One of the things that will be worked out in your divorce is the payment of spousal support, also known as alimony. Alimony is the financial obligation to make payments to the other spouse for a predetermined length of time in order to prevent the divorce from causing undue financial hardship on either person. The court will usually take into consideration the length of the marriage, the contributions of each spouse to the marriage, and the future earning potential of each spouse when deciding spousal support.
Should I take a lump sum alimony payment?
In most cases, alimony will be paid in monthly installments to the other spouse. Should one spouse miss a payment, the other is allowed to take legal action to obtain that money. With this kind of responsibility, one spouse may choose to make one lump sum alimony payment to avoid having to partake in the monthly payments. If this sounds like a good option, both spouses must agree to the lump sum amount and ensure that the spouse that is paying the lump sum amount has the available resources to do so.
Some benefits of taking a lump sum payment alimony include:
- Getting more money up front than may be received over the course of many years
- Being freed from collections problems that can arise from monthly payments
- The ability for spouses to be freed of obligations to one another
While these advantages may make receiving a lump sum alimony award worthwhile, it should also be noted that there are tax consequences that apply. The year the alimony sum is received, a spouse may be taxed on the full amount. If it is considered a settlement, the money may not be taxed. Speaking with a divorce attorney can help determine which option of alimony, whether it be a monthly sum or lump sum amount, will be the best option to suit your needs.