When a couple divorces, one of the terms of the divorce may call for continuing financial support for one of the former spouses. Typically, these alimony payments become a monthly legal responsibility that one ex-spouse must continuously make to the other until the other one remarries. However, there is another option besides these typical month-to-month alimony payments, lump sum alimony.
What is Lump Sum Alimony?
Several states have made it possible for former spouses to settle their alimony obligations with a single lump sum payment rather than the traditional series of monthly payments. This lump sum payment is equivalent in amount to the total alimony obligation if the alimony were paid out in the monthly payments, but may be reduced by a discount rate that reflects the time value of receiving the total payout early.
What Advantages Are Offered by Accepting a Lump Sum Alimony Payment?
There are several reasons why a lump sum payment may be more advantageous that the traditional monthly spousal support payments. The most obvious advantage is that agreeing to the lump sum alimony payment severs the continuing financial ties to the former spouse. As a result, there is no need for concern that a former spouse will pay late or will not pay at all. There is also the advantage of getting a large sum of money up front. This money could be used as investment income, to purchase a new home or to sustain a lifestyle while training for a new career. If the receiving spouse is disciplined with spending habits, owning that lump sum of cash can be a nice advantage over having money trickle in over many years.
Additionally, the lump sum alimony is a final settlement of the spousal support issue, so if the receiving spouse gets remarries the following day, there is no effect on the spousal support. On the other hand, monthly spousal support payments would normally terminate upon remarrying. Finally, if the obligated ex-spouse happens to die at an early age, the alimony payments to the receiving spouse will stop. Of course life insurance could protect the receiving spouse against this type of event. But the lump sum payment would negate any concerns about insurance premiums being up-to-date.
If you are getting divorced and are looking into alimony payments, ask your divorce attorney, like one from Koth & Gregory PC Law Firm, if lump sum alimony payments are right for your situation. Lump sum alimony payments may give you a discount on alimony, as well as relieve the responsibility of having to pay alimony each month.