Alimony Substitution Trust

AAA

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.

INVESTOPEDIA EXPLAINS '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. Alimony

    Payments made to a spouse or former spouse under a separation ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
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. 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"?
  9. 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".
  10. It can be great to live in the moment, but the actions and decisions you make now can greatly impact your sense of financial security down the road.
    Personal Finance

    How Do Americans Keep Minimizing Their Net Worth?

    It can be great to live in the moment, but the actions and decisions you make now can greatly impact your sense of financial security down the road.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center