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Pros and Cons: Lump-Sum vs. Monthly Alimony Payments

In the event of a divorce, couples will face the task of resolving many different aspects of their separation including the division of marital property, finances, and time spent with children.

A common occurrence in divorce proceedings is the agreement or court order that one spouse will pay alimony, or spousal support as it is often called, to their now-former partner. Courts take several factors into consideration when determining how much the support will be and how long it will last. In most cases, this support is paid out on a monthly basis. However, there are instances where a lump-sum payment may be the best way to go.

Lump-Sum Alimony vs. Monthly Alimony

When spousal support is ordered by a court, it is typically paid out monthly over a predetermined period. For some individuals, however, a lump sum payment is a better way to go when finalizing a divorce.

A lump-sum alimony payment is an alternative to monthly alimony payments paid out from one party to another following a divorce. The lump-sum payment is a one-time payment equivalent to what would otherwise be monthly payments.

A lump-sum payment can also happen through a buyout of assets. In cases where there has been a division of property, the party ordered to pay the spousal support can offer an alimony buyout. When this happens, the ownership of a property can be transferred over to the spouse receiving the alimony.

Lump-Sum Versus Monthly Payments: Which Is the Way to Go?

There are different reasons to go with a lump-sum alimony payment over monthly alimony payments. However, it depends on your needs, whether the court agrees, and whether it will be in your best interest. Let’s go over some pros and cons when it comes to receiving a lump sum alimony payment.

Pros of Lump Sum Alimony Payout

  • Guaranteed Alimony Payment — The payee will receive a substantial sum of money upfront. With this lump-sum payment, the payee will have the certainty that they are receiving their alimony payment. They do not have to worry about any delays or tracking down payments.
  • Avoid Issues With Future Employment or Loss of Employment —Alimony payment agreements can change if the financial circumstances of either party change. For example, if you receive alimony payment and your former partner has reduced income due to a job loss, then your alimony agreement may change, and the amount of alimony you receive may get smaller. Conversely, if you obtain a higher-paying job, your former partner could petition the court to have your monthly alimony reduced or eliminated altogether. When you opt for a lump sum payout, these are factors that will not impact your payout because the payment has already been made.
  • Remarriage — Individuals who go on to remarry can lose out on their monthly alimony payments. If you accept an alimony lump sum payout, you will be receiving the predetermined lump-sum alimony upfront, and a new marriage will not impact the total amount.

Cons of Lump Sum Payout

  • Poor Financial Management — If an individual has poor financial management, then it may be easier for them to squander away a lump sum alimony payment. With monthly payments, a payee will be given a set amount of money every month. This limits their ability to make large-scale splurge purchases. Lump-sum payouts make it more enticing for individuals with poor money management skills to lose that money faster.
  • Loss of Public Benefits — If an individual received a lump-sum alimony payout, they might no longer be eligible for any public benefits or government assistance programs.

Seek the Guidance of an Experienced New Jersey Divorce Attorney

A knowledgeable divorce attorney can help you navigate the financial decision-making process when you’re moving through a divorce. While a lump-sum payout may be an attractive option to go with, it is not necessarily the best option for everyone.

At the law offices of Herbert & Weiss, our dedicated attorneys can help you understand the financial responsibilities that come with lump sum payout and monthly alimony payments. To speak to someone about your case, reach out to our Englewood law office for a consultation.