When a person files for divorce, spousal support (alimony) can be awarded by the to one party based on economic need or a marital settlement agreement. In essence, the purpose of spousal support is to make sure the lower-wage earning spouse or the non-wage earning spouse is fairly compensated upon the dissolution of marriage. Spousal support may be awarded to the lower-wage earning spouse for a specified amount of time. Depending on the couple’s marital assets, some spouses seek creative solutions to spousal support in divorce.
Creative solutions to spousal support in divorce offer flexibility and freedom for both parties.
Creative solutions to spousal support in divorce allow the parties to decide together how they want to handle this very touchy issue. On the other hand, when the issue of spousal support is brought before a judge, the court will decide, and neither party may like the outcome. The court looks at several factors in deciding how spousal support is awarded, how much is to be paid and for how long. For example, the court will look at whether the low-wage earning spouse chose to stop a career to support the family. Essentially, spousal support is awarded to make sure the low-wage earning spouse has enough support to develop job skills after the divorce. The low-wage earning spouse is awarded alimony to equalize their marital standard of living post divorce.
Solutions to Spousal Support in Divorce
A People’s Choice has helped clients for over 35 years design many creative solutions to spousal support in divorce. For instance, when addressing spousal support, the following options can be discussed:
- Spousal support can be short-term or temporary.
- Spousal support and be long-term and modifiable.
- Support can be permanently fixed on amount and duration, This allows the parties to settle on a support order without the risk of ever having to go back into court to argue those issues.
- Spousal support can be waved in lieu of receiving a greater part of community property. A popular alternative to traditional spousal support payments in California includes property buyout. This means a divorcing spouse gives up his/her right of receiving spousal support in exchange for receiving the full value of a community property asset (example – the family home).
- Spousal support can be in a lump sum. In this situation, the supporting spouse pays a one-time lump sum payout instead of making monthly payments over a prolonged period.
Benefits of Fixed Spousal Support
There are several benefits of a fixed, non-modifiable spousal support order. As an illustration, with a fixed order for spousal support, both parties know exactly what the order is. Consequently, they can adjust their living expenses around a specific amount. In addition, the person paying spousal support knows the other party cannot take them back to court to increase support payments. As a result, this type of settlement has psychological advantages for both parties.
Downsides of Fixed Spousal Support
By the same token, there are downsides of a fixed spousal support order. In particular, a fixed spousal support order cannot be changed. For example, if the person obligated to pay support loses their job, they would not be able to ask the court to lower or stop support and still will be obligated to pay the ordered amount, even though they had no income. With all things considered, however, I have discovered many spouses like the idea of a fixed spousal support order simply to close the door on this issue.
Benefits of Lump Sum Spousal Support
Receiving a lump sum payment of spousal support has several benefits. For example, the low-wage earning spouse may receive more money overall in comparison to receiving a monthly spousal support amount. Additionally, receiving a lump sum award upfront will allow the spouse to invest and receive a reasonable return on investment in comparison to investing the monies monthly. Generally speaking, if the divorcing couple is near retirement age, it may be in the lower-wage earning spouse’s best interest to receive a lump sum payment. In California, the paying spouse can retire at 65-years of age. As a result, upon retiring, the spouse my no longer be obligated to make spousal support payments.
Aside from investment benefits, a lump sum payment also eliminates collection issues. For example, if the paying spouse fails to pay support, the receiving spouse will have to go to court to enforce payment. Receiving alimony upfront can help avoid any future court problems.
Downsides of Lump Sum Spousal Support
Unfortunately, a lump sum spousal support payment can have serious tax implications for the receiving spouse. For example, if a lump sum payment is selected and it is called “alimony” or “spousal support” in the divorce decree, the person receiving payment may have to pay taxes on the full amount in that tax year. In contrast, if the same payment is called a “settlement,” the spouse may not be taxed. Consult a financial advisor when determining to seek a lump sum payment in lieu of a monthly payment. Above all,
In conclusion, if you are looking for creative solutions to spousal support in divorce, contact A People’s Choice. We are happy to share ideas how other couples have settled this issue. Lastly, we can help you prepare all the documents needed to detail the terms of spousal support in your marital settlement agreement. Call 1-800-747-2780 to speak with us about creative solutions to spousal support in divorce.