Struck a lottery while married? Prize deemed part of marital assets

The only thing better than winning a Porsche Boxster S sports car in a lucky draw, at least for one couple here, would be not winning one, given how the luxury car sparked more disputes between them.

The couple, happily married at the time, won the coveted vehicle in a lucky draw staged by a bank to promote its personal loan services.

The wife was the actual winner, but she did not keep the car, which did not come with a certificate of entitlement. Instead, she sold it for about $83,000 and used the funds to pay off part of the mortgage on the matrimonial home.

All was well during the good times, but the marriage hit the rocks and swords were drawn in clashes over their assets amid the divorce proceedings.

The wife wanted the entire sum of the car sale to go to her as she was the lucky one who won the prize without any help from her husband.

But her luck ran out in the High Court, which ruled that windfalls that occur in a marriage, be it a lottery win or an extra large bonus payment to a spouse, would be considered as joint income to be shared.

As High Court Judge Choo Han Teck put it: “Lottery prizes gained during a marriage are part of marital luck, much like marriage itself, and so are part of matrimonial assets.”

So any lottery winnings must be shared, and since the car was sold for about $83,000, the spouses would be entitled to about $41,500 each.

The money had gone into their mortgage, so the amount would be used to calculate their share in the property, which would be determined by other cash amounts that they had each contributed to the purchase.

The outcome would be different if you had struck a big lottery win before you tied the knot.

Take for example a man who wins $2.5 million in a Toto draw and uses the money to buy a condominium that he then leases out as an investment. He later marries, and the couple buy another property for their matrimonial home.

If the marriage breaks down, the former wife would not have any claims over the lottery winnings or the condominium, as these are deemed premarital assets and not up for sharing.

The Porsche case highlights three key points on financial planning that all couples should note.

Overspending results in high debt

Ironically, the reason the wife in this case won the supercar draw was that she had a personal loan with the bank. Although the couple held senior and high-paying positions in their companies, both had substantial debts.

For instance, the wife had about $50,000 in her bank accounts but her debts exceeded $60,000. Similarly, the husband had about $18,000 in his account but owed almost $70,000.

His salary was not disclosed but the wife’s $20,000 monthly pay was probably higher than his because in the course of their 27-year marriage, she had been covering for him whenever he was late in paying debts. Bank records showed that she had paid at least $60,000 towards settling the husband’s liabilities.

It was not disclosed how the couple, who have three adult children, racked up these debts, which included two term loans and an overdraft loan.

The main message in this case is clear though – your financial well-being does not depend on how much you earn but how much you spend.

Even if you earn $20,000 a month, it is hard to save for retirement if your expenses keep exceeding your income.

Relying on loans and credit cards to offset expenses is a big mistake in the long run because as the debt balloons, the compounded interest will add to your misery.

A better solution is to reduce non-essential expenses to cut your monthly bills because all debts must eventually be paid.

In this case, the couple had a $5 million home and over $600,000 in their CPF accounts, so their debts only reduced the pool of the matrimonial assets to be shared.

Bank records are strong evidence

If you are involved in a dispute over money, the last thing you should do is to try to be economical with the truth because bank records can usually shed light on the real situation.

In this case, the husband accused his former wife of stashing away money because she had not been forthcoming with transactions related to her bank accounts. For instance, over a period of almost 10 months, she deposited and withdrew about $400,000, an average of $40,000 a month.

As her monthly salary was about $20,000, Justice Choo found it odd that she could have a monthly inflow and outflow of $40,000, a sum two times greater than her income.

“I am of the view that the wife ought to explain those deposits and withdrawals, but she did not,” said the judge, as he gave the husband a further 5 per cent share of the matrimonial assets due to the non-disclosure by his former wife.

The husband also complained about the lack of transparency over a bank account his wife opened with her best friend. It was not known how much she deposited, but records showed that she withdrew about $50,000 from the account.

According to her friend, the account had about $100,000, which was shared between them.

As the bank record showed that the wife had withdrawn about $50,000, the judge ordered that the whole amount should be added to the pool of matrimonial assets for sharing.

Share based on couple’s contributions

It is relatively easy to work out the cash contributions to a marriage because mortgage payments and other big-ticket items can usually be detailed in bank records.

What is less clear is how couples contribute indirectly to their families, as day-to-day expenses are hard to track.

For instance, the wife said she had been paying for household expenses such as groceries, bills, family holidays, the domestic helpers’ expenses as well as costs for their children, including education and tuition fees. Her husband claimed that he paid for utilities and was overseeing and paying for some of the renovations on their home.

Justice Choo noted that the wife even helped to pay off her former husband’s debt, and found that she had contributed more than her husband for the upkeep of the family. As she was also the primary caregiver for their children, she was given a 70 per cent share for indirect contributions.

Given that the court had earlier calculated that their cash contribution was on the ratio of 57 to 43, the combined ratio worked out to be 64 to 36 in favour of the wife. But as she lost 5 per cent of her share due to the non-disclosure of her banking transactions, her final share became 59 per cent while her former husband got 41 per cent.

The couple’s total assets were worth $5.76 million, so she got $3.4 million while her former husband received $2.36 million.

The lesson from this case is that you do not need to win the lottery to have money in old age; just watch your non-essential expenses so that you can avoid incurring a huge debt that will derail your retirement plans.

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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