Maybe you are in the process of filing for divorce. Or perhaps you have been divorced for several years already. Either way, you may be wondering: do we need to delay alimony payments? Can we do this all in one lump sum?
Many divorced or divorcing couples are surprised to learn that, yes, you can buy out your remaining alimony obligations in lieu of monthly installments. At Webb Soypher McGrath, our alimony attorneys help couples in Bethesda and the Washington, D.C. area reach divorce conclusions that work best for them, which in some cases is an alimony buyout. Here is how it works.
How Alimony Typically Works in Maryland and D.C.
Alimony, also known as spousal support, is a payment one former spouse makes to the other over a set period. Spousal support may be temporary, durational, or indefinite, and the amount paid is determined by each spouse’s income, earning capacity, the length of the marriage, and other influences.
In Maryland, the law does not specifically allow ‘alimony’ to be paid in one lump sum. However, you and your spouse can agree in your settlement agreement that one will pay a specific sum of money in place of traditional alimony.
In Washington, D.C., Code §16–913 allows alimony to be organized “appropriate to the facts,” which makes a one-time payment under the term ‘alimony’ more readily accessible. Still, you and your spouse should specify whether the agreement is modifiable in the future.
How to Set Up A Lump-Sum Alimony
Although Maryland courts do not generally recognize alimony as a one-time award, you and your spouse can still reach that conclusion if you choose to do so. You can make a settlement agreement that outlines a gross payment or transfer of assets instead of future alimony.
A spousal support buyout must be clearly written into a signed agreement that is incorporated into your court order. Simply writing a large check does not eliminate court-ordered future alimony or the possibility of your spouse asking for additional support in the future.
In both Maryland and D.C., your agreement needs to explicitly specify that you are waiving future alimony rights/payments and/or the possibility of modifying the agreement in the future.
What If Our Divorce Is Already Finalized?
If you have already begun periodic alimony and have not completed it yet, you can still pursue a buyout. Even if your alimony agreement was not modifiable, if both parties jointly agree to modify, you can pursue a buyout.
The clearest path is obtaining a written post-divorce settlement with a consent order or court-approved modification. The modification will state clearly that you are replacing the remaining payments with a buyout.
How Spousal Support Buyouts Are Calculated
Before you and your spouse decide on an alimony buyout, remember that currency today is worth more than the same amount paid five or ten years from now. Because the receiving spouse can invest the money, and because the duration of future payments may be uncertain, we work with couples to determine a fair buyout value for today.
For instance, remaining alimony payments of $3,000 monthly for ten years total $360,000. But many alimony payments do not necessarily reach the ‘full term.’ If the recipient remarries, for instance, or if the paying spouse becomes ill, disabled, or passes away, alimony may be modified or terminated.
For this reason, cash buyouts are typically discounted below the nominal total. But the recipient can negotiate with their spouse, often in exchange for giving up dependable monthly income and future modifications.
When Is Alimony Buyout the Right Decision?
There are several reasons couples decide to buy out their remaining alimony obligations, including:
- A Clean Break: In high-conflict divorces, many couples want a resolute, clear-cut ending.
- Receive Payment Now: Many recipients find it beneficial to receive a lump sum to purchase a home, relocate, start a business, or pay off debt.
- Guaranteed Payment: The receiving spouse acquires the agreed amount or assets now without concern about future alimony modification or termination.
- Eliminate Administration Obligations: Some people prefer not to manage the monthly budgeting of bank-to-bank transfers or the hassle of mailing checks.
- Prevent Amendment Disputes: An alimony payout typically removes the possibility of the recipient seeking an increase in the future, which facilitates a clear, cut-and-dried solution.
Who Should Not Pursue an Alimony Buyout?
While a lump-sum payment is a great option for some couples, others benefit more from traditional, periodic alimony. Consider:
- The Recipient Needs Predictable Income: A recipient using spousal support for recurring expenses like rent and health care may be better situated with a monthly stream of income. If the recipient lacks a financial plan to manage a large sum of money, it can disappear quickly.
- The Payer Cannot Afford a Buyout Today: If the payer cannot easily fund the buyout and will need to drain emergency savings, sell a property at a bad time, or take on debt, we typically advise against paying out a lump sum.
- Substantial Uncertainty About the Future: Because a buyout can be difficult to revisit if the agreement is final, you should not pursue a lump-sum alimony if there is doubt about health, employability, income, debt, and business values. If you aren’t comfortable with the potential inability to modify terms in the future, consider traditional alimony.
Receive the Guidance You Need for a Fair Alimony Arrangement
Whether you would like to revisit your alimony agreement or are just starting the divorce process, we are here to guide you through every step of the way. At Webb Soypher McGrath, we take the time to understand both you and your spouse’s unique situation and goals. With eighty years of combined experience, we bring careful attention to every detail of your case.
Contact our alimony attorneys in Washington, D.C., and Bethesda, Maryland, or call us at 301-298-8401 for a consultation today.
