Family Law Blog

Lump Sum Spousal Maintenance

Commonly, spousal maintenance in Australia is a regular amount paid over time. However, in certain circumstances, you might be better off looking into lump sum spousal maintenance instead.

In this article, we’re going to take a look at the circumstances in which a lump sum spousal maintenance order might be preferable and address a few common questions along the way.

What is Lump Sum Spousal Maintenance?

As the name suggests, lump sum spousal maintenance is a Court ordered payment where one ex spouse is made to pay a specified amount to the other in a single payment rather than in smaller regular amounts over time.

Of course, to get to that decision point at all, you still have to meet the standard criteria for spousal maintenance, as set out in our article here.

As you would expect there are some pros and cons to going down this path that are worth considering.

When Seeking a Lump Sum, Capacity to Pay is Still Relevant

Even though you might decide a lump sum is in your best interests, bear in mind that the other party’s capacity to pay spousal maintenance is still a relevant factor.

Naturally a lump sum payment is going to:

  1. Be a substantially higher amount than periodic payments; and
  2. Therefore put a more significant burden on the payer.

So if the evidence does not establish that your former spouse can actually afford to pay a lump sum – either at all, or without risking bankruptcy – then you are not in a good position to be pressing for a lump sum payment.

So the starting point with lump sum spousal maintenance is to be reasonably confident that your ex can actually afford it. Given that financial disclosure between you and your ex will likely have taken place, you should be able to make that assessment.

How Much would Lump Sum Spousal Maintenance Be?

The calculation of a lump sum will go through roughly the same process as calculating payments over time.

That is, by reference to both the needs of the person receiving the payments, and the capacity of the person making the payments.

However, you can also expect that a lump sum spousal maintenance payment will consider the fact that it is in “today’s dollars” rather than made over time. Because money is generally worth less over time, receiving all of it in a fund now may attract a type of discounting as a result.

In all, other than the time factor, you would not normally expect that the overall amount would be significantly different in terms of its ability to provide for the needs you have identified.

When would you seek a Lump Sum instead of Payments Over Time?

Assuming your ex can afford it, there are three primary times you might seek a lump sum spousal maintenance order.

First, if you or the children in your care are making a major transition that requires significant funds to achieve. Houses, education and relocation might all be on the cards after separation, and a lump sum might be necessary to allow those things to happen.

Second, if you have a reasonable belief that your spouse might default on future payments. Getting a lump sum provides you with certainty that the payment will be made, and avoids the potential hassle of constantly chasing up a delinquent payer.

Finally, you might seek a lump sum if the ongoing connection with your spouse over time through requiring regular payments will cause you undue stress, anxiety or mental health issues. A lump sum will offer a greater degree of finality.

When might you Not Seek a Lump Sum?

The challenge with a lump sum maintenance amount is that you can’t go back for more if you spend it.

Unfortunately, many of us when in receipt of a reasonable sum of money in one go, risk making poor financial decisions about it.

So, if you are considering seeking a lump sum payment you would want to be relatively confident in your ability to budget, invest, and generally utilise the fund for its intended purpose. If not, you could end up in a situation where the fund is exhausted and your needs are not met.

Of course, this involves a degree of self-awareness and potentially getting financial or accounting advice.

Making a Good Decision on Spousal Maintenance

Faced with the option of seeking a lump sum, it can be tempting to reach for that almost by default – after all, it seems initially the more attractive option.

While a lump sum payment reduces some risks, it increases others, so it’s important to make a considered and informed decision.

Of course, whether or not a lump sum spousal maintenance order is made will ultimately be up to the Court. It may be that after consideration and submissions from both parties, the Court believes that the order is not appropriate in the circumstances and looks to payment over time instead.

Reach out if you need help seeking spousal maintenance.

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