In terms of spousal maintenance, there are a number of options available to the litigants that are not available to the court. Here’s what I mean. If you ask a judge to make a decision on the issue of spousal maintenance, his or her hands are really tied to one of two outcomes, either a temporary award or a permanent award.
On the other hand, there may be times when it’s appropriate for the parties to agree to a lump sum property settlement in lieu of spousal maintenance. Quite often that happens when there are the financial resources within the marital estate to do so. In lieu of monthly payments, the parties agree on a lump sum number to come from some source where their cash accounts or retirement assets and that in effect does away with the issue of spousal maintenance.
The other thing that litigants can do is a partial buyout where they can spend down what the ongoing monthly spousal maintenance payment will be by partially funding that through a lump sum property distribution. The nice thing about a property distribution, well really there’s two nice things.
The first is that there is no income tax consequence. Property settlements as part of a divorce are not taxable, where spousal maintenance payments are taxable. There can be some significant tax savings. I think even more so the greater benefit is the fact that the litigants don’t have to do business with one another following the divorce. They don’t need to write out the check every month hastily or they don’t have to worry about whether that check is going to arrive.
Some of our clients will take advantage of those alternatives. Again, a court has no authority whatsoever to order that lump sum buyout.
Still another option for the litigants that the court can’t do, but the litigants can involve something called a Karon waiver. A Karon waiver is named after a case decided by the Minnesota Supreme court some years back entitled Karon v. Karon. The Karons decided that they were going to lock stock and barrel, figured out exactly what the alimony amount would be and for how long it would be paid.
They solidified that agreement and made it non-modifiable, so that at no point could one spouse try to undo the alimony obligation in terms of amount or duration. What that did for the Karons and for so many who have also reached those types of agreements is have finality, have certainty. The paying spouse knows for sure that if they got a promotion or a large bonus, that that money is not going to be tapped into as part of a motion to modify spousal maintenance.
At the same time, the lower income earning spouse knows with certainty that they’re going to receive a prescribed amount for a prescribed period of time. In the event that the paying spouse loses their job, they don’t have to worry about whether or not they will be paid.