Alimony, also known as spousal support, is a mandatory payment that one spouse makes to the other after a divorce. Its purpose is to allow the receiving spouse to maintain the lifestyle they grew accustomed to during the marriage, and bridge the gap if there is a significant difference in earning potential between the two spouses. If the paying spouse receives a financial windfall, they may be concerned that they will have to increase their monthly payments to their ex. Contact an Oakland County alimony lawyer to find out more about your rights.
What is a Financial Windfall?
Financial windfall is a term to describe when a person comes into an unexpectedly large amount of money. A windfall is surprising, either because you did not expect to get any money at all, or because you did not expect that the amount would be so high. Financial windfalls can manifest in a variety of ways, such as a parent leaving you an inheritance of a million dollars when you thought it would only be a few thousand, buying a lottery ticket and winning thousands of dollars, or receiving a life insurance payout after an unexpected passing.
Will Alimony Increase Due to a Financial Windfall?
If you received a financial windfall you might be celebrating your good fortune. However, have you considered the consequences of receiving such a large sum of money? Many people are worried that large financial gain will result in a mandatory increase in alimony payments. However, that is likely not the case.
Because alimony payments are typically a flat rate that is decided at the time of divorce, your financial windfall will probably have no impact. Spousal support payments are not intended to designate a percentage of your income to your ex-spouse, its purpose is to allow your ex to live in a similar way that they did when you were married and account for any disparity in earning capacity. Sometimes one spouse will postpone higher education to support the other spouse or leave the workforce to take care of children. After a marriage ends they might not be able to make enough money to support themselves, so alimony makes up for that.
If you receive a financial windfall, it will not negatively affect your ex’s financial situation or mean that they need more money, so your payment will usually not be impacted.
What is an Escalator Clause?
An escalator clause is a clause in a contract that states that the agreed-upon amount of money or price of something is subject to change depending on certain factors or conditions. If there is an escalator clause in your divorce agreement, it could state that your ex-spouse will receive an increase in alimony based on your increase in income or wealth. The only way your financial windfall will result in larger alimony payments is if there is an escalator clause in your contract.