When someone thinks of paying spousal support in Kentucky, also known as alimony, usually that person assumes they will be making monthly payments. However, there may be an alternative to making monthly alimony payments after a divorce that may be worth considering -- a lump sum payment.
In a lump sum payment, the payor of spousal support makes a one-time payment to the receiving spouse. Usually the court and each spouse needs to agree to such a payment. A lump sum payment usually must be at least equal to what the monthly payments would amount to.
One should consider, however, that there may be negative tax ramifications when it comes to receiving a lump sum payment. Alimony payments are taxed as income, so a large alimony payment may mean a large tax bill. That being said, it may be possible to classify a lump some alimony payment as a settlement in some circumstances, which has different tax consequences.
Despite that, there are also advantages to lump sum payments. For example, one advantage to lump sum payments is that there is no issue with receiving payments on time and in full each month. Also, if the receiving spouse chooses to invest their spousal support payments, they will probably earn more by investing a larger amount of money for a longer period of time.
A lump sum payment can be one way to neatly walk away from a divorce with all obligations met. Those with questions about making lump sum payments may want to do their research to see if this is a possibility for them.