LUMP SUM ALIMONY PAYMENTS IN DIVORCE
LUMP SUM ALIMONY PAYMENTS IN DIVORCE

A client came into my Brentwood, TN office today and mentioned he wanted to pay his wife lump sum alimony rather than paying her alimony over time.  He told me he just wanted to get the payments behind him.  I can understand his position...  We discussed what amount of monthly alimony he would owe her and for how long.  Since he did not know what amount of alimony was reasonable, I began to outline her potential monthly expenses.  I then looked at the potential duration of the proposed alimony and calculated the NPV value of the wife receiving the full alimony now rather than receiving it over time.

When we looked at the final alimony amount, he could not afford to pay the alimony upfront and still have adequate resources in savings.  He said, "Well, my attorney said I could pay the lump sum alimony.  Why did he say that when I can't afford it?".  My reply was, "The attorney's job is to address the legal issues.  You hired me, to help you understand the financial issues and that is what I am doing."

While I understand the desire to get the divorce in your rearview mirror, I encourage those divorceing to carefully review the financial and tax issues of their divorce with a financial professional rather than relying on an attorney to address financial and tax topics.