Being ordered to send monthly spousal maintenance payments may be a hindrance for some former spouses because they want to be free of any reminders of their former marriages. Others might simply be worried about accidentally missing a payment. Those who are divorcing in Illinois and are negotiating spousal maintenance could avoid monthly payments by paying it all in a lump sum.
Illinois is one of several states that allow spouses to pay spousal maintenance in a lump sum if the court and the recipients approve it. Taking advantage of this is similar to winning the lottery in that the party receiving the maintenance is paid in full with one transaction rather than having the payment spread over several years. However, the total amount of maintenance that the obligor pays has to equal the total amount of the would-be future payments.
One of the big reasons some people want to avoid paying monthly spousal maintenance is because they are worried about forgetting to make a payment or are concerned that the recipient will ask the court for the payments to continue when the obligation is coming to an end. Opting to make a lump sum payment allows the obligor to avoid these issues. There are also advantages for those who are receiving lump sum payments. They do not have to worry about the obligors missing a payment, and they could end up receiving more money. Lump sum payments have to equal what the party would receive if future payments were made but could end up being more because the transaction is not discounted according to present value.
While there are advantages to making lump sum payments, this method does not work for every divorcing couple. It might be beneficial for those who may be in this situation to consult with their lawyers and financial advisers about whether this payment method works for their circumstances.
Source: FindLaw, “Avoid Alimony Monthly Payment Programs”, accessed on Jan. 12, 2015