Alimony, also called spousal support or spousal maintenance, is a monetary award a court in California may give one spouse in a divorce case to maintain that person’s quality of living after the divorce. If one spouse in the marriage gave up a career to raise kids, for example, that spouse may be eligible for alimony payments from the higher-earning spouse after the divorce to keep things fair. It will be up to a judge or the paying spouse to decide how to deliver alimony payments: one lump sum or monthly installments.
Lump Sum Alimony
Lump sum alimony refers to a spouse fulfilling his or her entire alimony obligation at once, with a single lump sum payment. It is an alternative to paying a spouse monthly for spousal support. In most cases, lump sum alimony will be an option if the paying spouse would prefer to do it this way. One of the pros of lump sum alimony is avoiding a drawn-out obligation to the other spouse. The paying spouse can complete his or her financial obligation immediately and avoid monthly communications with the recipient.
Paying alimony as a lump sum could also prevent the order from changing in the future. If the paying spouse gets a raise six months after the divorce, for example, the recipient could potentially go to the courts and request higher alimony payments. Paying as a lump sum prevents an ex from bringing a claim to more alimony if the payer increases his or her income or assets. It could also backfire, however, if the payer loses his or her job. If the paying spouse already fulfilled his or her entire alimony debt at once, he or she cannot get any of that money back after a sudden loss of income.
A lump sum payment could also be desirable for the receiving spouse. The recipient may prefer to receive the total amount of his or her owed spousal support at once rather than having to wait month to month. A single payment ensures the fulfillment of the order, while waiting could lead to forgotten or missed payments and a court battle to try to get the spouse to pay up. It could also be a con, however, if the recipient is not good at managing money. The recipient could spend the lump sum alimony too quickly instead of saving any for the future. Lump sum alimony could also take away tax breaks and the ability to qualify for financial aid for the recipient.
Paying an entire alimony order in one lump sum may not be possible for everyone. The paying spouse may not have enough money on hand to pay off the total amount at once. Rather than trying to take out a loan – which may not be advisable due to interest – the paying spouse could agree to monthly alimony installments. Paying monthly rather than in a lump sum can have pros such as spreading out the financial obligation over time.
It could also benefit the paying spouse to opt for monthly installments due to the possibility of reduced payments in the future. If the payer starts to make less money or the recipient’s status changes (e.g. the recipient gets a job or moves in with someone), the courts may reduce the alimony obligation or eliminate it completely. If the spouse has already paid everything in a lump sum payment, however, it will be too late. The payer will have spent more than he or she would have with a monthly installment agreement without being able to get any of it back.
In some divorce cases, the courts determine the alimony payment arrangement and sign off on a court order to enforce it. In others, the person responsible for paying alimony will get to choose how he or she would prefer to pay. The paying party may benefit from consulting with an attorney about both options before deciding which is the right one.