If you are in a position to receive alimony as a part of your divorce, the settlement (or the judge) may specify exactly how much your ex-spouse is obligated to pay and over what time period. Normally, your ex would be required to send you a monthly alimony payment, but you can attempt to negotiate a lump sum payment as part of your settlement, usually in exchange for a lower overall payout. (Are you eligible for alimony after your divorce? Find out!)
Is it ever a good idea to try to receive your alimony payments as a single lump sum even if it means less money overall? The answer is yes! Here are five major reasons why:
1. Your Ex-spouse Could Lose His Job or Face Other Financial Difficulties
Your ex can only pay you alimony if he can afford it. These days, no job is certain, and if your ex loses his job (and therefore his income), he can go back to court and ask a judge to lower or even eliminate his alimony obligations altogether. It’s not just your ex-spouse’s job you have to worry about. If he faces any financial difficulties, he can use this to convince a judge that he can’t afford alimony. If he gets sick and faces high medical bills, or if he remarries and has to support his new family, you could find that your monthly alimony checks disappear!
2. You Could Get a Job
If you took care of the home and/or children before your divorce, you may have a very strong case for requesting alimony from your ex-spouse. However, if your ex can convince a judge that you no longer need his alimony payments to support yourself, you could lose that helpful monthly payment. That means that if you get a job or start earning income by other means after your divorce, you could be sacrificing your alimony.
3. You Could Get Remarried
As soon as you remarry, your ex-spouse is no longer required to pay you any remaining alimony. Imagine if you meet someone special and want to join your life together with his. Now, you have to make the choice of whether you want to lose out on alimony payments or wait until the alimony period lapses before walking down the aisle again. If you take the alimony payments in a lump sum, you won’t get trapped in this difficult conundrum.
4. Your Ex-Spouse Could Just Stop Paying
The beauty of accepting a lump sum alimony payment is that you will have the security of knowing that you received the full amount of the payment, even if the overall amount is less than you would have received if you had taken monthly payments. This security is important, because you can’t control your ex or his circumstances. He can decide for any reason at any time to stop paying your alimony. Sure, you can take him to court and try to force him to pay, but imagine the hassle, stress, and expense of that!
5. You Can Use a Lump Sum to Buy Out Your Ex-Spouse’s Share of Your Home
If you want to stay in your home and your ex-spouse agrees to leave, you will need to find a way to buy him out of his share of the home’s equity. Let’s say that you have $80,000 worth of equity in your home, but you don’t exactly have the $40,000 you need to buy your ex out just sitting around in your bank account. What to do? One option is to apply the full amount of your ex-spouse’s alimony obligations against what you owe him for the house. For example, if his alimony obligation is $30,000 to you, then if he agrees, you can apply that toward the $40,000 you need to buy out his equity in your home. Now, you just have to find $10,000 on your own! (Learn other ways to keep your house during a divorce.)
If your mother ever told you that “One in the hand is worth two in the bush,” she might have been onto something! Consider asking for your alimony payments as a lump sum during your divorce negotiations. At least you’ll have your money in hand, and if you don’t need it right away, you could even invest it so that it can grow for you over time!
If you are asking for a lump sum, you’ll probably want to seek professional advice to determine the amount you should ask for.
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I am trying to help my mother in law, who has been divorced for 8 years from her ex.
In the divorce decree, he pays alimony, was supposed to give her 50% of his pension, and 30% of his 401k.
Without going back to court, I am helping her negotiate a settlement.
Is a lump sum in lieu of alimony payments taxable?
She was 62 at the time the decree said she was to receive 50% of pension. No paperwork was ever turned into the pension plan administrator. Now, she is 70. If we turn the decree into the pension administrator, how will the 50% of the pension be calculated as she didnt take any payments for the last 8 years?
Lastly, he was to give her 30% of the value of the 401k as of 2013 (lump sum cash pmt). He told her over the years he would pay her when he turned 60 (this year) but I think she should get the 30% value PLUS the market growth of that 30% over the last 8 years. Does she have a legitimate claim to the market growth or is she stuck with just the 30% of the value from 2013?
She’s lucky to have you to help her, but I’m afraid that she’ll need to consult an attorney as well so she addresses all these issues properly in accordance with the laws of her state. If she takes a lump sum in lieu of alimony, generally the parties negotiate a non-taxable lump sum. That’s because having a big deduction that he can’t use and having income that jacks her tax bracket way up is not ideal. If that’s what happens, be sure that it is designated in their negotiated written agreement as non-taxable.
She should definitely get a Qualified Domestic Relations Order served on the plan administrator ASAP. Once the administrator accepts it, payments to your mother-in-law can begin. If her ex has been receiving monthly benefits from the plan, a portion of which belongs to her, she’ll probably have to go after him legally to get those funds handed over to her. Again, since he’s paid tax on them, the amount should probably be tax-effected to give him credit for the taxes he paid on her behalf on funds he received on her behalf.
If the divorce agreement said she was to receive 30% of the 401(k) and she didn’t file a QDRO, she should prepare that ASAP and serve it on the plan administrator so she can get her 30% of the funds in the plan. If he’s taken money out of the plan since the divorce, then she may also have to file a legal action against him to get her share of those funds paid over to her. As discussed above, he’s probably paid tax on that so he should get credit for that in computing what he owes her.
Anyone who is reading this, pay attention! This is the mess that you get yourself in when you don’t prepare and file QDROs and collect all the alimony that’s due you.
I’m 67 years old, my husband is 60. We’ve been married 33 years. we have 2 adult children in their 20’s. I quit a lucrative career as a computer systems analyst 27 years ago to become a stay-at-home mom (one child was diagnosed with a learning disability and needed intensive therapy for a number of years.) After 12 years of emotional abuse I told my husband to move out as the marriage was over. We attempted mediation; with no luck and have now hired attorneys. I sold our house last October and am now renting. He has been living out of the country on a temporary assignment from his company. He earns over $250k. He has offered me a lump sum amount in lieu of monthly spousal support; but the amount is slightly less than his have of the proceeds from the sale of the house. ($430K lump-sum amount) The rest of our assets are in the form of retirement accounts and would be divided 50/50. I would end up with a total $830K.
Does it make sense to take such a seemingly small lump-sum to offset any of the above risks stated above?
He has income. You do not. He has substantial earning power, you have minimal. So you definitely need support. But he is reaching the end of his career, so his ability to pay support may be just for a few years. So any lump sum that you get will be based on that shorter period you can reasonably expect to receive support. As far as risks, you don’t specifically state any, beyond his short remaining career span, which is more of a certainty than a risk.
Hi. I was a stay at home mom for 23 years – four kids (two are adults, 16 yo and 13 yo). I’m now working, but make only 10% of what he makes (He is a VP of a very large company) He makes at least $500,000 that I am aware of, but likely more with back door dealings he has going on not traceable. Because of a badly worded divorce document, he is interpreting it to mean he can end my alimony after just three years. We are currently in a very expensive court battle that he can afford, but not me. He has suggested an alimony buyout, which I am apt to consider. I am worried if he becomes disabled or dies, or he wins the court battle, or if he quits his job out of spite. He is very narcissistic and will only do what a judge orders. He has offered alimony buyout plus child support. I am thinking to up the ante by suggesting a total buyout of child support and alimony. How would I go about calculating these two amounts? Is there a formula?
Are you sure that your state allows child support to be paid in a lump sum? Many states don’t, since children are entitled to support based on their parents’ incomes for the entire period of their minority, and there is no way of predicting with certainty the parents’ incomes. As for lump sum alimony, it is generally calculated as the monthly amount of alimony times the total months you can expect to receive it, discounted by a rate of return if you received a lump sum and invested it. It is often difficult to get both parties to agree on those factors, but perhaps you can.
Hello, I am considering a lump-sum agreement at the moment. I’m 49 years old and have been married for 25 years and have been a stay-at-home mom for 20 years. He makes an excellent salary and I was a teacher and he earns approximately 6 times more than my starting salary would be. He’s fighting hard for around 5 years of spousal maintenance in lump-sum form. That seems to be a really short duration for the length of our marriage. In Arizona, there are vague guidelines. It’s hard to know what is the right amount to accept. My attorney says I’m entitled to a lot more than has been offered. The cost of litigation has me scared to fight. I’m not being unreasonable, in fact, my attorney says I’m being too reasonable. Without a job yet, how do I know what amount will be sufficient?
Alimony is meant to bridge the gap between now and a later time when you become self-supporting and no longer need support. At that time, in most states alimony would cease to be paid. If what you could make won’t be enough for you to become completely self-supporting, then it is possible that support would continue for a long time, which is what your attorney is telling you. To figure out how much you need, you could figure out what your living costs are, multiply that by the number of years that your attorney thinks you could get support, subtract the amount that you expect you could earn during that time, and that would be the amount you need. it likely is more than he is willing to pay, and so you will end up with monthly support. If it is normal for someone in your position to get a monthly support award, which it sounds like it is, then your husband isn’t likely to battle this out in court, since it would be a sure thing that he would lose. You and he (through your attorneys) will negotiate out a monthly support amount. And then in a few years, once you are settled in your new life, your ex may approach you to take a lump sum and terminate support. And you will be in a better position then to decide whether to take the offer, negotiate for more, or reject it.
As an ex-husband, this is really gross and disgusting stuff. Take a lump sum because you might actually get a job? A “ conundrum” you might face for your next marriage because you’re still sucking your ex-husband dry? I guess love does not conquer all. Tough article to read. I thought women and men were supposed to be equal…..what a joke.
Thank you for sharing your point of view, and I applaud you for reading the article all the way through. Here are some things to consider: in many marriages, for various reasons, the spouses are not equal in earning power. In many, maybe most states, when one spouse doesn’t have the income to pay their expenses, that spouse may need support to continue living in the lifestyle established during the marriage. I get that your opinion is that lump sum negotiation is all one-sided, when in fact, the supporting spouse (male or female) can often reduce their overall support obligation by paying a lump sum in exchange for a termination of their obligation to pay support.
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My husband has agreed to lump sum alimony payment. Looking at taxes requirements we cannot share a residence to be considered money for alimony. Does this mean at the time the divorce is settled or when we file this years (year of divorce) taxes? We are currently staying in the same home and dismantling a 45 acre farm. This is including equipment, cattle and the such. We are sleeping in different rooms. One of us will stay until property is sold, the other will leave sometime in the next couple of months after all the work is done to dismantle things.
Thanks
There are several reasons you should not be concerned about that: First of all, that rule only applies to alimony payments made more than 30 days after divorce is final, and it sounds like your payment may be made sooner than that. Secondly, that rule only pertains to tax-deductible/taxable alimony payments made pursuant to pre-2019 support agreements, and it sounds like your divorce negotiations are more recent than that. Third, even if the support were pursuant to a pre-2019 agreement, we generally characterize lump sum payments as non-taxable/non-deductible in the agreement to keep from running afoul of the three-year recapture rules. So what you are worrying yourself with is a rule that doesn’t apply to your situation at all.
Hi Ginita, great article, thanks for taking the time to write it. One question about the Lump Sum option for Spousal Support. My wife and I are married for 11 years in California, and we’re both seriously considering to divorce. Due to the difference in our income I’ll very likely to be required to give her spousal support. Since we’ve been married for 11 years, there won’t be a predetermined time for the support, right? In this case, do we still have the option to agree on a Lump Sum amount instead of monthly payments? Would the court accept that if we both agree that we want to settle the Spousal Support as a one time Lump Sum payment? Thank you!
Yes, the two of you can agree on a lump sum, and then waive monthly support in the divorce settlement agreement. You can’t do that for child support, but you can for alimony/spousal support.
If my wife and i agree to a one time lump sum agreement when do i need to pay that? When the divorce is final?
You need to pay the lump sum on the timetable called for in your divorce agreement.
Thank you
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We were married for 15 years. By law, he needs to pay 7 years of alimony. Our marital home is “underwater” we owe $350,000 and it is worth $320,000. We have a boat (some equity) and a truck (fully paid off) under both of our names. We also own a property that we are still in the process of building a house. There is a loan of $450,00 to build a house (almost complete) on the lot/property and the value is undetermined with this “new economic” crisis. He makes 70% than I do. He has also had cancer and beat it … twice. He drinks and smokes … I am concerned about him keeping his job and maintaining his health. With all of this debt under both of our names, does it make sense to ask for a lump sum alimony? or monthly payments? Is it possible to ask for a “partial” lump sum… one or two years as well as monthly payments? What is your financial advice in this situation?
The house has no equity, there’s a boat with a little equity and a truck to drive. You are building a home on which you owe a lot of money, it isn’t complete, and you likely couldn’t sell it in its current condition, not to mention the condition of the real estate market. So sure, you can ask for a lump sum payment, but unless he has a printing press in the basement, I don’t see where he’s going to get the money to pay you.
My husband has been paying his ex-wife alimony on a 17 year marriage. It is now exactly 17 years that he has been paying alimony – more than half of their long term marriage. When they got divorced, neither parties were legally represented and instead went through a mediator to help w the divorce and alimony paperwork. Bad decision, I know. Divorce paperwork has no end date indicated for the alimony. There is though the “Gavron Warning” but ex-wife has done nothing to our knowledge to improve her situation. She is 57 years old and we are concerned that she would play the health card should we take her back to court. We attempted this 5 years ago but were able to work things out outside of the court to reduce the payments by $500 from $1795 to $1295 in fear that the judge would see her and take pitty on her. Ideally, we would like to have this alimony line item eliminated from our finances once and for all. We heard from family members that ex-wife is living at the Salvation Army after couch-hopping and damaging countless other living situations w now former friends. We see this as an opportunity to hang a carrot over her head with an alimony lump sum buyout and terminate the alimony payments. I understand that each state has different laws that apply and that you cannot offer official legal advice. However, can you offer your thoughts and opinions on what might be possible challenges for us in offering alimony lump sum buyout to ex-wife? What do you think would be the recommended steps to have this done? And what do you think would be sufficient amount (say maybe 20 months worth)?
The challenge is coming up with a lump sum that he is willing to offer and she is willing to accept. Your other choice is to take her back to court saying that sufficient time has passed for her to become more self-supporting. I would think she’d rather accept a lump sum than go through a prolonged court case, that would likely be followed in the future by another rematch. That said, I doubt the court would be willing to leave her without means of support if he has the ability to pay support, so keep that in mind.
How can I best word my proposition to my ex husband on this issue?
The past 4 years he’s paid child support and spousal support through the state. Now the child is 18, so he has just spousal support for the next 4 years. I’ve already had to hire an attorney to contact him when he wasn’t paying on time after the child support ended. He will never go for a lump sum payoff if he thinks it may benefit me, so what can I propose to him that will help to sway his decision?
Does he have a pile of cash lying around in an account that he could use to pay you? If not, there’s nothing that you can do to convince him, since he doesn’t have the means to pay you. If he does have funds available, then figure out what his hot buttons are around alimony. He just hates writing out that check every month? Here’s a way he won’t have to. He thinks you are getting too much? A lump sum up front is generally less than the total of the remaining payments.
I would like to make a settlement offer of part monthly alimony and part lump sum payment in lieu of reducing the time he pays alimony, which is attractive to him. If the lump sum is paid in two parts on two future dates, 18 month and 27 months, respectively; will I lose those lump sum payments (like regular alimony) if I were to remarry before receiving the payments?
If you specify in your divorce agreement that you will get those lump sums in lieu of that portion of the alimony, that will probably protect the lump sums if it is worded correctly.
I have been divorced for two years.My ex husband was ordered to pay Maintanance for a total of 17 years in a two tier payment plan. one year after the divorce he took me back to court to try to get the payments lowered. We settled on 13 years. Now he has gone through the process of saying that he cant’t work anymore because of arthritis. He is 44, and told the judge that he was in good health two years ago. I have video of him f=running across a golf course frm less then a year ago. I also have proof that he has been planning this for over a year. What can I do to to make him pay his obligations?
The laws of each state are different. You’ll need to talk to an attorney about your situation and see if there’s anything that you can do at this point.
So I have been married for 7 years almost 8 and we have been separated since Jan 1,2018. He is a veteran of the United States army. He is duly disabled on the va side I need some advice as to what to do
I gather that he was a vet when you married, and so you aren’t entitled to any of his pension. But you may be entitled to support based on his income, so consult with an attorney to see what the laws of your state provide.
My x and I agreed to sell the house which should end up with $200k in equity to split 50/50. In determining Alimony need could I argue that the $100k in equity she is getting should be considered? Whats the need for her if she has 100k in the bank? I was hoping to use this like a lump sum payout for at least partial alimony.
It sounds as though the house belongs to both of you, so you are each getting your half. Certainly if you are giving her your half of the equity as well, you could count that as a lump sum alimony payout. But if she’s just getting half, that’s what she owns as property. To the extent that those funds are available to invest, the earnings from them would be counted as funds she has to support herself, but I doubt the funds themselves would be counted.
Been married five years with a one year old. We own a house both name on the deed and mortgage. We wants me to leave. I’m not leaving without my son. Should I stay until we see attorneys? I have a full time job but he makes much more money and pays the mortgage and car note. Advise?
You’ll need to talk to an attorney — we aren’t attorneys and don’t know the law in your state.
I have married my spouse last year, but due to some differences we would like to get separated. Is it compulsory that i should pay alimony? If my wife says that she does not require it, can the court consider it?
Contact an attorney to find out what the laws are in your state. It is doubtful you would be on the hook for alimony for very long in such a short marriage. And of course, if she waives alimony, then it isn’t an issue.
I owned a mobile home and he was buying land. We married n he was sole provider. We put in septic electric well n concrete pad. We then put my home there. Now a divorce. He’s self employed n works cash deals and hides his money at his mother’s. He’s been abusive but he filed. There is an order of protection. Land has two separate addresses. He has a pole barn on one lot my home on other. It appears we will be going to trial. He wants me to move but doesn’t want to pay. I have no income and haven’t in the whole marriage. My attorney asked for $23,000 and 6mo spousal support. He turned it down. Pretends he has no money. What will judge Grant?
Talk to your attorney about what you can expect in court. You never know what a judge will do until they do it.
What is the point of this Q&A section ? Most of us come here for advice because we don’t have a lot of money to talk to an attorney. Every damn answer is talk to your attorney it doesn’t take a rocket scientist to figure out that some of us don’t have $200 to $300.00 an hr.
The point of these articles is to give you general financial advice around topics of interest to you. When people ask for specific legal advice, often unrelated to the content of the article, I have no choice but to tell them they should talk to an attorney or other divorce professional familiar with the law in their state. Would you rather I guess at what the law might be and make up some answer that you want to hear? I mean, you could do that for yourself, you are as qualified as I am, since I am not an attorney. I don’t know the law in your state and am not qualified to give you legal advice, and it would be irresponsible for me to make something up.
I have been married for 33 years it has been a bad marriage for many years. I stay because I depend in my husbands checks . I am a stay at home mom. do to not being able to work out side the house. I do daycare but if I was to leave I would have to start over. I don’t make much. And he carries all are insurance and retirement.my children are grown but still live with us and go to school. my husband would quit his job if I was to leave and we would have nothing what am I to do
Talk to an attorney about your husband’s duty to support his family. Quitting his job to spite you is probably not an option in your state.
Just be aware that on the lump sum payment that you can affect the deductibility of the spousal support if the payments drop by more than $15,000 during the first three years. I think a one time payment will trigger recapture for the payor.
Kellie is right regarding lump sum payments of taxable/deductible alimony. That is why we usually structure such payments as non-taxable/non-deductible alimony payments, so that he doesn’t get a deduction and you don’t pay tax. That way there is no “recapture” issue.
Although my soon to be ex-husband makes a large amount of money, we have few assets, monetarily or otherwise. However, we have a substantial retirement. Would it be wise to settle for a lump sum in the form of retirement, and then cash out the portion that I need for living expenses? I think that I can withdraw from retirement at the time of divorce without penalty?
Thanks in advance for any advice you can offer.
If the retirement funds are in his name, you will need a Qualified Domestic Relations Order to transfer the funds to an IRA in your name. You can ask that a portion of the funds be paid directly to you rather than going into your IRA, and you will have to pay tax on those funds, though there is no penalty.
Anything under $500 in theory you can just take. That’s what I did. I took 95% of the kitchen stuff. I left enough plates, silverware, a few drink glassware and anyhting we had extra off like cutting boards. I would take all the furniture – you should leave a little.
Sorry meant to type take some furniture not all of it
I am in a cohabitation arrangement. We broke up about two months ago. He has cut off all communication with me. I don’t want to be mean but I got my own place and will be moving in on the 6th of September. What do I have a right to take? We have purchased all of our housewares together like dishes and the Keurig, lawn furniture. We both bought stuff here and there. Do I have a right to take anything? He actually said I only have my clothes but it’s not true! I don’t want anymore unnecessary drama. I can’t see myself moving into my new place without the silverware I chose. It may seem futile but it’s been very nerve wracking.
I don’t know what you have a right to take, and you can discuss that with an attorney. But there is a saying that possession is nine point of the law ….. just saying.