Sale of the Marital Home and Spousal Support
My question involves a marriage in the state of: Texas
I am in the process of divorce and the Ex and I have decided to sell the house once the divorce is complete. There is a significant amount of Equity in the house so both sides stand to come out decent. Once the house is sold, I plan to purchase another house. My credit is not great right now, but the only negatives I have are a high utilization on cards, so easy to fix with money and a few months. I expect to be required to pay spousal support since we have been together (common law marriage with no definite marriage date) for over 10 years and she is legally considered disabled.
My question is, would I be better off paying her off, or offering her a lump sum settlement out of my share of the house. I am thinking about the second option to make my debt to income ratio look better for a new home purchase. What are the pros/cons of offering a lump sum settlement vs a traditional payout?
Thank you.
Re: Sale of the Marital Home and Spousal Support
Spousal support is taxable to the recipient, so by paying over time you can reduce your taxable income over a period of years, and that may provide a tax advantage. Paying a lump sum, "in gross" settlement may allow you to negotiate a lump sum that is lower than you would pay in periodic payments, even when discounted to present value. But really -- it's a numbers game, and the costs and benefits will turn on the numbers. Speak with your divorce lawyer or a divorce financial planner about how various settlements will affect you given your specific financial goals and circumstances.