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Is it better to accept a lump sum alimony payment?

On Behalf of | Oct 21, 2020 | Divorce

It’s essential to protect both your immediate and long-term financial stability after a divorce. If you are the lesser-earning spouse, you could have a rightful claim to spousal support payments from your soon-to-be ex. In most cases, this support comes in the form of monthly payments, but it is possible you may receive an offer of a lump-sum settlement. How can you know if this is the better option for you?

There may be some benefits to this option for both the payee and the recipient. If you are considering accepting a lump sum payment, you may want to first explore all of the options available to you and learn more about what you can expect from spousal support and a financial settlement. It is your future on the line, and careful consideration is essential before moving forward.

Benefits of a lump sum

For the individual paying alimony, there are some benefits to offering a lump sum. The main one is that it allows the payee to make one payment, eliminating the need to worry about monthly payments. It can be the simplest and easiest option. There could also be benefits to those accepting a lump sum spousal support payment. Those may include:

  • It is possible a lump sum could be more money than what you would receive through payments over the years.
  • Receiving money now gives you the opportunity to invest it, getting a better return than investing what you receive over time.
  • If you take the money now, you do not have to worry about an ex-spouse’s potential financial problems resulting in collection problems down the road.

There could be some drawbacks if you accept a lump sum. It is possible you will have certain tax consequences for accepting a substantial amount of money, and it’s prudent to discuss this before you make any final decisions.

The best option for you

Ultimately, you should make choices during your divorce that are good for you and your long-term financial interests. Before you agree to terms or decide things regarding alimony, you may want to discuss your situation with an experienced New Jersey family law attorney. Knowledgeable guidance is particularly useful as you consider important choices such as how to approach your spousal support payments in a way that will make sense long term.