You and your spouse are discussing all available options as you work through your divorce. You know that alimony is going to be paid, but you’re debating exactly how you want to receive it. Should you take a lump sum payment or monthly payments?
Both have their pros and cons. For instance, the monthly payments can be nice because they give you consistency. You can budget around them and make sure that your expenses fit your income.
That said, there are two major benefits of lump sum alimony that you should consider:
1. No collection issues in the future
If your spouse pays you every month, what do you do if he or she misses a month? Many couples run into collections issues. This may violate the court order, so the law is on your side. However, do you really want to go through the process of taking your ex back to court five years from now? With a lump sum, it’s over with and you know that you’re getting everything.
Plus, if something changes, you already have your money. If your ex loses a high-paying job, for instance, those monthly payments may stop or get reduced. Not so with a lump sum payment.
Getting the money up front also means you can increase its value. If you’re paid $4,000 per month for ten years, you likely will spend it on expenses. If you’re paid $480,000 at once, you don’t need it all right away. You can live off some of it and have money to invest that you otherwise wouldn’t have received for years. By the time you need it, if you invest well, it could be worth far more than it was to start with.
As you can see, there are many factors to consider when getting divorced. Make sure you look into all of your options and your legal rights.
Source: FindLaw, “Avoid Alimony Monthly Payment Programs,” Oct. 25, 2017