Although divorce is the end of your marriage, it may not be the end of your financial responsibilities to your spouse. Alimony payments are assigned by the court specifically to support a spouse who cannot achieve financial independence. This can be due to age, disability, or absence from the job market for an extended period. If one spouse were either fully or partially financially dependent upon the other, the court would assign alimony payments until such a time that the spouse can support themselves or is supported by someone else.
Types Of Alimony
There are several types of alimony that a court may assign to your spouse. Payments can be periodic, lump sum, or rehabilitative. Let’s briefly cover the differences.
Periodic alimony refers to continuous payments at set intervals. This is sometimes called “permanent” alimony, and the goal is to set both spouses on equal financial footing. This is specifically appropriate when one spouse is entirely dependent upon the other. Periodic alimony only ends when the recipient remarries, cohabitates with another partner, or if either party dies.
As the name suggests, lump-sum alimony is often an amount given all at one time, although several payments over a period of time is possible too. What sets this apart is that the amount of money is finite. The amount of money paid to the recipient spouse cannot be changed or modified even in the event of remarriage or death.
The most common type of alimony payment is rehabilitative alimony. This functions much like periodic alimony in that it is granted periodically to the recipient spouse due to an inability to achieve financial independence. The difference here, though, is that the payments are directed towards the recipient eventually regaining independence. The funds are to be utilized to create new employment skills or education. That way, the recipient can subsequently take care of themselves. The paying spouse must pay a finite amount over a set period, and after that, the alimony requirements end.
Originally alimony was deductible by the paying spouse, and the recipient spouse would pay taxes on the income they received. But this is no longer the case since the Tax Cuts and Jobs Act was enacted by Congress in 2017. All divorces after January 1st, 2019, will fall under the new law, and alimony cannot be deducted by the spouse making the payments, and the recipient will not pay taxes on the income.
If you have any questions about the types of alimony or how it will affect your taxes, call the Law Offices of Rusty Willard at (601) 824-9797.