Avoid Alimony Monthly Payment Programs
If you have been ordered to pay alimony, you may be able to avoid a monthly alimony payment program and pay all of your alimony in one lump sum.
Avoid Alimony Monthly Payments -- Use Lump Sum Instead
Just like collecting a lottery winning all at once instead of spread out over a period of years, you may be able to pay off your entire alimony balance all at once and avoid making monthly payments. Several states allow a spouse to pay the total alimony amount in one lump sum as long as the total sum is equal to the total amount of future monthly payments.
There are benefits to receiving a lump sum alimony payment. First, if you decide to take a lump sum payment, you may get more money than if you decide to take monthly payments over the course of many years. Because a lump sum payment must be equal to total amount of future payments, and the lump sum is not discounted to current day value, you will most likely receive more. This is because a dollar today is more than likely going to be worth a dollar five years from now.
Second, you will not have to worry about collections problems if you decide to receive a lump sum alimony payment. Many people often must go to court and obtain court judgments that order their former spouses to continue making monthly alimony payments. However, if you opt for a lump sum alimony payment, you can avoid these enforcement problems as you will receive all of your alimony up front.
Keep in mind that there may be tax consequences if you decide to accept a lump sum payment for your alimony. If you receive a lump sum payment that is labeled as "alimony," it may be taxed for the full amount in the year that is received. However, if that same payment is instead classified as a "settlement," this may allow you to not be taxed on the amount. You should consult with a lawyer or another expert that can help you determine how best to take a lump sum payment. The money that you spend to hire an expert to help you could be pennies compared to the cost of income taxes you may owe.