Bedrock Divorce Advisors

To read this article directly on the ForbesWomen and/or to leave a comment, please click on this link: http://blogs.forbes.com/jefflanders/2011/06/01/upfront-lump-sum-payment-or-alimony-why-some-nfl-ex-wives-are-now-smiling/

Image(s): FreeDigitalPhotos.net

For years, they undoubtedly listened to their husbands dissect the finer points of an on-side kick, zone coverage, or the blitz.

But now, many former NFL wives may need to start drawing up a few special plays of their own.

For months, the National Football League owners and players have been locked in a seemingly intractable labor contract dispute. If the two sides can’t agree to a resolution, NFL players soon may be without a paycheck –and that means many NFL ex-wives are now wondering about the future of their alimony payments.

According to an article at Bloomberg.com, NFL players are already lining up at their attorneys’ offices so that they can get child support and alimony payments lowered to reflect diminished incomes IF the contract battle puts the brakes on the NFL season.

Do the players’ ex-wives have any recourse? What can you do if you find yourself in a similar situation?

What happens if your ex-husband’s financial status changes, and he’s not able to fulfill his alimony obligations?

In order to address these questions, let’s first review some basic information about alimony.

Alimony (which is also called spousal support or maintenance) is the term that describes the payments made from one spouse (the “moneyed” spouse) to the other (the “non-moneyed” spouse) after the divorce is finalized. The fundamental purpose of alimony is to provide economic support to the dependent spouse and to allow the “financially disadvantaged” spouse to continue a comparable standard of living that he/she enjoyed during the marriage.

Although a variety of alimony options exist, for the purposes of this article, I’m going to discuss only the following two:

• Regular Alimony (also known as Periodic Alimony)
• Upfront lump sum payment in lieu of alimony

And, as you might imagine, there are advantages and disadvantages to each.

Regular alimony is paid in established intervals (typically monthly). This regular payment schedule usually continues per the divorce settlement agreement until: 1) the spouse who’s receiving it remarries (or, in some cases, cohabitates); 2) either party dies (keep reading to find more details about this); 3) either party goes to court to seek a modification based on a substantial change in financial circumstances.

So, you see, factor #3 says it all:

Yes, regular alimony payments can be modified (up or down).

As some NFL ex-wives may soon discover, a judge can reduce alimony if there is a significant negative change in the payor’s financial circumstances.

Do these NFL ex-wives have any recourse?

They do. But, their options are limited. Any modifications to alimony, child support and/or other divorce-related payments must be approved by the court. However, if the judge agrees that the ex-husband can no longer afford to pay the current amount of alimony, that judge can decide to reduce those required payments.

What would I recommend in a situation like this?

As is so often the case with divorce –and with the NFL! –the best defense is usually a good offense. In other words, it’s best to build a qualified divorce team from the onset to help you analyze and consider all the options available to you before you agree to any divorce settlement.

Since my firm exclusively represents women, it is our belief that an upfront lump sum payment in lieu of alimony is, in the vast majority of cases, the preferred option if the woman is to be the recipient of alimony. Of course, before making a recommendation like this, we must be certain that:

• There are sufficient assets available to make such a lump sum payment.
• The recipient  is not a spendthrift.
• The recipient  has no lawsuits pending against her.
• The recipient has good continuing financial advice on asset protection and how to make the lump sum payment, along with the rest of her settlement, last as long as possible.

An upfront lump sum payment in lieu of alimony is a one-time payment of a fixed amount. Obviously, any NFL ex-wife who agreed to a lump sum payment is not particularly worried now about a potential drop in her ex-husband’s income. She has already received everything she is entitled to and her ex-husband cannot come back to request any modifications. There are no “do-overs” for either party.

Because the entire payment is made all at one time, an upfront lump sum payment requires careful, deliberate financial management. As mentioned above, you will have to handle the one-time payment appropriately so that it sustains your lifestyle long-term.

The Divorce Financial Strategists™ here at Bedrock Divorce Advisors™ are careful to discuss each of these alimony options with all of our clients and their divorce attorneys because we’ve seen how devastating it can be for a woman to lose her alimony income.

What’s more, in those cases where there are periodic alimony payments, we always recommend that our clients establish a life insurance policy to help secure those alimony payments should their ex-husband die. This kind of life insurance policy would enable her to receive a tax-free, lump-sum payment of what she would have received over time from her alimony, child support and/or other divorce-related payments.

It’s best to establish this life insurance policy before the divorce has been finalized. Keep in mind: After the divorce, your ex-husband may refuse to cooperate in getting the required medical exam.  Or, you may discover during the process that he is uninsurable.  Either way, you need to know this before the divorce is settled so that, if necessary, you can find alternate ways of securing your divorce settlement payments.

In short, build a solid divorce team, and know the playbook inside and out. You don’t ever want to rely on a Hail Mary pass for a secure financial future.

——————————————–
Jeffrey A. Landers, CDFA™ is a Divorce Financial Strategist™ and the founder of Bedrock Divorce Advisors, LLC (http://www.BedrockDivorce.com), a divorce financial strategy firm that exclusively works with women, who are going through, or might be going through, a financially complicated divorce. He also advises women business owners on what steps they can take now to “divorce-proof” their business in the event of a future divorce. He can be reached at Landers@BedrockDivorce.com.

Share this: