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The pros and cons of getting a lump-sum alimony payment

On Behalf of | Mar 20, 2022 | Spousal Support

Typically, alimony payments are made monthly. That’s often best for the paying spouse, who can budget them into their monthly expenses, and for the receiving spouse, who can count on that monthly income for as long as it’s court-ordered or you’ve negotiated.

Sometimes, however, one or both spouses decide that a lump-sum payout is best. If the paying spouse prefers making one lump-sum alimony (or spousal maintenance) payment, the other spouse and the court generally have to agree to that arrangement.

A paying spouse, if they can afford a lump-sum payment, often seeks this option because it allows them to put the marriage – and their spouse – behind them. If they don’t have children, they may never have to deal with their ex again.

The advantages of getting your alimony upfront

If you’re the recipient spouse, you need to consider whether a lump-sum payment is best for you. A one-time payment has its advantages. For example:

  •         If your spouse loses their job or business or has some other financial downturn, you don’t have to worry that they’ll seek a modification to pay less alimony.
  •         You don’t have to worry about collecting from them if they stop paying in full and/or on time.
  •         If you remarry, it won’t affect your alimony, because you already have it.

However, as you negotiate the amount of alimony, it’s probably wise to talk with a financial adviser to make sure that you’re getting enough to last for as long as you need it to. This may depend on how well you invest it.

Potential pitfalls of a lump-sum payment

Even a generous payment may pose problems. If you aren’t good at saving or investing, you could find yourself spending the money in a relatively short period and not having it to live on when you need it.

Further, it’s important to remember that while alimony is no longer considered income (or a deduction for the payer) under federal law, it is under New York state law. That lump-sum payment could leave you owing the Department of Taxation and Finance a lot of money.

These are just a few considerations. If a lump-sum alimony payment is on the table, it’s crucial to have good legal and financial guidance as you decide whether this is in your best long-term interests.