Wisconsin Family Law Info
sponsored by Nelson, Krueger & Millenbach, LLC
paying child support on lottery winnings
I Hit the Jackpot! Does That Mean My Spouse or Ex-Spouse Did Too?
When someone wins the lottery, it can make headlines. When West Allis local Manuel Franco won the $768 million Powerball in April, it was big news for weeks. State lotteries are becoming a growing phenomenon, with the winnings often accruing well past the million-dollar mark. So, if you hit the jackpot, does that mean your spouse or ex-spouse did too?
Let’s talk lottery winnings and divorce. Say you’re in the middle of a contentious divorce, and the stress of it all has you on edge. You’re at the gas station filling up your car on the way home from work, and you feel like you need a win. So, you try your luck and buy a Powerball ticket. Unbeknownst to you at the time, that lottery ticket is going to make you a millionaire. The Wisconsin Lottery does the Powerball drawing, and you find out that your ticket won you the $400 million jackpot.
So, now you’re wondering – how does this big win impact my divorce?
The short answer is, those winnings are now property of the marital estate. Since Wisconsin is a community property state, the court is going to presume that your lottery winnings should be split equally. Although this may seem unfair, it is consistent with how family courts in Wisconsin split other assets (and debts) in a divorce. When considering the marital estate, the lottery winnings will go in the “assets” column of your estate, and your soon-to-be-ex will likely get a chunk.
Although Wisconsin is a community property state, that does not necessarily mean your spouse will necessarily get exactly half of the winnings. The court can unequally divide assets based on a variety of factors. From an equitable standpoint, the court could decide that it is unfair to equally divide the lottery winnings based on the fact that the ticket was purchased after the divorce action was filed. However, a recent case in Michigan found that the husband was required to pay the wife nearly one-half of his winnings under the same circumstances, finding that because he had regularly played the lottery during the marriage, the losses he incurred came from the marital estate so the winnings should be equally shared as well.
Further, the court will likely consider the “final” winnings from the lottery –even if you win a $400 million jackpot, there will be taxes and other deductions from that amount. So even though you win $400 million, it doesn’t mean your ex gets $200 million and you’re stuck having to pay the taxes and other deductions out of your share. Those should be split equally.
So, what happens if you aren’t in the middle of a divorce, but you’re paying child support to her pursuant to a court order from a prior divorce, or a paternity case? Or, you aren’t divorced yet but you still would owe child support or possibly maintenance?
In situations where you are ordered to pay child support, the court generally weighs two factors when they set child support: your placement schedule, and your income. If you’re unsure how child support gets calculated, check our other blog posts for more information on calculating child support. So now you’re asking yourself – are my lottery winnings income? Those winnings aren’t regularly recurring (if you take the lump sum payout option), and you aren’t guaranteed future lottery winnings. How can they call lottery winnings “income”?
Unfortunately for you, the court can consider your lottery winnings as income when they calculate your child support. How they consider the winnings will depend (in part) on how you are being paid your winnings – did you take the lump sum payout option, or are you getting regularly recurring monthly payments of your winnings? If you are getting the regularly recurring monthly payments, then it is more likely the court will consider that “income” because it is regularly recurring and available for child support purposes. If, however, you take the lump sum payout, then it is less clear what the court will do. Child support is intended to “equalize” the households of both parents so that the children have similar experiences (and opportunities) at both parents’ houses. The court doesn’t want one parents house to the be “fun” house with lots of expensive gadgets and fancy food, and the other parents house to be boring. Clearly if one parent wins the lottery, the standard of living at their house is very likely to increase. Whether or not the courts would award the other parent a portion of your lump-sum winnings will likely depend on the facts specific to your case. It will also depend on the amount of winnings – if you win a $10,000 lottery, the court will look at those winnings differently than a $10,000,000 win.
Even though your winnings may be included for child support purposes, they may not be included for maintenance purposes. The stated goal of maintenance under the law is to maintain your spouse at a standard of living enjoyed during the marriage. Clearly, a large lottery jackpot is far above any standard of living that was enjoyed during the marriage. There is a case in Wisconsin where the appellate court found that a post-divorce lottery win should not necessarily be grounds for an increase in maintenance to the other spouse for that reason.
The worst thing you can do, however, is to try to hide your winnings. Any time someone tries to hide assets during a divorce, the court could penalize that person by awarding the entire asset, or an unequal share, to the other party. After all, one-half of $400 million is still $200 million dollars!Posts about paying child support on lottery winnings written by nelsonda
What Percentage of Lottery Winnings Can They Take for Back Child Support?
If Owing Back Taxes or Child Support, Will the Government Take .
Winning the lottery may seem like a dream come true, but there can be some complications. If there is a child support order and back support owed, you may not see all of the big payoff. Most states have laws allowing the seizure of lottery winnings for certain financial obligations, and child support is one of them.
Withholding on Winnings
State lottery authorities will pay out the winnings from your lucky lottery ticket. Before they cut the check, however, they will withhold for income taxes (federal and state), and research other debts you may have. They may have the authority to pay on court judgments, back taxes, and student loans, which carry a federal guarantee. Most states also allow their lottery agencies to verify and withhold past-due child support in any amount. For example, the state of New Jersey runs such a check on anyone who wins more than $600 from any lottery.
Each state writes its own law on the interception of lottery winnings. California, for example, has set up the Interagency Intercept Collection Program. A child-support agency with a delinquent account will submit the information to the IICP, which keeps the information on its books. The lottery agency submits the Social Security numbers of lottery winners; other triggering events could be a payment from the state’s unclaimed property office, or the payment of a tax refund from the state tax authority. Local child-support agencies have first priority in this system; non-local support orders come second.
No Limit Collections
The states don’t place a limit on the percentage of past-due support that can be subject to an intercept. If the lottery pays $25,000 and the past-due child support is the same amount, then the entire prize can be seized. This general rule will prevent a situation where a multimillion-dollar winner is only required to satisfy a few thousand dollars of past-due support, if state law happened to limit the percentage that could be paid.
In addition, a lottery win can lead to a change in current child support that is due. The custodial parent can petition the court for a modification of the support order. In many states, a substantial change in the financial circumstances of the parent who’s paying can be valid grounds for a change in support. Since a lottery prize is considered income (and taxable income, at that), it will allow a change in the calculation of the monthly child support amount. For that reason, lottery winners who have child support in the picture would be wise to consult an attorney versed in child support and marital separation agreements.
Can the Wages of a Wife Be Garnished to Pay the Taxes of Her Husband? →
Help for the Noncustodial Parent With Changing Child Support →
Avoid Bank Account Garnishments by a Debt Collector →
- California Franchise Tax Board: Interagency intercept Collection Program
- CNN.com: Powerball Winner Wanted for Child Support
Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor’s degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.Winning the lottery may seem like a dream come true, but there can be some complications. If there is a child support order and back support owed, you may not see all of the big payoff. Most states have laws allowing the seizure of lottery winnings for certain financial obligations, and child support is one of them. ]]>