This article is from Richard D. Soat, a San Antonio-based financial professional with BDO (a professional services firm providing assurance, tax, financial advisory and consulting services) and a board member of the Collaborative Law Institute of Texas. The opinions expressed on this site are Rick Soat’s own and do not necessarily represent the views of BDO USA, LLP.
Typically, we think of alimony as something that an ex-spouse pays to another ex-spouse to help her (or him) through the first few years of a divorce. It’s meant to be a temporary financial bridge in the transition to a post-divorce life.
But contractual alimony is something different altogether – and it’s a powerful tool in helping couples to arrive at a divorce settlement in certain cases.
Contractual alimony, unlike a court-ordered alimony to help someone who earns considerably less than his or her partner acclimate to a new financial reality, is a voluntary process in which one ex-spouse agrees to pay the other a certain amount to make a divorce settlement more fair.
It’s particularly useful in situations where one party has a large amount of illiquid assets, like real estate or long-term investment funds, that can’t be easily sold off. By establishing contractual alimony for a certain amount, for a certain period of time, the party with the illiquid assets can keep those intact, while reimbursing the other party as part of the property settlement.
Of course, if people come into marriage with separate property holdings, those wouldn’t automatically figure into the contractual alimony equation. But, like in all collaborative law situations, it’s the financial neutral’s job to make sure both parties are disclosing all their assets, fairly ascertaining the value of those assets, and then coming up with the options to divide those fairly. And, thankfully, collaborative law is set up so these discussions can happen in a private setting, on the couple’s schedule, rather than a judge’s that is not always at convenient times.