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The Pros & Cons of Lump Sum Alimony Payments

Before the divorce process can be finalized, all financial matters relating to spousal maintenance, or “alimony,” must be agreed upon by both spouses or determined by the court. The purpose of alimony is to offer financial support to a lower earning spouse as they adapt to being single and self-sufficient. Typically, alimony is paid in monthly installments to benefit the financial situations of both former spouses. However, the paying spouse or the court can decide that submitting a lump sum amount is an acceptable alternative to an on-going payment plan.

Lump sum payment options include:

  • Cash
  • Check
  • Marital property division

By choosing to pay through marital property division, the paying spouse essentially agrees to forfeit a portion of the assets there are entitled to in lieu of paying alimony.

The Pros

A lump sum payment can offer unique benefits to separating spouses depending on their specific financial circumstances and the dynamic of their relationship.

For example, when a lump sum maintenance payment is provided, both spouses are relieved of any financial obligations to each other. The paying spouse never has to be concerned about affording spousal support or the legal consequences of missing a payment. Likewise, the receiving spouse doesn’t have to worry about not receiving the payments they are legally entitled to. Also, the lump sum payment may provide enough financial aid to help the receiving spouse pay for expensive necessities, like a house or a car.

The Cons

Unfortunately, there are also downsides to selecting this maintenance option. For example, it may be difficult for the paying spouse to afford the total support payment. Taking a loan out is unadvisable because it requires borrowing at excessive and non-deductible interest rates. Depending on the 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 financial aid available to the receiving spouse.

Seek Legal Guidance

Preparing for divorce also means planning for your life after the paperwork is finalized. Contact Wakenight & Associates, P.C., if you require divorce representation or have concerns about paying or receiving maintenance. Our experienced Illinois divorce lawyers can help you navigate this complicated legal process and negotiate a beneficial divorce settlement agreement.

We have offices in Mokena, Elmhurst, Oak Park, and Joliet! Call our divorce attorneys at any of our convenient locations to schedule your consultation.


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