Spousal Support: Lump Sum vs. Payments
It is often said that there are very few guarantees in life. Our lives are in flux and so too are our relationships over time. In family law, when those common laws or marital relationships breakdown, the legal issue of entitlement to spousal support may come into play. Once entitlement has been demonstrated and the quantum and duration of support payable from one party to the other, another decision to be made is the support to be paid on an ongoing regular basis or can it be paid in a lump sum amount? For both the payor and payee, there are advantages and disadvantages to each approach. There are also several factors that need to be taken into consideration and discussed with your family law lawyer before a decision is made.
Proponents of alimony paid as a one-time lump sum argue that this method defines a clean break. Once the payment is made the recipient or payee signs a full release from making any future claim to extend the support in any manner or raise any future entitlement to support no matter how catastrophic the recipient’s life may become. The lump-sum calculation typically takes into consideration the midpoint between the cost to the payee if the support was paid on a periodic ongoing basis over an estimated number of years net of any tax advantage to the payor and the net benefit to the recipient who no longer carries a tax obligation applicable to ongoing payments.
Opponents of lump-sum alimony payments argue that a lump sum doesn’t directly take into account a foreseeable future illness in the recipient’s family, market downturns, or poor financial planning. The payor will take the position that the obligation to pay support should be proportionate to the duration of the period of cohabitation before and during the marriage if any. And that they too could be subjected to the same decline in income levels for the same or other reasons.
Change in Jurisdiction
Any uncertainty of whether the payor will honor a long term schedule of regular payments due by taking a flight to a non-reciprocating enforcement jurisdiction is immediately lifted when the payment is made through a secure means.
Relocating to where the payor may have family in a country that is not a signatory to an international enforcement treaty is an immediate concern of the recipient’s decision for the payee to seek a lump sum. Relocation may also cause an added layer of complexity when it comes to enforcement and exchange rate of the alimony payments.
The negotiation and ultimate resolution may be subject to litigation or private arbitration in the future by the payor to terminate an ongoing spousal support obligation or by the recipient to extend or vary the terms of an existing support arrangement. Whereas some parties may believe that a lump sum alimony payment with a full release effectively terminates the economic dependency between the spouses, the court or private adjudicator is the body that makes that determination based on the relevant factual evidence.
The decision to send or receive a lump sum or monthly alimony payments should be fully discussed with an experienced family law lawyer. Private consultations are available with Lorisa by calling 416-596-8081, emailing firstname.lastname@example.org, or filling out a secure consultation request form.