The Pros & Cons of Lump Sum Alimony Payments
Before the divorce process can be finalized, all financial matters relatingto spousal maintenance, or “alimony,” must be agreed uponby both spouses or determined by the court. The purpose of alimony isto offer financial support to a lower earning spouse as they adapt tobeing single and self-sufficient. Typically, alimony is paid in monthlyinstallments to benefit the financial situations of both former spouses.However, the paying spouse or the court can decide that submitting a lumpsum amount is an acceptable alternative to an on-going payment plan.
Lump sum payment options include:
- Marital property division
By choosing to pay through marital property division, the paying spouseessentially agrees to forfeit a portion of the assets there are entitledto in lieu of paying alimony.
A lump sum payment can offer unique benefits to separating spouses dependingon their specific financial circumstances and the dynamic of their relationship.
For example, when a lump sum maintenance payment is provided, both spousesare relieved of any financial obligations to each other. The paying spousenever has to be concerned about affording spousal support or the legalconsequences of missing a payment. Likewise, the receiving spouse doesn’thave to worry about not receiving the payments they are legally entitledto. Also, the lump sum payment may provide enough financial aid to helpthe receiving spouse pay for expensive necessities, like a house or a car.
Unfortunately, there are also downsides to selecting this maintenance option.For example, it may be difficult for the paying spouse to afford the totalsupport payment. Taking a loan out is unadvisable because it requiresborrowing at excessive and non-deductible interest rates. Depending onthe stipulations listed in the settlement agreement, the receiving spouse,in turn, may have concerns about reporting the payment as taxable income.The potential tax impact could greatly reduce the amount of financialaid available to the receiving spouse.
Seek Legal Guidance
Preparing for divorce also means planning for your life after the paperworkis finalized. Contact Wakenight & Associates, P.C., if you requiredivorce representation or have concerns about paying or receiving maintenance.Our experiencedIllinois divorce lawyers can help you navigate this complicated legal process and negotiate a beneficialdivorce settlement agreement.
We have offices in Mokena, Elmhurst, Oak Park, and Joliet! Call our divorce attorneysat any of our convenient locations to schedule your consultation.