Lump Sum Alimony Buyout

By Beverly Bird

Lump sum alimony isn't a buyout as much as it is an alternative form of payment. Not all states recognize this type of arrangement in divorces, and even in those that do, courts may be reluctant to order it. Pros and cons are associated with lump sum alimony provisions; your personal situation will dictate if you want to negotiate for it in a marital settlement agreement.

Terms

As the name suggests, lump sum alimony is typically made in one large payment to a spouse as part of a divorce decree. The spouse receiving alimony does not take it as income trickling in monthly, but as a sometimes significant cash asset that she can invest or do with as she likes. Particularly large lump sum alimony awards may be paid in installments, however. For example, if your spouse owes you $100,000, either by court order or marital settlement agreement, you or the judge might structure the terms so that you receive $50,000 in June and $50,000 in December after he liquidates assets to come up with the cash.

The most important distinction between lump sum and regular alimony, sometimes called periodic alimony, is that the award is for a set amount and the issue of alimony is forever closed. With periodic payments, if your spouse lives to a ripe old age and never remarries, you could end up paying her considerably more than the amount of a lump sum.

Modification

Lump sum alimony is not modifiable. If you agree to pay your spouse $100,000 in a year's time, and if you suffer a catastrophic business loss in the meantime, you still owe the money. If the payment is specifically called alimony or spousal support in your decree, it's not dischargeable in bankruptcy. Filing for bankruptcy can only relieve you of the obligation if your decree indicates that the payment is in lieu of a property settlement.

Purpose

Courts typically only award lump sum alimony under extraordinary circumstances. If a judge has reason to believe that your ex won't make periodic alimony payments to you, he can order him to pay a lump sum instead. This increases the odds that you'll actually receive the money and you won’t have to hold your breath every month wondering if he'll pay. If you're faced with paying alimony to your ex, a judge might order that you do it in a lump sum if you report negligible income, but you have property that can be liquidated.

Pros and Cons

One advantage of lump sum alimony is that when it's paid, it's paid, and unless you have children, there's nothing left to tie you to your ex after the divorce decree is final. Another advantage is that it gives the receiving spouse some financial flexibility. Unlike periodic alimony, lump sum alimony is not affected by the remarriage or cohabitation of the receiving spouse. This can be a disadvantage to the paying spouse, because he can't get his money back or be freed of any required future payments.