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.

  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. Trust

    A fiduciary relationship in which one party, known as a trustor, ...
  6. Beneficiary

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