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Alimony: should you receive all payments now or spread them out?

by | May 18, 2019 | Spousal Support |

As you embark on the path to divorce, you worry about how you will survive financially without your spouse’s monetary support. At the same time, you realize that your marriage is over, and you have no choice but to break up.

The good news is that you can seek support from your spouse in the form of alimony, or spousal maintenance. In fact, instead of receiving monthly payments of alimony, it may behoove you to seek a large upfront alimony payment. Here is a look at why receiving an upfront payment of alimony may be the best option for you in Arizona.

Lump sum of alimony: how it works

When a person wins the lottery, he or she has the option of spreading the winnings over several years or receiving the money upfront. One can treat alimony in the same way. However, before you can qualify for an upfront alimony payment, both you and the other party, as well as a judge, will most likely need to agree to this. If you all agree, then you can receive an upfront payment equivalent to the amount you would have received over time through periodic payments.

Why receive an upfront alimony payment?

A major benefit of receiving all of your alimony at once is that you will probably end up with more money in the long run. If you receive all of your money upfront, this means you can invest it now rather than later, and over time, you can generate a greater return as a result.

Furthermore, if you receive an upfront payment, you will not have to contend with collections issues. With periodic payments, your spouse may stop paying at some point, in which case you must seek a court judgment that orders him or her to keep making payments.

Considerations from a tax standpoint

It is important to take into consideration how a large sum of alimony will affect you tax wise as well, however. Specifically, the amount you receive might be income tax. However, you may be able to classify your payment as a divorce settlement to avoid taxation. An attorney can provide you with guidance in this area so that you can make an informed decision about whether to pursue an upfront payment or stick with traditional periodic alimony payments in the years ahead.