipt of the document. All that matters is that the property was in existence at the time of your divorce. The presumption means that either you or your spouse would need to prove with evidence that the property should be a part of one of your separate estates if you do not believe that the property should be subject to division in your divorce.
The two main examples of when property acquired during your marriage may not count as community property is in reference property acquired by gift and by inheritance. If someone gifted you some money but somehow made it specific for you to be the only intended recipient then this would normally be considered separate property belonging to you. The second example is if someone passes away and they leave you some money or property in their will. This would also be counted as separate property under the community property laws of Texas.
Otherwise, spouses share in the property that is acquired in Texas. It doesn't matter if your spouse makes much more money than you do or if your spouse has their name on the title to the property. All that matters is the money that was used to purchase the item and the date on which it was purchased. If your spouse used their income from their 9-5 job, then the property will likely be community property and will be subject to division in the divorce. Whether you and your spouse can divide that property yourself using negotiations or if a judge will ultimately need to decide the matter is a different subject altogether. A lottery ticket purchased with community income would be community property. The winnings would be community property.
What steps should you take after winning the lottery?
So, you went ahead and bought a lottery ticket that ended up winning big. Congratulations. Once you think that you have the winning numbers, combination, or whatever is required in a certain game to win the big prize you should go ahead and log onto the lottery website just to make sure that you have a winning ticket in your hand. You should sign the back of the ticket and write your name below your signature almost like you were signing the back of a check or something similar. Make a copy of that ticket and then keep the original ticket in a safe place.
It may be wise for you to hire an attorney who works in estate planning, like one from the Law Office of Bryan Fagan, to help you plan for how this money should be handled for an end-of-life situation. In the meantime, if you have debts, bills, or other places this money could be spent you can work with your spouse on determining how to use it. If you win the lottery while going through a divorce, then you should work with your divorce attorney to figure out how to keep the money safe. If you have not done so yet, you will need to share with your spouse and their attorney that you won the lottery so those funds can be considered in the community when it is being divided by the two of you.
What if you are separated from your spouse and win the lottery?
This is, at first glance, a little bit of a grey area. Let’s suppose that you and your wife separated from one another on October 15th. This means that you no longer live together and are planning on getting a divorce at some point soon. However, before those divorce papers can be filed on a whim you buy a lotto ticket. When you get home from work you turn on the news and learn that the numbers you selected ended up being the winning combination. You’re staring at the television speechless. After confirming that you have the winning combination in your hand the next thought you have has to do with whether you have the share the money with your spouse. After all, you're no longer living together and are about to file for divorce. Seems fair that the money would not need to be divided up.
With that said, you are married until you are not married. That is until a judge declares your marriage to have ended you are still married. This means that before the divorce is filed, during the divorce, and up until the moment that your final decree of divorce is signed off on by the judge you are still married. That lotto ticket purchased during your marriage counts as community property.
What if you are already divorced and win the lottery?
On the other hand, if you win the lottery after you have already gotten divorced then this would count as your separate property and would not be a part of the divorce. One thing to bear in mind with an increase in your income or assets because of lotto winnings or even as a result of an increase in pay from your day job could lead to an increase in your child support responsibilities. Your ex-spouse may learn about your winnings and make an argument that your resources have increased to such an extent that this is the equivalent of receiving a raise.
Hiding your lotto winnings from your spouse- how risky is this?
Winning the lottery is a dream that many of us have. The lottery winnings would be a ticket out of whatever situation that we found ourselves in at that moment in time. Even if our lives aren't so bad, it would always be nice to have the option to tell our employer that we aren't coming to work the next day. Paying off your debts, setting some money aside for your kids, and taking a big trip may be exactly what you had in mind when you think about the lotto winnings and what you would do if you were lucky enough to win the big prize.
However, what if you were in a position where you finally win the lotto but are going through a divorce? Would you be tempted to try and hide those winnings from your spouse until the divorce is over? Don't try and spend any more on luxurious items like clothes or a new car. Just lay low, put your winnings in a new bank account that you just opened, and just hope that your spouse never finds out about the winnings. That plan carries with it some risks, but those risks may be worth the reward if you can successfully hide the money and not have to divide it up during the community property division of your case. Or, at least, that is the plan that you had in mind.
One of the reasons why you may want to hide the money from your spouse is that he or she is terrible with money. She may be a compulsive shopper who cannot stay away from the stores or any online retail outlet. Or your husband may be a gambler who spends every penny he earns (and then some) on sports betting. With the NFL season ramping up and the NBA soon to start your spouse maybe someone who cannot be trusted to take on any of the money. Your reason that you’re hiding the money is being done in their best interests.
Whether you claim the money under your name or do so anonymously, hiding money from your spouse is not necessarily against the law but it can get you into hot water in a divorce. The family court judge will oversee the entire process even if you do not walk into his courtroom until the case is done and over with. Here is how your hiding assets from your spouse can come back to haunt you if you end up being caught before the divorce comes to an end.
Consequences for hiding assets from your spouse during a divorce
Since Texas is a community property state there is a great deal of emphasis placed on making sure that both you and your spouse are honest and forthcoming about the income, assets, and property that you own. This is because the property that you own is presumed to be divisible in the divorce. It does not matter who earned the income that purchased the property. It does not matter whose name appears on the property. All that matters is that it was purchased during your marriage with community income. The rest is a matter of figuring out how to divide up the money and property in a way that is just and right.
In other states, the person who earns more income tends to also be awarded more property. Texas doesn’t work that way. If you think about it, even if your spouse was a stay-at-home spouse for most of your marriage, she still contributed a great deal to your household in an economic sense. Think about what you would have to pay someone to care for your child, clean your home, cook, run errands, and perform all of the other necessary household tasks that make up a typical home. Odds are good that these costs would add up to a substantial number. This is one of the reasons why Texas is a community property state.
If you decide to hide assets from your spouse and it is discovered that you have done so there will be consequences to consider. There is a part of your divorce that will be known as Discovery. During discovery, you and your spouse will have an opportunity to submit questions and requests for information to the other person. This is all done through the court. If you have purposefully lied to your spouse, withheld information, or otherwise not been forthcoming about your lotto winnings and that information is discovered somehow then your spouse may be able to ask a judge for attorney's fees and other penalties for having violated the terms of the discovery request. The penalty could be quite severe depending on the nature of your actions and the size of your lotto winnings.
Have you ever tried to run a credit check for yourself? It's a wise thing to do even if you are not going through a divorce. The whole process will allow you to see what sort of debts you have in your name, your payment history on debt, and the actual values of debt you have across different areas. It is useful to seek a copy of your credit report and history in a divorce so you can determine if your spouse has opened up any debt accounts in your name. You may want to request to see a copy of your spouse’s credit history or account to see if any money is being hidden away or if any large amounts of debt were either taken out or paid off because of the lotto winnings.
Even simpler would be to look at your bank account to determine if you believe that any amounts have been moved around or otherwise emptied. For example, what if your spouse has opened a new bank account but needed a little bit of money to do so? To not cause any suspicion your spouse may have opened an account with $15.00 that was withdrawn from your checking account. While this sum of money may not be especially noteworthy, you can look for small clues like this to determine whether something much larger is happening.
Another worthwhile set of documents to request in discovery is tax returns, loan applications, or any other financial statements that your spouse may have investigated after winning the lottery. It would not be the first time for a spouse to use s relatively small amount of lotto winnings to secure a larger loan or line of credit. At first glance, these steps may not be noticeable. However, you need to pay attention to the details to protect yourself in the divorce.
There are also potential impacts to hiding assets like lotto winnings on your marital or premarital property agreement. A premarital or marital property agreement is a negotiated document that spells out exactly how your property will be divided in the event of a divorce. There are many advantages to negotiating a premarital property agreement, foremost among them that you do not have to negotiate this subject with a spouse that you are on rocky terms with. Why not do negotiating with your spouse when you are on good terms instead of bad?
Well, if it comes out in the divorce that you have attempted to hide assets from your spouse in the divorce then a judge could decide to render the entire agreement void. That means all the time and effort that you put into creating the marital property agreement could be for nothing. This would not only mean that you wasted your time in creating the document but that you now must renegotiate the entire subject within the divorce. Specifically, within a divorce where you have been untruthful to your spouse. Not exactly an ideal situation when it comes right down to it.
Final thoughts on the lotto and your divorce
Winning the lottery can be a dream under the best of situations for many of us. The financial flexibility that lottery winnings provide can give us options. With options, we can make good decisions for ourselves and our families. While winning the lottery during a divorce case is not exactly the best time to do so, it is better to have it now than to never have won it at all, however. With that said, you need to be careful, to be honest with your spouse about the winnings, and to disclose information to your attorney regarding the nature of the winnings.
You and your spouse can work out between yourselves how to divide up the money. The more assets and property in your divorce the more creative you can be with how you divide up the money- if at all. There are a lot of ways to negotiate your way through a divorce. Being truthful about lotto winnings and providing information to your spouse about the nature of that win can foster a good discussion about the remaining assets in your case.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed family law attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law as well as how your family's circumstances may be impacted by the filing of a divorce or child custody case.