Alimony Substitution Trust

DEFINITION of 'Alimony Substitution Trust'

A trust agreement in which a divorced person agrees to pay spousal support from the income generated from a trust. An alimony substitution trust is different from receiving alimony because this trust is taxed differently. The ex-spouse responsible to provide income from the trust is not required to pay income taxes on the income generated by the trust nor do they receive a tax deduction for payments made from this trust.

BREAKING DOWN 'Alimony Substitution Trust'

A trust is a bank account that is managed by a trustee (person or institution) who holds a legal title enabling them to manage trust funds for the benefit of the beneficiary. The money held in this trust is referred to as trust money. This trust agreement ends when the obligation to pay the ex-spouse ends. Payments made from these trust accounts are done automatically and periodically as long as there are enough funds or assets in the trust to cover such spousal support payments.

RELATED TERMS
  1. Living Trust

    A property interest created during a person's life that allows ...
  2. Alimony Payment

    A periodic pre-determined sum awarded to a spouse or former spouse ...
  3. Child Support

    The monetary payments that are made from one ex-spouse to another ...
  4. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  5. Alimony

    Payments made to a spouse or former spouse under a separation ...
  6. Trustee

    A person or firm that holds or administers property or assets ...
Related Articles
  1. Retirement

    Become A Certified Financial Divorce Analyst

    Use your financial knowledge to help people preserve their financial integrity after a failed marriage.
  2. Budgeting

    You Can't Live On Love

    If your head is in the clouds, check out this down-to-earth financial advice for couples.
  3. Retirement

    Divorcing? The Right Way to Split Retirement Plans

    Mishandling how you define and allocate retirement-plan assets in a divorce can cost you plenty in taxes and aggravation. Here's how to do it right.
  4. Retirement

    Marriage, Divorce And The Dotted Line

    Does signing a prenuptial agreement put your marriage on shaky ground, or is it just smart planning?
  5. Taxes

    Taxing Times For Divorced Parents

    Find out how to deal with the tax issues that arise for divorced parents with dependent children.
  6. Budgeting

    Get Through Divorce With Your Finances Intact

    Find out how to split your finances without coming up short.
  7. Taxes

    The Fundamentals Of Spousal Support Taxation

    The spousal support that is paid out after a divorce can have varying tax implications. We'll look at what you need to know to settle on the best tax solution.
  8. Options & Futures

    Combining Credit For A Happy Financial-Ever-After

    A couple's finances may not always be a match made in heaven. Find out when to say "I Do".
  9. Retirement

    5 Things To Consider Before Late-In-Life Marriage

    Waiting to marry has become the norm, but do you know what to consider before saying "I do"?
  10. Retirement

    How Much Should You Have In Your 401(k) To Retire?

    Determining how much money should be in your 401(k) when you retire depends on several variables, many of which are uncertain.
RELATED FAQS
  1. When should my tax refund arrive?

    More than 90% of income-tax refunds arrive in less than three weeks, according to the Internal Revenue Service (IRS). However, ... Read Full Answer >>
  2. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  3. Are Flexible Spending Account (FSA) items tax deductible?

    Flexible Spending Accounts (FSAs) are employer-sponsored, tax-favored savings plans expressly for the future reimbursement ... Read Full Answer >>
  4. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
  5. Where else can I save for retirement after I max out my Roth IRA?

    With uncertainty about the sustainability of Social Security benefits for future retirees, a lot of responsibility for saving ... Read Full Answer >>
  6. Will quitting your job hurt your 401(k)?

    Quitting a job doesn't have to impact a 401(k) balance negatively. In fact, it may actually help in the long run. When leaving ... Read Full Answer >>
Hot Definitions
  1. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  2. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  3. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  4. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  5. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  6. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center