Image of a couple talking to a lawyer representing alimony alternatives.

Alimony Alternatives: How They Work

In the aftermath of a divorce, alimony ensures that one spouse can maintain their lifestyle. While this traditionally manifests in the form of monthly payments, there are some alimony alternatives that can be used to tailor the payments to the spouse’s needs.

Lump-Sum Payment

A lump-sum payment is the most immediate of the alimony alternatives. For some spouses who can afford it, a lump sum payment is a superior option to monthly payments. Unlike being locked into a monthly payment, the single lump payment immediately settles the obligation. If the person paying alimony were to fall on hard times financially or lose their job, a monthly payment could become overwhelming. 

There are potential drawbacks of the lump sum for both the payer and the recipient. For the person paying the alimony, the drawback is obvious: they have to pay out immediately. For the person receiving the lump sum, the issue is taxation. As of 2019, alimony is fully taxable while receiving alimony in monthly installments can result in small sums being taken out of it. By receiving the alimony in a single payment, all the alimony will be taxable at once, resulting in a higher single tax rate.  

Retirement Account Payments

The longest-term of the alimony alternatives, this alternative allocates monthly payments into a retirement account. By placing the money in a retirement account, the alimony is not taxable. The lack of taxation means that more of the income is retained by the recipient. An experienced attorney could parlay that into lower monthly payments as a result. 

The drawback of a retirement account payment lies in the nature of the account. Because the account is intended for retirees, the alimony payments will not be immediately available. If the spouse needs the money to support themselves, they may not be able to receive the payments from the retirement account.

If you are facing the decision on how to pay out spousal support, an experienced Divorce & Family Law attorney can help you make the best possible choice. With the help of a Divorce & Family Law attorney, you can work out the best plan for handling your spousal support.

A skilled Divorce & Family Law attorney can help you select a neutral financial advisor to help you and your spouse devise a fair and equitable way to handle your spousal support. The best Divorce & Family Law attorneys can be found at Attorney at Law.

At AAL, our nationwide network of attorneys and law firms can pair you with experienced Divorce & Family Law attorneys in your area. Our partners have the resources, legal expertise, and experience to navigate the most complex of separations while defending your interests. 

Our partners have unparalleled client care. They know the emotional struggles that accompany divorce. That’s why our partners approach every case with empathy and the knowledge of the most efficient way forward to help you move on faster. 

Don’t wait. Contact AAL today for a free, no obligation consultation and protect your assets today.

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