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Alimony Lump Sum v. Fixed Amount

Alimony is a frequently litigated issue due primarily to the fact that Kentucky does not have a fixed formula for determining alimony.  Alimony is based on a number of actors, but primarily is the disparity of income or earning ability and the length of the marriage.

Generally alimony is awarded as a monthly payment over a devinitive period of time.  There are occasions when the payor would rather pay a lump sum amount in stead of a monthly rate.  Often, the payee would also prefer to receive a lump sum payout.  The lump sum erases concerns of: future modification based on change of circumstances of the payor, death of the payor, modification based on remarriage of the payee and simple act of collection should the payor elect to not make the payments.

A major consideration should be given to the tax implications of all spousal support/alimony awards.  Generally, spousal support is taxable to the receiving party and tax deductible to the payor.  That said, there is also a recapture rule, which applies to the payor when alimony payments decrease substantially or end during the first three calendar years. This rule is intended to prevent payers whose divorces occur near the end of the year from making deductible property settlements at the beginning of the year.

If a longer term alimony payment is contemplated, it can be structured so as to avoid this recapture rule and allow for payments to be deductible over a period of time.  Special consideration should be given to clients contemplating such payments.

Alimony, spousal support and spousal maintenance are used interchangeably throughout this article.  Their plain meaning is the same, although Kentucky law is based on the concept and language using the term spousal maintenance.  Whichever term is used, the tax consequence is the same.

If you have questions about spousal support in Kentucky, call attorney Michael Bouldin for a consultaiton. Contact [email protected] or call 581-MIKE, (859-581-6453).

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