Alimony, or “ maintenance” as it’ s known as in New York State, is traditionally in the form of monthly payments. However many married couples choose to negotiate a lump-sum acquistion instead. The payor gives the payee a single large disbursement instead of monthly obligations over the next several years. Although the total amount in a buyout is lower than the payments would total to, many recipients are better off recognizing such an offer.
First let’ s understand why a lump sum is a smaller total amount than the monthly payments calculated with the New York spousal maintenance formula. A dollar today is worth more than a dollar tomorrow so the payout amount has to be adjusted for inflation. In addition the lump sum can be invested, potentially offering monthly income for the rest of a person’ s life so it is a source associated with future earnings. Even though the lump sum is really a smaller number, it will have the same long-term buying power as the individual payments.
One of the leading reasons spouses accept servicing buyouts is immediate need. Sure it’ s nice to have a dependable monthly income– assuming the old flame is reliable but that’ ersus another issue– but that doesn’ t help pay off large bills right now. Job loss, medical bills, car accidents or other disasters may leave a person with enormous debt. It is better to pay off the loan instantly rather than run up massive financial charges as payments chip aside at the sum over years.
The acquistion can be advantageous for the payor within a divorce settlement as well. Yes, it can be a short-term hardship to raise that much cash. However if the payor aggressively works to replace savings or pay associated with loans taken to meet the obligation, it can mean less money paid out in the long run. Many people would rather make monthly payments to a savings or a lender than to write a check to an ex, so the emotional value is lower as well.
Family law attorneys use divorce settlement calculators to determine a reasonable buyout amount. These calculators consider the monthly payments and the length of the maintenance agreement to find a base value, and then modify that for inflation. The more in the future a given payment is the smaller effect it will have on the buyout quantity. It’ s harder to determine a reasonable lump sum for maintenance agreements with no end date, though it can be done.
Contact Easy Soft, a provider of regulation practice management software for over twenty years, to learn more regarding how our family law software can provide an unbiased analysis of the current maintenance agreement and calculate a fair lump sum settlement.