Residents of Massachusetts who depend on alimony payments for survival may suffer anxiety because they are not always sure whether they will receive their monthly alimony payments. If your ex-spouse has the means to settle the alimony in a lump sum, it may benefit both parties. If your former spouse agrees to pay alimony in a lump sum, approval of the court presiding over the divorce may be required.
A lump sum alimony payment is equal to a total as agreed upon by the parties. Receiving all future alimony in one payment may prove to be beneficial, as it may offer the opportunity to increase the value considerably. By investing the money wisely, the value could increase significantly over the years. In addition, an alimony payment in a lump sum would typically avoid the possibility of having to go to court in the future to obtain a judgment to enforce alimony payments.
It is important to understand that the tax implications of receiving the full amount of future alimony may be significant. If the payment is classified as “alimony,” you may be taxed on the total amount during the year that the money is received. In contrast, labeling the payment as a “settlement” may result in it not being taxed. Income tax on the lump sum may be substantial and justifies careful consideration.
It may be beneficial to consult with an experienced professional in Massachusetts, who could explain the tax implications. Advice on a suitable way to accept the payment may have a significant impact on your finances. In addition, ongoing anxious anticipation while waiting to receive monthly alimony payments will be eliminated.
Source: FindLaw, “Avoid Alimony Monthly Payment Programs“, , Aug. 30, 2014