If you’re going through a divorce, and trying to decide what route to take when it comes to spousal support— you might soon realize that you have a few options. But, one option many people forget about, is that of alimony buyout. It’s quick, easy, it allows for you to pay your part— and move on. But how do you calculate the alimony buyout amount? And is it the right choice for you?
Alimony Buyout: Lump Sum, and Be Done
People often refer to alimony buyout as lump sum alimony. Basically, lump sum alimony is a one-time, up front payment made to the receiving spouse. One of the main benefits of going this route is that it’s a one-time thing. You aren’t making monthly installments, and in turn for going this route— you craft an agreement that disallows the court from making changes to support in the future.
How do you calculate alimony buyout?
The alimony buyout amount will consider the amount that you would be receiving over X period of time. So, if there is a time limit set— the court will calculate the amount according to that amount of time. It will be less, because there’s the potential for interest to build on a larger sum. Ultimately, the guess work really begins when you do not have a set time limit on the alimony. An example would be: if the court agrees to your receiving of alimony for the rest of your life. You’ll agree upon an amount between both parties, put into writing, and submit to the court for approval.
What are disadvantages?
You will give/get less money, because many times spousal support is indefinite. Therefore, there’s no way to calculate how much you would be getting because you’re receiving it for life. Because of this, the lump sum will inevitably be less. But, it is a large sum of money that you’re getting at once. Meaning you can do more with it, and if you invest properly— you can accrue interest, as well as potentially make profit.
Ultimately, you have to pick an agreement that works for the both of you
A lump sum agreement has a lot of potential upsides for both parties. It’s quicker, requires less contact, and allows for the receiving party to apply the payment in a bigger way. Invest in something, build a business, or just the lump sum accrue interest until you retire. No matter what route you decide to take, alimony buyout is a viable option to consider.