Issues in Determining a Lump Sum Spousal Support Buy-Out

Determining an exact figure for a fair spousal support buy-out number is difficult because there are so many factors. To give you an idea of what needs to be considered, here is a list of some of the variables that go into a buy-out calculation:

  • Amount of spousal support which would be paid is not absolutely clear unless there’s already a court order;
  • Chances that spousal support would be modified in the future:
    • Increase;
    • Decrease;
    • Anticipated retirement.
  • Length of time spousal support would be paid;
  • Early termination: death of either party,remarriage of recipient;
  • Risk that spousal support is not paid:
    • Disability or decrease in income for person paying support;
    • Person paying support fails to pay or disappears.
  • Earning capacity;
  • Duty to be self-supporting;
  • Tax ramifications: ordinarily spousal support is tax deductible by the person paying and included in the income of the recipient, but lump sums are not taxed;
  • Time value of money:
    • Advantage to having the money in one lump sum;
    • Anticipated rate of return if lump sum was invested.

Non-Monetary Factors:

  • Peace of mind and closure;
  • No need to modify spousal support later;
  • Privacy with regard to your financial situation in the future;
  • Each party has incentive to prosper financially without penalty;
  • Easier to co-pa
  • rent when you’re not worried about each other’s earning capacity;
  • Decreased anxiety associated with ongoing litigation.

Don’t forget to add: the cost of litigation in order to find out what the spousal support order will be if you cannot settle on the terms.