Lump Sum vs Monthly Maintenance After Divorce

Two ways to pay maintenance

Spousal maintenance (financial support from one spouse to the other) can be paid as:

• a lump sum: one payment that settles future maintenance; or
• periodic payments: usually monthly.

Sometimes it is a mix of both. Each choice has clear advantages and risks.

What is a lump sum?

A lump sum is a single payment meant to cover the other spouse’s maintenance needs. Once paid, the duty to pay maintenance is usually treated as done.

Under Section 80 of the Law Reform (Marriage and Divorce) Act 1976, an agreement to pay a capital sum in place of all future maintenance claims only works once the court approves it.

The amount is worked out the same way as any maintenance. Under Section 78, the court looks mainly at each spouse’s means and needs. The lump sum is roughly what the monthly payments would have added up to.

Advantages of a lump sum

• A clean break. After payment, you have no ongoing money ties. This helps when the relationship is difficult.
• No risk of missed payments for the person receiving it. There is nothing to chase and no need to go back to court.
• Money now. The recipient can invest it or use it to set up a new home.
• Certainty for the payer. The duty is finished, with no monthly bill hanging over them.

Disadvantages of a lump sum

The payer needs enough cash or borrowing power for a large payment. If their wealth is tied up in property or a business, this may not be possible.

The recipient gives up the chance to ask for more later. If their situation changes badly, for example a serious illness, there is generally no way to get extra maintenance.

What is monthly maintenance?

The payer makes regular payments, usually monthly. The court sets the amount and may fix an end date or leave it open. This is the more common form in Malaysian courts.

Monthly payments can be set to suit each spouse’s current finances. If circumstances change a lot, either spouse can ask the court to vary the order under Section 83.

When does the court prefer monthly payments?

When the payer cannot afford a lump sum. A salaried employee with little savings can more realistically pay from monthly income.

When the recipient’s future needs are unclear. For example, if the wife is training for a new job, the court may order maintenance for a transition period. In Lee Yu Lan v Lim Thain Chye [1984] 1 MLJ 56, the High Court stressed that maintenance is assessed on the means and needs of both parties under Section 78.

Risks of monthly maintenance

The main risk is that payments stop. The recipient must then go to court to enforce the order. The court can order salary deductions, but enforcement takes time and money.

Monthly payments also keep you financially tied. For some people this link causes stress, and arguments over late or smaller payments are common.

How does the court choose?

The court looks at both spouses’ finances, what is practical, and what is fair overall. Where the payer has substantial assets, a lump sum gives a clean break. Where assets are limited, monthly payments make more sense.

The court may also consider whether the recipient can manage a large sum. For some, monthly payments protect against spending it too quickly.

Before you decide

Get a clear picture of both spouses’ assets, income and debts. You need this to work out a fair lump sum or monthly figure. Complex assets, such as a business or investments, may need a professional valuation.

Looking to engage a divorce lawyer? If you are weighing up a lump sum against monthly payments, request independent lawyer contact via WhatsApp: Request Lawyer Contact. For general information, use our guides and tools.