By Allison Kruk Ormond, Esq.
March Madness is now in full swing with the Sweet Sixteen and Elite Eight starting this weekend. Depending on your state’s laws on betting on college sports, you or your spouse may have prepared a bracket or wagered on the games.
In watching the excitement and Cinderella stories unfold, you probably aren’t thinking about your divorce case. However, your winnings (or losings) could have an impact on family law issues in ways you might not expect.
Are Gambling Winnings Subject to Equitable Distribution?
When it comes to the division of marital property, New Jersey is an equitable distribution state. This means that property acquired by either or both spouses during the marriage may be subject to division during a New Jersey divorce proceeding.
However, marital property in New Jersey does not necessarily get divided 50-50. Rather, equitable distribution in New Jersey requires the Court to consider a number of factors in determining how marital assets should get split. Some of those factors include each spouse’s income and earning capacity; each spouse’s custodial responsibilities for children born of the marriage; the income and property each spouse brought to the marriage; and the economic circumstances of the parties.
A full list of these factors is contained in New Jersey’s equitable distribution statute, N.J.S.A. 2A:34-23.1.
Whether an asset – like one spouse’s March Madness winnings – is subject to equitable distribution depends on whether it was legally and beneficially acquired during the marriage. This means that the windfall must have occurred before the filing of the complaint in divorce. If one spouse legally bet on college sports and won after the complaint was filed, that gambling win may be considered that spouse’s separate property, since it was acquired after the marriage end date.
If the gambling win happened during the marriage, the proceeds may be subject to equitable division during the divorce process.
For instance, in DeVane v. DeVane, the New Jersey Appellate Division considered whether lottery winnings should be divided as part of a couple’s divorce proceedings. Ultimately, the appeals court affirmed the trial court’s decision to include such winnings in the equitable distribution of property ordered as part of the divorce.
In so ruling, the Appellate Division found that the judge did not abuse her discretion in finding that the lotto winnings were marital property. The Appeals Court further agreed with the trial court that the proceeds should be divided equally between the parties because they arose not from the effort of either spouse but from “fortuitous events” during the marriage.
Extending the logic of DeVane, other gambling winnings acquired during the marriage may be part of the division of property during a divorce.
Could I Be Held Liable for My Spouse’s Gambling Debts?
On the flip side, during a divorce, there may be outstanding liabilities owed due to one spouse’s betting or excessive gambling. Since marital debts and liabilities also get divided as part of a divorce, you may be wondering whether you will have to pay for gambling debts your spouse incurred during the marriage.
Marital debt is any debt or obligation incurred for the benefit of the marital enterprise. In other words, the liability must have benefited the marriage in some way in order to be allocated between both spouses. Otherwise, the debt should be considered one spouse’s separate liability.
Common examples of marital debt include a mortgage on the marital residence or a home equity loan taken out for repairs on marital property.
However, in the case of gambling debt, it is possible that the Court will consider that liability to be separate if it served no benefit to the marriage and was due to one spouse’s excessive and irresponsible betting or untreated gambling addiction.
Additionally, excessive gambling during the marriage may be considered dissipation of marital funds. In other words, it may cause the non-gambling spouse to get a greater proportion of marital assets because the other party wasted these monies during the marriage.
For instance, the New Jersey Court has stated that dissipation of marital property may be found where “a spouse uses marital property for his or her own benefit and for a purpose unrelated to the marriage at a time when the marriage relationship was in serious jeopardy.”
In cases of excessive betting, it may be that one spouse is using marital funds to further their
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