Alimony or spousal support is a financial payment made to a former spouse after separation or divorce. The purpose of alimony is to recognize a lower-income spouse’s contribution to a marriage and help that spouse become financially independent. Traditionally, alimony payments are made monthly, but there are exceptions. One of which is a lump-sum alimony payment. A spouse may request a lump sum if he or she wishes to purchase a home, needs money to complete a training program, or doesn’t trust the ex-spouse to make regular payments.
A lump-sum spousal support may be the best option for your ex, but is it the right choice for you?
There are advantages of a lump-sum alimony payment. Once you have made the payment, you will have no ongoing financial obligations to your ex-spouse. In addition, your ex cannot require you to maintain life insurance in order to guarantee alimony in the event of your death.
Disadvantages of a Lump-Sum Alimony Payment
The downsides to paying in a lump sum include the following.
- A lump-sum payment can be a financial hardship if you don’t have the financial resources to make the payment.
- If you borrow money to provide a lump sum, you will have to pay interest. This can end up costing more than making monthly alimony payments.
- You cannot take an alimony deduction for a lump-sum payment.
Every situation is different. However, in most cases, the divorce attorneys at Petrelli Previtera Schimmel advise our clients to make monthly spousal support payments and to document each payment made. This prevents the spouse from using all the money at once and then later filing for spousal support with the court. It also allows you to deduct the payments made from your income. This deduction can translate to a significant tax advantage. Our attorneys can work with you and an accountant to determine the best option for you and your family. To learn more, contact Petrelli Previtera Schimmel at 215-523-6900.