Periodic or Lump-Sum Settlement: Which Alimony Payment is Best?

 Posted on November 14, 2014 in Divorce

A common stipulation in high-asset divorces is alimony, also known as spousal maintenance. Alimony is money that one spouse is court-ordered to pay the other spouse. Unlike child support, alimony is completely up to a judge's discretion. In September 2011, Texas HB 901 amended the rules regarding alimony in this state, including increases to the amount and length of time a spouse may be entitled to spousal maintenance.

Traditionally, there are two ways alimony payments can be made in high-asset divorces—either periodic alimony (which is paid on an established schedule i.e. monthly) or in a lump-sum payment. There are benefits and disadvantages to each of these two methods, and an experienced complex litigation attorney can help determine which is best for your situation.

In periodic alimony payments, the payments are typically set for a certain period of time. Usually, alimony payments will end if:

• The receiving spouse remarries (or begins living with a significant other);
• One of the spouses dies; or
• One of the spouses seeks a modification of the support order before the court.

There are situations where periodic alimony payments may be increased if the paying spouse's income increases. However, the payments can also be decreased if the paying spouse's income decreases. Another drawback to periodic payments is if the paying spouse dies, the payments stop. Therefore, many high-asset divorce settlements include a stipulation where a life insurance policy is taken out on the paying spouse, with the receiving spouse as the beneficiary. The amount of the policy is dependent on the amount of spousal and child support for which the paying spouse is responsible.

The benefit of a lump-sum settlement is that any decrease in the paying spouse's financial situation will not affect the alimony amount. The receiving spouse is also free to remarry at any time without the marriage affecting alimony. However, receiving a large amount of money requires careful financial planning to ensure these funds last.

If you are considering divorce where there will be high asset or complex property litigation, make sure to hire an aggressive Austin complex divorce attorney to begin planning and strategizing to ensure you receive all that you are entitled to in your divorce settlement.