Alimony payments are generally made on monthly basis but the parties can agree or the court may order that the payment be made in a lump sum.
In such cases, the spousal support or alimony is in the form of a one-time payment. It is often a substitute for adjustment in property settlement. There are many tax benefits associated with lump-sum alimony. This type of alimony is generally paid even if the receiving spouse remarries or qualifies under an exception that usually results in the termination of the alimony order.
A spouse can accept or be awarded lump sum alimony in lieu of the usual monthly alimony payments which are subject to taxes. It is usually in the form of a single cash payment or transfer of a valuable asset from the paying spouse to the recipient spouse. It is generally made as part of the divorce or legal separation or dissolution of a marriage. It is not subject to taxation. It is an attractive option to regular alimony because the recipient spouse receives the entire amount in one go and does not have to depend on the paying spouse’s financial ability to make the payments in the future. To avoid being taxed, the payment or transfer must take place within one year from the date of the divorce.