Should You Accept Spousal Support as a Lump Sum Payment?

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In New York, spousal support awards in divorce are determined according to a formula set by statute. However, the parties still have the flexibility to negotiate their own terms. One option is for spousal support to be paid upfront in a lump sum rather than over time as a monthly amount. There are advantages and disadvantages to this depending on the circumstances of the parties. Some of the considerations in determining whether to accept spousal support as a lump sum include:

How much support will you receive or have to pay if it is calculated as a lump sum?

The formula calculating spousal support varies depending on whether the recipient is also getting child support and whether the payor’s income exceeds an income cap (which is $192,000 in 2021). In addition, the formula sets out how long support should last, which is generally based on the length of the parties’ marriage. When support is paid as a lump sum, the parties must factor in these statutory provisions as well as anticipated future income and other circumstances to determine what would be the total amount paid over time. Typically, this amount is then discounted to its present value because it is being paid in advance as a lump sum. In deciding whether to make or accept an offer, the parties must consider how the payment will affect their current and future financial situation.

How long was your marriage?

As noted above, the duration of support is part of the calculation of the lump sum amount. Generally, in marriages of less than 15 years, support payments should last between 15% to 30% of the marriage’s length. For marriages of 15 to 20 years in length, payments should last between 30% and 40% of the length of the marriage. For marriages over 20 years, payments should last for 35% to 50% of the length of the marriage. Generally, a lump sum payment favors the payor spouse when the marriage lasted less than 15 years. This is because the payment eliminates the payor’s future obligations, which is important as he or she ages. The lump sum amount may also be more reasonable because the marriage was short, and less support is owed. In contrast, in a marriage over 15 years, the lump sum payment is more likely to favor the payee or recipient spouse because he or she receives a large amount upfront and does not risk losing support in the future if the payor dies or has financial problems.

What are your respective financial and health circumstances?

Where parties are older, they are more likely to have money or health problems. The payor spouse may die, become disabled, and have reduced income and higher expenses. The recipient spouse may have a hard time finding employment if he or she has been out of the workforce for many years, while also experiencing higher expenses. A lump sum can provide extra security protecting against the sudden loss of support if something happens to the payor. Note that life insurance can also be purchased to secure payment of support in the event the payor spouse dies during the term of the support obligation. 

A lump sum payment of spousal support is not right for everyone. If you are considering divorce, please contact us to learn how we can help you resolve your support and other divorce disputes.

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