If you could, would you pay spousal maintenance in one lump sum and move on with life?
There are several reasons an individual may appreciate the option to pay the other spouse maintenance in full instead of making monthly payments for years. The peace of mind of being completely done interacting with or thinking about your soon to be ex-spouse may be worth paying all the maintenance in one payment and being able to move on with life.
In Texas, marriages ending in divorce may involve an order for one spouse to pay the other spousal maintenance, also referred to as alimony. In order to qualify as eligible to receive maintenance, the spouse requesting an order of maintenance must establish a lack of significant property, assets or income to provide for their reasonable needs. In some instances, despite need, a spouse convicted of an act of family violence may be ordered to pay maintenance to the other when they request it in the divorce proceedings. Additional eligibility requirements are set forth in the Texas Family Code, such as the length of the marriage and income earning abilities.
In most cases, when the court determines that the spouse requesting spousal maintenance is eligible, a maintenance award may be entered and ordered in a monthly amount to be paid over a certain period of time, often several years. Prior to the entry of the maintenance order and judgment of divorce, a request may be made for an allowance to pay the entire amount of ordered maintenance up front, in one lump sum.
Paying your ex-spouse in full and moving on.
There are several reasons an individual may prefer an option to pay the other spouse maintenance in full instead of making monthly payments for years. The peace of mind of being completely done interacting with or thinking about the soon to be ex-spouse may be worth paying all the maintenance in one payment.
If court-ordered maintenance, otherwise to be paid over years, is a significant amount of money, some may elect to raise the money by liquidating assets or borrowing against property or a retirement account, for example. The additional cost might be worth the peace of mind where the maintenance obligation is satisfied by settlement.
Consider also the value of money today, versus when last maintenance payment would otherwise occur. If the lump sum is not discounted to reflect the change in monetary value over time, there lump sum can be an advantage to the payor and recipient spouse.
When parties to divorce are allowed to make lump sum maintenance settlement payments, the payor does not have to worry about missing any payments. If there is a job loss or financial emergency and a maintenance payment is missed, the payor could face additional costs and attorney’s fees if an enforcement action is initiated.
Beware of tax consequences and whether you are permitted to make a lump sum maintenance payment.
Income tax implications can influence the determination whether a lump sum maintenance payment is allowed. Maintenance payments qualify for tax deductions for the maintenance payor, and the payments are classified as income to the recipient spouse. It may be allowable to classify a lump sum payment as a “settlement” instead of as an “alimony” payment, in which case the settlement amount may not be taxed as it would be where classified as alimony.
When there are potentially significant income tax consequences associated with various payment options, a divorce financial professional can be consulted through divorce counsel to assist in giving clients the best advice and protected short and long-term implications of available options. For these complicated reasons, your spouse may not want to receive lump sum maintenance and the court may hear arguments from both sides if the issue is contested.
Modification of maintenance orders following a substantial change in circumstances.
The courts hearing divorce and family matters are busy and require the establishment of a substantial change in circumstances before allowing hearings and trial to modify a final court order and judgment of divorce. An example of a substantial change in circumstances is the job loss of the paying spouse, which could be a factor in suspending or temporarily reducing the required monthly payment. A better substantial change in circumstance would be winning the lottery and being able to pay the entire maintenance debt in one lump sum.
The attorneys at Scroggins Law Group, can advise and assist individuals seeking a divorce who are interested in what they may be required to pay if maintenance is ordered. Likewise, the option to accelerate the payment schedule and satisfy the obligation in one lump sum can be evaluated.
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Scroggins Law Group represent clients in a variety of divorce and family law matters including spousal maintenance obligations and related financial issues.
At Scroggins Law Group, our Dallas, Denton and Collin County divorce attorneys have more than over 24 years of collective experience with family law cases. When you retain our firm, you can trust that your case is in the hands of a highly skilled, dedicated professional. we understand the unique challenges of a high value divorce case, and more importantly, have the knowledge and experience you need on your side. Call us today, (214) 469-3100, to learn more about Texas divorce and family law.
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Keywords: There are several reasons an individual may appreciate the option to pay the other spouse maintenance in full instead of making monthly payments for years. The peace of mind of being completely done interacting with or thinking about your soon to be ex-spouse may be worth paying all the maintenance in one payment and being able to move on with life.