Alimony Trust

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.

BREAKING DOWN '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

    Payments made to a spouse or former spouse under a separation ...
  2. Alimony Payment

    A periodic pre-determined sum awarded to a spouse or former spouse ...
  3. Spousal Beneficiary Rollover

    A transfer of retirement fund assets to the spouse of the deceased. ...
  4. Qualified Terminable Interest Property ...

    A type of trust that enables the grantor to provide for a surviving ...
  5. A-B Trust

    A trust created by a married couple with the objective of minimizing ...
  6. Form 8857: Request For Innocent ...

    An IRS tax form used by taxpayers to request relief from a tax ...
Related Articles
  1. Retirement

    Retirement Planning for the Non-Employed Spouse

    A stay-at-home spouse probably racks up more hours working than any office jockey. Make sure he or she is set up to save for retirement, as well.
  2. Managing Wealth

    Why It's So Important to Update Your Estate Plan

    As rules and exemptions tied to the estate tax change, so should your estate plan. Here's why updating it is so important.
  3. Financial Advisor

    Work or Staying at Home: You Still Need a Plan

    A great deal of the econonmic engine is fueled by stay-at-home parents. Their financial needs matter as much as anyone. Here's how you can help.
  4. Financial Advisor

    Making Social Security Work for Client Couples

    What are the best ways to advise client couples when it comes to filing for social security? Here are some strategies.
  5. Retirement

    How Advisors Can Help Surviving Spouses

    When someone dies, it's natural for a surviving spouse to grieve. But with a little planning, fear of an unknown financial future can be avoided.
  6. Retirement

    Marriage-Killing Money Issues

    Money issues hamper many marriages.
  7. Retirement

    When Spouses Die, Who Gets Their Retirement Funds?

    You don't automatically get your spouse's IRA, 401(k) and other accounts when he or she dies. Here's how to plan so the right survivors get the funds.
  8. Financial Advisor

    How to Protect Your Retirement After a Divorce

    Divorce is never fun, but knowing the rules and anticipating the impact of retirement plan division and pension payouts can make things easier.
  9. Investing

    Reverse Mortgage: Could Your Widow(er) Lose the House?

    A guide to determine if you're at risk that you or your surviving spouse could be evicted from your home.
  10. 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"?
RELATED FAQS
  1. How does a divorce impact regular social security benefits?

    If a person divorces and he is already receiving social security benefits, does he need to share those benefits with his ... Read Answer >>
  2. How do alimony and child support factor into my taxable income?

    Find out how child support and alimony are treated by the IRS and why alimony has a much greater impact on total tax burdens ... Read Answer >>
  3. Do I have to pay capital gains tax when I sell my home?

    My husband and I were divorced in 2011. We owned our house jointly and he lived there after the divorce until his death in ... Read Answer >>
  4. Can IRAs be held jointly by spouses?

  5. With death of my spouse in December 2015, can I still file jointly for 2015 like ...

    Spouse and I have always completed a joint tax return, though we haven't needed to file for years with our low income. ... Read Answer >>
  6. Can I file single if I am legally married but have not lived with spouse for two ...

Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center