Divorcing spouses have another choice when it comes to the manner they get their spousal support payments. Whether you call it alimony, maintenance, or spousal support, you have the option to either get regular monthly payments or take it all in one lump sum. Needless to say, to take the lump sum option the ex-spouse should be financially able to honor it. Read on to find out what the advantages of taking such a payment might be.
Lump sum payments of spousal support
Depending on what state you live in, this form of spousal support might be called a buyout or a lump sum payment, but it just means that the receiving spouse agrees to a large up-front payment of spousal support in lieu of regular payments. You might be wondering why anyone would possibly turn down this option since it appears to be a win-win for the receiving party. Often, the amount of the lump sum turns out to be less money than if regular payments were made. That is due to what is known as a discount. The amount of the discount varies, so be sure to know how much money you might be sacrificing in order to be paid the lump sum. The lump sum payment, if the offer is accepted, can come in the form of cash, check, or property.
Some good reasons for accepting a lump sum buyout
It is insurance against future changes in income. If your former spouse experiences a job change in the future that results in less of an ability to pay spousal support, they may be able to have the courts reduce the monthly payments. Getting it upfront reduces the chances that your spouse's income ups and downs will affect you.
You can cut ties with your ex and move on. Taking a lump sum payment means that you won't need to deal with that ex more than necessary.
It's one less thing to worry about. Particularly for those who've been through a contentious divorce, you might not want to take the chance that your ex will become angry and try to avoid paying those regular payments.
It provides a quick infusion of cash. This can be used for housing or to shore up a retirement account.
It protects your income from suffering a hit when you remarry. Most spousal support agreements call for regular payments to end once the receiving spouse remarries, but taking it ahead of time can secure those funds no matter what.
Discuss the pros and cons of taking a lump sum spousal support buyout over that of regular payments with your family attorney before you make a decision.