Alimony Trust

AAA

DEFINITION of 'Alimony Trust'

A legal arrangement where property is transferred to a former spouse as a source of support following a divorce or separation. The payor spouse transfers investments and other assets that generate income into an alimony trust for the recipient spouse or beneficiary. The payor spouse cannot claim an alimony deduction on the income from an alimony trust, while the recipient spouse is taxed on the income but not the principal.

INVESTOPEDIA EXPLAINS 'Alimony Trust'

Alimony trusts are particularly useful in situations where a greater degree of protection is desired, either from the payor spouse or recipient spouse's point of view. For example, the payor spouse may be concerned about the recipient spouse's lack of financial experience in managing a large divorce settlement. Similarly, the recipient spouse may be concerned about the risk of the payor spouse's business becoming insolvent, which may have a detrimental impact on his or her ability to make continuing support payments.

RELATED TERMS
  1. Alimony Payment

    A periodic pre-determined sum awarded to a spouse or former spouse ...
  2. IRS Publication 504

    A document published by the Internal Revenue Service that provides ...
  3. Legal Separation

    For all practical purposes, a circumstantial divorce without ...
  4. Child Support

    The monetary payments that are made from one ex-spouse to another ...
  5. Alimony

    Payments made to a spouse or former spouse under a separation ...
  6. Guarantee Company

    A form of corporation designed to protect members from liability, ...
Related Articles
  1. Retirement

    Become A Certified Financial Divorce ...

  2. Retirement

    Divorcing? The Right Way to Split Retirement ...

  3. Budgeting

    Get Through Divorce With Your Finances ...

  4. Taxes

    The Fundamentals Of Spousal Support ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center