Many divorcing couples in New Jersey have to deal with matters like alimony. If there’s an agreement between the spouses, it’s possible to skip the traditional alimony route and go with an alternative instead. This might be a good solution if standard monthly alimony payments are not the right route for both parties.
Consider lump sum alimony instead of traditional monthly alimony payments
Lump-sum alimony might be the best alternative if a person is averse to making traditional monthly alimony payments. With this option, a single lump-sum payment is made to a former spouse after a divorce and the parties no longer have to think about it again. The only way to make a lump sum alimony payment is if the parties reach an agreement and the court allows it. However, paying lump sum alimony means paying the entire amount of what would have otherwise been paid in monthly payments. This isn’t necessarily appropriate for everyone, but if the individual can afford it, it might be worth it.
What are benefits of receiving a lump sum alimony payment?
The former spouse who receives a lump sum payment toward alimony can reap certain benefits from it. They don’t have to worry about potential collections on it. A lump sum means that the person has all of the money they are due upfront, which means they can save it and amass interest on it or even invest the money and have it grow considerably in the future. Lump-sum alimony often equals more total money than individual monthly payments as well.
However, there is one downside to lump sum alimony. There is a tax implication toward the payment and it’s required to be taxed for the same year it’s paid if it’s labeled as alimony. It’s possible to avoid that if it’s instead labeled as a settlement.
When two divorcing spouses agree on an alternative to traditional alimony, the lump sum option might be good for them. It’s wise to know what to expect from this type of alimony to make sure it’s appropriate.