Can I end alimony with a lump sum?

Ask NJMoneyHelp

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Q. I have been divorced for eight years. I am 60 and will have to pay alimony to my ex until I retire, which won’t be for another 10 years. What is the mathematical formula if I wanted to pay my ex off now and be done with this monthly alimony? My ex said she will never remarry as she said she wants to take me to the cleaners for my money.
— Ex

A. In New Jersey, there is a calculator for determining child support based on certain inputs, but there is no set formula for determining alimony.

New Jersey has some guidelines, but nothing specific, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

“Some of the factors that are considered include the needs of both parties, the ability of each to support those needs as well as the duration of the marriage,” she said. “Also considered are the health – emotional and physical – of both parties and the marital lifestyle that they have enjoyed.”

The goal is to approximate the standard of living, realizing that for most households, particularly in New Jersey, this may not be achievable, she said.

D’Agostini said if your ex-wife is not working, the courts often impute an income. This would be based on their education, past work history and the length they have been out of the workforce.

You may need to revisit her earning capacity, she said.

D’Agostini said there are ways to impute an alimony buyout and she uses financial planning software to help with that.

“You’ll need to consider the amount and duration for the remaining alimony, and then tax-effect it,” she said. “Alimony, as you recall, is taxable deductible for the payer and taxable to the payee.”

Keep in mind those tax rules change in 2019, and that’s why many people are rushing to complete their divorces this calendar year. Also note that those who are divorced before the change are grandfathered in to the old deductibility rules.

Keep in mind how your tax situation would change if you arranged a buyout and whether it would make sense given your overall financial situation.

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