What does the word alimony make you think of? If you are like most people, you probably think about one spouse making regular monthly payments to his or her ex. What many people fail to understand is that alimony, or spousal support, is much more flexible than it was in bygone days.
Now, divorcing couples can choose from different alimony payment programs. The basics of these programs include: regular open-ended payments, usually on a monthly basis; short-term or rehabilitative maintenance; and temporary support while a divorce is pending.
A fourth option that many Kentucky residents have begun choosing is called a closed-ended program. This maintenance program centers on an exact figure often paid over time until the amount is exhausted. However, more and more people are opting for a closed-ended maintenance program paid all at once in a single lump sum.
Both parties can benefit from this type of alimony. The payer needs only pay once and the subject of alimony is closed. The payee benefits by receiving a large sum of money at once to start life anew. Another benefit is that the total of a lump sum payment often turns out to be more than the person would receive on a monthly alimony program.
As with most important decisions, there is a potential downside to lump sum alimony programs. Depending upon how it is labeled, the receiver might have to pay a significant amount of tax on the payment. If it is called alimony, this will probably be the case. If it is labeled as a settlement, these tax consequences may be avoided.
In the end, it is best to brainstorm with a divorce lawyer to determine which alimony program best meets your needs.
Source: FindLaw, “Avoid Alimony Monthly Payment Programs,” accessed March 31, 2017