What is Lump Sum Alimony and is it Better for my Virginia Divorce?
As its name suggest, lump sum alimony is court-ordered alimony that is typically made in one payment. There is no modification, and typically there are no future payments to be made. However, in some cases, a judge might order a specific amount to be paid each month as well as a lump sum payment within a certain time frame. Before you agree to a lump sum payment, it’s important to understand the pros and cons of this type of spousal support award.
Types of Spousal Support
As an alternative to lump sum payments, the court primarily awards periodic payments. These can be awarded for a defined duration or an undefined duration. That means the periodic payments will continue each month for a certain amount of time if the duration is defined. An undefined duration would mean for the rest of the spouse’s life or until there is a court order modifying the award.
Receiving a large lump-sum payment may allow you to pay off some bills, buy a home, go back to school, etc. With monthly payments, it might be harder.
Potential Pros of Lump Sum Alimony
If your spouse is one who may be difficult to collect regular payments from, a one-time lump sum might be a more desirable option. Your ex might have to borrow money or arrange financing to make the payment, but once it’s received, you are done. You don’t need to wonder if the payment will arrive every month, or face added expenses in trying to enforce the court’s award.
Tax Implications of Lump Sum Alimony
Spousal support payments in Virginia have had tax implications that are important to factor into your divorce. However, if your divorce or separation agreement happens after January 1, 2019 support payments are no longer taxable or deductable, at least according to the plain language of the Tax Cuts & Jobs Act. Many attorneys and tax professionals are being very cautious about this since it is not clear exactly how it will all play out. An experienced family law attorney is essential to litigating or negotiating spousal support payments in a way that takes into consideration this uncertainty. While the payments typically have to be made in cash, there may be circumstances where certain necessities can be paid, like a mortgage payment. In this case, the court needs to include that information in the divorce order or separation agreement.
If your spousal support payments arose prior to January 1, 2019, they have tax implications, and it also means that a lump sum payment could have a massive tax attached to it for the recipient. It’s important to talk to a Virginia divorce attorney or tax professional to determine whether a lump sum payment is right for you.
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