Divorce is a challenging process, even if you and your ex-partner are willing to settle out of court. Beyond the heightened emotions that come with leaving a long-term relationship, you’re also facing major financial decisions. This is especially the case if you are the one paying spousal support.
You generally have two options in how you can make your payment: through monthly payments, or as a lump sum. While it may seem trivial, this choice can have a big impact on your financial future and your ability to fully separate from your past marriage.
Monthly spousal support: Ongoing financial commitment
This is when you make regular payments to your ex-spouse over a specified period of time. Most divorce settlements default to this structure because it aligns with typical income flows. It also creates a predictable expense you can budget for without immediately draining your savings. Courts might even modify this arrangement if your situation worsens significantly.
However, these payments maintain your financial connection to your ex-spouse for years. This might not be ideal if the separation was emotionally fraught. Your ex could also request increases if your income grows, and you remain obligated regardless of your changing circumstances. In some cases, the total paid may even exceed what a lump sum would require.
Lump-sum spousal support: Complete financial separation
A lump-sum arrangement allows you to fulfill your entire support obligation upfront or through a few major payments. This allows for a complete financial separation from your ex-spouse moving forward.
Your obligation ends permanently regardless of your ex-spouse’s future circumstances, including remarriage or death. Moreover, your future financial success becomes entirely your own. Raises, bonuses or business growth will not trigger requests for increased support payments.
However, this is also a substantial upfront payment. It may require significant liquid assets or borrowing capacity. You might have to sell stocks or dip into your retirement savings before you plan to. You may not also be able to deduct lump-sum payments on your taxes, unlike some monthly payments.
Making your decision
Your personal circumstances should guide this important choice. It’s important to assess your income stability and future prospects. It is also wise to consult with an attorney. They can give you an objective assessment of your situation, as well as negotiate for terms that align with your best interests.
