We typically think of child support and spousal maintenance (alimony) in terms of monthly payments. But in Texas, it’s possible to pay these obligations in other ways.
Texas Family Code § 154.003 states that child support can be paid by periodic payments, a lump sum payment, the setting aside of property, an annuity purchase, or some combination of those methods. It’s also possible to satisfy spousal maintenance obligations in these ways.
The use of an annuity to satisfy child support or spousal maintenance obligations is what is known as a structured settlement. The obligor (person required to pay support or maintenance) purchases an annuity, and the proceeds of the annuity are distributed over time to the obligee (receiver of support or maintenance.)
When might you wish to pay child support or spousal maintenance through a structured settlement? What are the benefits to the obligor and obligee?
The Advantages Of Using A Structured Settlement
These are some of the benefits of using a structured settlement for the payment of child support or alimony:
- For the paying spouse, the out-of-pocket cost of the annuity may be less than the discounted value of monthly child support or alimony payments.
- For the receiving spouse, there is greater security, no delay in receiving payments and no arrearages.
- In Texas, annuity income is creditor-proof in bankruptcy.
- There are creative annuity solutions that allow for multiple income streams and long-term payouts.
- A structured settlement is a clean break solution. It can potentially end contact between the spouses.
One drawback though, is that annuity income is taxable and will be reported to the IRS. The divorce settlement can specify which spouse will incur the tax liability.
There are other pluses and minuses regarding the use of structured settlements for paying child support and spousal maintenance. An attorney at Scott M. Brown & Associates can review your situation discuss your legal options.