Five Reasons Why You Should Request Alimony as a Lump Sum During Your DivorceAugust 23, 2016 • By Ginita Wall, CPA, CFP®
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.