Alimony redistributes property from one ex-spouse to another so that both can maintain similar standards of living as they did before their marital separation. However, not every former spouse who owes alimony can be trusted for regular, timely alimony payments. In these cases, a court can order a spouse to pay lump sum alimony — a one-time payment in the full amount due. When it comes to your divorce case, lump sum alimony rulings affect your financial status, including potentially your income taxes. Look to the Law Office of Silverman, Mack & Associates for alimony solutions. Our dedicated team of divorce attorneys in Gainesville can advise you on whether lump sum alimony or periodic alimony is a better option for your case. We’ll faithfully represent your case to earn you a fair separation agreement and fair alimony support. Contact us today for legal representation and counsel.
Lump Sum Vs. Periodic Alimony
Lump sum alimony is a payment method for different types of alimony agreements. The opposite of lump sum alimony is periodic alimony, where the payer makes several payments at regular intervals, usually monthly or quarterly. Periodic alimony can last for as long as the divorce case is open (temporary alimony); for a set period (durational alimony); until the dependent spouse achieves financial or professional self-support (bridge-the-gap alimony, rehabilitative alimony); or until the spouse remarries or passes away (permanent alimony). If either party’s circumstances change while periodic alimony is in effect, the court can increase, reduce, or eliminate the payments. Such adjustments cannot be done to lump sum alimony, however. Once the court has ruled on a lump sum case, its decision is final and non-amendable. Like periodic alimony, lump sum payments can be used to satisfy various types of alimony. In Florida’s family courts, one-time payments are granted most for permanent and rehabilitative alimony.
Who Is Eligible For Lump Sum Alimony?
The courts only award alimony after certain marital separations. In general, people receive alimony because they own significantly less money or property than their ex-spouses. Without the financial help, they would thus suffer marked drops in their quality of life. The courts order lump sum alimony, in particular, when a person’s ability to pay regular alimony is doubted. For example, if an ex-spouse has plans to leave the country or a gambling addiction, that person could be court-ordered to pay alimony up front in a lump sum.
Lump Sum Alimony Calculator
In most cases, lump sum alimony has the same value as periodic alimony. The only difference is dependents receive money all at once, rather than distributed over months or years. Lawyers used to consult people who receive bulk alimony that they could be brought into a higher tax bracket. The post-tax value of their payments would thus diminish more than if they had received periodic alimony. However, the new tax law removed this concern for dependents who divorced in 2019 or later (read more about alimony taxation below). When the court calculates alimony, it consults Florida family law statutes and legal precedents. The following factors could influence a court’s calculation of lump sum alimony.
- Each spouse’s respective financial resources;
- All sources of prior income;
- The earning capacity of each spouse;
- Money spent on education or career training during the marriage;
- The standard of living for members of the household;
- The age and physical and emotional health of each party;
- Each person’s contribution at home and work;
- Tax implications of alimony awards; and
- The distribution of parental responsibilities.
Is Lump Sum Alimony Taxable In Florida?
A family law attorney can advise you on the tax liabilities associated with lump sum alimony. In most cases, alimony is treated as taxable income, whether it’s lump sum or periodic alimony. However, which spouse must claim alimony as income depends on whether the marital separation was before or after the new tax plan took effect on January 1, 2019.
Divorces In 2018 Or Earlier
Couples divorced in 2018 or earlier are grandfathered in under the previous tax laws. According to these statutes, the person who pays alimony may deduct it from his or her income for tax filings. Meanwhile, the dependent who receives the money has to declare it as taxable. For example: if spouse A made $60,000 but paid $15,000 in lump sum of alimony to spouse B, who makes $30,000, then both spouses would report $45,000 income on their taxes. Under the pre-2019 arrangement, the tax benefits went to the spouse court-ordered to pay alimony.
Divorces In 2019 Or Later
Under the new tax plan, spouses who pay lump sum alimony must now claim that money as income and pay taxes on it. Their dependent spouses, on the other hand, may deduct the alimony from their income reports. For example: if spouse A earned $60,000 but paid spouse B $15,000 in lump sum alimony, spouse A would owe taxes on $60,000 income, despite having a net income of just $45,000. Conversely, spouse B would pay taxes on $30,000 income but net $45,000. The new law, which impacts couples who divorce in 2019 or later, inverts the earlier arrangement: the tax burden is now on the payer rather than the recipient. An alimony attorney can help a couple modify or remove this tax treatment through a prior agreement in their divorce decree.
How The New Tax Law Affects Alimony Cases In Florida
In terms of Florida divorce law, the new tax plan has big implications for lump sum alimony cases. Before 2019, family law attorneys had to caution dependent spouses that by accepting lump sum alimony, they could be brought into higher tax brackets. Since this would cause them to owe larger percentages of their income to the IRS, the net value of their alimony would be diminished. This concern no longer exists for the spouses who receive lump sum alimony. Instead, spouses who pay bulk alimony must now examine the tax implications. If it can be shown that awarding lump sum alimony would place financial hardship on a spouse, the court may grant periodic alimony instead — an alimony lawyer can help you make such an argument. To learn which type of alimony is best for your case, call the Law Office of Silverman, Mack & Associates.