How to Negotiate Alimony Payments

Getting a divorce or separating from a long-term partner can leave both parties emotionally spent and angry. Dividing a couple’s assets and negotiating alimony adds stress to an already painful situation.

Alimony refers to a payment that one partner pays another as compensation for his or her share in the marriage. These payments are negotiable, as well the division of assets belonging to the couple. Alimony is different than child support, which refers to the payments used solely for children in a marriage. While emotions are always going to play a role in these negotiations, focusing on realistic outcomes and understanding your options will help you complete the process quickly and efficiently.

What is alimony?

Alimony is a cash payment transferred from one spouse to another after a divorce has been filed. Alimony does not include all transactions. A couple must file separately to qualify for alimony payments and they must be made in cash. This includes check and money orders. According to the Internal Revenue Service (IRS), alimony cannot be classified as one of the following items:

  • Child support payments.
  • Payments from a community property.
  • The use of property.
  • Payments that are voluntary.

Negotiate Without Your Emotions.

While it is hard to separate emotion from a divorce, anger or indifference will not serve the negotiations. Being spiteful or spending attorney dollars arguing and swapping notes will only hurt your finances and prolong the proceedings. If you find yourself in a deadlock and cannot settle, you may be forced to go to court. This outcome can be positive if you are unlikely to reach a compromise and you need a judge to step in and make the decision for you. However, the judge’s decision may not favor you.

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If you go to court, make sure you are comfortable with losing some of the assets that you are fighting for. Similarly, you may inadvertently spend the value of the asset you are fighting over on court fees. Keep a clear head, stay emotionally separate from the situation and be practical.

Value Your Assets Before You Begin Negotiations

Understand your assets. In order to head into negotiations with all of the facts, you must have all of the facts! Find out the value of the properties you own and the investment accounts you share. In addition to this, make sure you know the value of your spouse’s assets, including income. Just because an item is not in your name does not mean it cannot be used for alimony. If you have a full picture of your financial portfolio, you will have a stronger footing in the negotiations and can either defend a lower alimony payment or fight for a higher one.

Alimony and Taxes

The new tax law restricts payers from writing off their alimony payments on their tax returns. Similarly, the new law no longer requires alimony recipients to pay income tax on the payments they receive. The new law is similar to child support laws that are already in place. These changes may cause couples to enter harder negotiations. A spouse is less likely to give as much in alimony if the payments are no longer tax deductible.

All alimony payments must be made in cash. Any investments that are sold to pay for alimony will be subject to gains tax. All taxes owed are the responsibility of the person selling the asset. When negotiating, keep these tax payments in mind and only include those that would not leave you paying unnecessary fees. Using another asset to pay for alimony may make more sense than paying the gains tax on an investment that could be used to grow and fund alimony payments in the future.

Use Professional Help

Emotions can run high in negotiations and a mediator can serve as an impartial party. Having a professional mediator facilitate the meetings will help move the conversation along and stay on topic. In addition to this, hiring a qualified lawyer and seeking legal advice is recommended. An expensive lawyer does not always translate to the best legal advice. Find a lawyer that you trust and works within your budget. It does not serve you to spend more money on a lawyer than you will spend or receive in alimony.

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A forensic investigator may be key to your case and should be hired if necessary. Understanding your rights and the law will help you in the negotiating process. A professional attorney will have a greater understanding of the choices in front of you. Free legal advice is available in all 50 states.

Pick Your Battles

Compromise is something that will help you in the long run. Spending vast amounts of money on legal fees fighting over something that you do not want will not help you. Head into the negotiations with a clear view of what you are capable of paying or realistically receiving. In some cases, a higher alimony payment would be less beneficial than receiving full ownership of a property. A property can be rented or sold and used as a future investment. Keep an eye on your long-term goals and do not get caught up in smaller, petty battles.

A Lump Sum Instead of Monthly Payments

Alimony can be paid in a lump sum or via periodic payments. There are pros and cons to both methods. A lump sum can benefit those who do not trust their spouse to follow-through with continuing payments. Similarly, a lump sum can be used as an investment and help the recipient start a nest egg for themselves. Payers may prefer a lump sum if they do not want to have a continued financial relationship with their spouse. They may also opt for this method if their income easily allows them to recoup the losses after a short period.

Periodic payments are advised for those who are not as financially savvy with investments and need a steady income to pay for bills. Payers may benefit from this method if a lump sum would hit them hard and their finances would take a long time to recover.

In both cases, the negotiations over the amount will differ. A lump sum may be less money than monthly payments over 10 years but if invested well, can earn the recipient a lot more in the long run.

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