How Spousal Support is Paid

Once an agreement is reached or a determination is made by the Court that spousal support is payable, it is generally paid in monthly installments or a one-time lump sum payment. There are pros and cons to each method of the support payment.

When spousal support is paid monthly pursuant to a written agreement or Court Order, it is tax-deductible to the payor spouse and is treated as taxable income to the recipient spouse. This arrangement is especially beneficial to a payor spouse who earns a considerable income as the tax benefit will be greater. Monthly payments are typically paid for an extended period of time and even if there is an end date to the spousal support payments, there is a risk that the recipient spouse may apply to the court to have the payments extended if the recipient spousal can prove continued entitlement and/or need.

Lump-sum spousal support is not tax-deductible by the payor spouse and it is not taxable income in the hands of the recipient spouse. The benefit of making a lump sum spousal support payment is that it is a one-time payment and there is no continued obligation to support the recipient spouse. It is not common for a recipient spouse to apply for continued spousal support after a lump sum payment as it is difficult to prove entitlement and/or need for support after a period of time has passed without continuous support being received by the recipient spouse. One thing to note is that a lump sum payment of spousal support is rarely ordered by the Court and is typically an arrangement between the separating parties when negotiating the terms of a Separation Agreement or Consent Order.

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