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Avoiding Monthly Alimony Payments

Making monthly alimony payments can be frustrating for a former spouse. Some people may want to avoid monthly payments because they don't want to risk the consequences of missing a payment one month. Others may want to make a lump sum payment so they can move on with their lives and not have a monthly reminder of a prior marriage.

Just like collecting a lottery winning all at once instead of spreading it out over a period of years, you may be able to pay off your entire alimony balance at once and avoid making monthly payments. Read on to learn about avoiding monthly alimony payments by making a lump sum alimony payment instead, as well as the benefits and tax consequences of receiving lump sum payments.

How to Avoid Monthly Alimony Payments: Use Lump Sum Payment

If you've been ordered to pay alimony, you may be able to avoid a monthly alimony payment program and pay all of your alimony in one lump sum. However, to qualify, both your spouse and the court will likely have to approve the lump sum payment. Several states allow a spouse to pay the total alimony amount in one lump sum as long as the total sum is equal to the total amount of future monthly payments.

Benefits of Taking Lump Sum Alimony

There are benefits to receiving a lump sum alimony payment. First, if you decide to take a lump sum payment, you may get more money than if you decide to take monthly payments over the course of many years. Because a lump sum payment must be equal to the total amount of future payments, and the lump sum is not discounted to the current day value, you'll most likely receive more. Having a dollar today is more than likely going to be worth more than receiving a dollar five years from now, given the opportunity to invest.

Second, you won't have to worry about collections problems if you decide to receive a lump sum alimony payment. Many people often must go to court and obtain court judgments that order their former spouses to continue making monthly alimony payments. However, if you opt for a lump sum alimony payment, you can avoid these enforcement problems as you will receive all of your alimony up front.

Tax Consequences of Lump Sum Payments

Keep in mind that there may be tax consequences if you decide to accept a lump sum payment for your alimony. If you receive a lump sum payment that is labeled as "alimony," it may be taxed for the full amount in the year that is received. However, if that same payment is instead classified as a "settlement," this may allow you to not be taxed on the amount.

You should consult with a lawyer or another expert that can help you determine how best to take a lump sum payment. The money that you spend to hire an expert to help you could be pennies compared to the cost of income taxes you may owe.

Need Help Avoiding Monthly Alimony Payments? Talk to an Attorney

Alimony payments, whether you want a monthly payment or a lump sum, come with benefits and drawbacks. You should know the consequences of your choices to make the right decision. If you would like to know more about your options for paying or receiving alimony, consider consulting with a qualified divorce attorney in your area.

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Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.

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