in the middle of divorce start to negotiate terms and conditions of a property settlement, many
will find a structured settlement the most appropriate solution. A structured
settlement entails a series of smaller payments over a period of time
rather than a lump sum payment up front. The total of the smaller payments
comes to a greater sum than the original “lump sum” payment
would have been because the recipient typically receives interest on the
amount to compensate them for waiting for the delayed payments.
The structured settlement is typically used in
divorce situations where one party has a valuable, but non-liquid, asset that they wish to
keep (i.e. house, business, etc.), but not enough other marital property
to generate an offsetting award. In this situation, the structured settlement
would be the best option to guarantee that both parties receive a fair
amount of marital assets without one losing the non-liquid asset that
they wish to keep, but can’t afford to “purchase” from their ex.
John wishes to stay in the home he and his soon to be ex wife, Susie, shared
during their marriage. The agreed upon settlement amount is more than
he is able to pay. John can still stay in the home and provide Susie with
the agreed upon settlement amount with a property settlement note. Because
the money/settlement is a division of property, it is typically not taxable
so the recipient only pays taxes on the interest, not the principal. The
property settlement note allows John to keep the house and Susie to receive
a continued income stream. Please be sure to obtain tax advice before
entering into a binding settlement agreement.
The same solution can be applied in situations where one of the divorcing
parties wishes to keep the family business, but cannot afford a lump sum
payment amount due to their ex-spouse.
Other solutions that are sometimes utilized in this type of situation include:
lump-sum settlement, deferred lump-sum settlement payment, etc.
If you need to discuss whether a structured settlement could be appropriately
applied to solve difficulties in dividing your marital assets, get in
touch with the divorce attorneys at
Arizona Family Law Attorneys.