Alimony Payment Terms and Methods

Alimony is the payment of funds from one ex-spouse to the other following a divorce. Just as there are different terms of alimony there are also different ways that the payment of alimony may be structured. To learn more about different payment terms and methods, consult Bergen County alimony lawyer Brian D. Iton. He can explain what to expect from this process and help you understand your rights and obligations under New Jersey law.

The spouse who will be receiving alimony decides whether they want to receive alimony through the court (probation) system or outside of court (“direct pay”). If the alimony recipient chooses to receive their alimony payments through the court system then a probation account is opened and the probation department serves as the agency which receives or collects the alimony from the other spouse. The paying spouse’s wages can be garnished so that the alimony monies come directly from the employer to the probation department, who then disburses the money to the alimony recipient.

Alternatively, the recipient spouse can decide that they don’t want to have the probation department involved in the collection and distribution of the alimony payments. In this case the recipient spouse can decide to receive alimony directly from their ex-spouse. If the recipient spouse decides to receive alimony via direct pay from their former spouse they can always change their mind and ask the court to direct the probation department to collect the payment and disburse it to them. Most spousal agreements for direct pay include a provision that if the paying spouse is late or misses a payment that alimony can then be collected and disbursed through the probation department.

In lieu of alimony, the couple can agree to a settlement in which the payee spouse will receive a greater share of assets—or just plain cash—in return for waiving any right to ongoing support. To calculate the share, the spouses determine the amount of alimony that the payee spouse would receive over time and then discount it to its present value. For example, instead of receiving $2,000 per month for 10 years/120 months, which would equal $240,000, the payer could offer the payee ex-spouse a discounted present value lump sum payment upfront.

There are a number of advantages to a lump sum alimony payment. For the paying spouse, the financial dealings are done. The money is paid in one chunk, and all future income is the payor’s to spend as he or she wishes. In addition, the payor spouse is relieved of any burden to purchase a life insurance policy to guarantee that alimony is covered in the event that he or she dies before the alimony term ends. Conversely, by paying upfront in a lump sum the payment can be viewed as non-tax deductible equitable distribution, rather than tax-deductible alimony. As well, if the recipient spouse is likely to cohabitate or marry within a short time frame he or she may get a windfall if they receive a lump sum, as alimony would terminate upon marriage or cohabitation.

For the payee spouse, the advantage of a lump sum payment is that there is no more financial connection to their ex-spouse. The payee may enter into a new relationship at any time—or even get married—without losing the upfront payment. The payee spouse has no need to worry whether payments will be made on a timely basis or whether their ex-spouse will seek to modify the amount of alimony due to changed circumstances. As mentioned above, the payee spouse could take the upfront payment as equitable distribution – which is tax-free to the recipient, as compared to periodic alimony that is taxed to the recipient.

The decision to opt for the lump sum payment in lieu of periodic alimony should be considered carefully by both sides. For the payee, a lump sum payment can only “do the work” of alimony—replacing income—if the payee spouse exercises financial discipline and prudent management. If the lump sum is blown or mismanaged there is no option for the payee to go back and try to get periodic alimony.

When it comes to alimony, you should thoroughly explore all of your options before you make a decision on how it will be paid or received. For a free consultation on which alimony structures may be available and which options may serve your needs, contact Bergen County alimony attorney Brian D. Iton. He can be reached toll-free at (844) 431-3380, or through our online contact form to set up your appointment. We proudly represent people who need a divorce attorney in communities throughout Bergen, Essex, Hudson, and Passaic Counties, including the cities of Hackensack, Paterson, Newark, and Jersey City.