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. Cestui Que Vie

    The individual who is the beneficiary of a trust or insurance ...
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. 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.
  3. Budgeting

    Get Through Divorce With Your Finances Intact

    Find out how to split your finances without coming up short.
  4. 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.
  5. 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"?
  6. Professionals

    Tips for Spreading the Wealth to Relatives

    There are many ways that your clients can move money or other assets to relatives in order to reduce their tax bills. Here's a primer on best practices.
  7. Professionals

    Tips for Handling Client Inheritance

    When clients leave or receive an inheritance, be prepared to deal with much more than mere paperwork or financial transactions.
  8. Professionals

    Advice on Dealing with Unequal Inheritances

    When it comes to inheritances, the concept of equal versus equitable can be hard to navigate, even when all parties are reasonable.
  9. Professionals

    Top Tips for Family Wealth Transfers

    Essential tips for tackling family wealth transfers.
  10. Professionals

    Estate Planning Tips for Financial Advisors

    Estate planning is not a set-it-and-forget-it proposition. Here are some tips for you and your clients.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center