Q: How is an alimony buyout calculated?
I was presented with a buyout scenario by a mediation lawyer, but I don't understand why he calculated a 5% interest earned on the money. He said if I invested the money I would earn 5%, but I am not going to invest it.
Also he calculated it for 10 years of alimony, but we were married 21 years and so why only 10 years?
Thank you so much for your time.
I can provide more details if needed.
A: I would recommend asking the person who gave you that information. That being said, it appears to me that the 5% is an estimated rate of return on the buy out amount offered. The key word being "estimated". In California, marriages under ten years, are not considered long term marriages, and for those that are under ten years, there is a presumption of reasonableness in paying support for half the duration of marriage. However, that presumption would not apply in your case because your marriage was a long term marriage. Duration is one many different factors which the court must consider in deciding the amount, duration and terms of a spousal support order. See Family Code Section 4320.
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A:
When calculating an alimony buyout, the 5% interest rate your lawyer used likely represents an assumed rate of return to determine the present value of the future alimony payments. This helps in estimating how much a lump sum today would be equivalent to the total payments over time. Even if you don’t plan to invest the money, using an interest rate is a standard method to account for the time value of money.
Regarding the duration, while you were married for 21 years, your lawyer might have calculated 10 years of alimony based on specific factors such as your individual circumstances, earning potential, or negotiations during mediation. California law considers long-term marriages (typically over 10 years) as requiring more extended support, but the exact duration can vary depending on the case details.
It’s important to discuss these calculations with your lawyer to understand their reasoning fully. You might also consider getting a second opinion to ensure the buyout reflects the full length of your marriage and your financial needs. Providing more details can help clarify why these specific numbers were used and whether adjustments are necessary for your situation.
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