What is a Spousal Maintenance Buyout? | Episode 165

Understanding a Maintenance Buyout in a Colorado Divorce | Divorce at Altitude

In this short how-to episode of Divorce at Altitude, Ryan Kalamaya explains what a maintenance buyout means in a Colorado divorce and how it works in practice. He breaks down the concept using the podcast’s hypothetical divorce clients, Eric and Melanie Wolf, to show how a lump-sum payment can replace future monthly maintenance payments.

Ryan explains that a buyout is essentially a one-time payment made by one spouse to the other instead of ongoing monthly support. He also highlights the pros and cons of this approach, including the certainty it can provide both parties, as well as the financial risks if future circumstances change. The episode also touches on how maintenance buyouts may interact with property division and why they are often structured as part of the overall settlement.

Episode Highlights

What a Maintenance Buyout Means
Ryan explains that a maintenance buyout is a lump-sum payment made by one spouse to the other in exchange for ending future monthly maintenance obligations.

Using Eric and Melanie Wolf as an Example
He gives a simple example where Eric would owe Melanie $10,000 per month for 24 months, and instead of making monthly payments, he pays a one-time total amount upfront.

The Main Benefit of a Buyout
A buyout creates certainty. Melanie receives the money immediately, and Eric no longer has to worry about making monthly payments over time.

The Main Risk of a Buyout
Ryan points out that a buyout can also create risk. If Eric loses his job or his financial situation changes later, he cannot go back and modify payments he has already made in a lump sum.

How Buyouts Work with Property Division
He explains that the buyout amount is often paid through the broader property settlement, such as from one spouse’s share of home sale proceeds or other marital assets.

Why Structure Matters
Ryan notes that maintenance buyouts are often characterized as an additional property payment, which can have important tax advantages.

Tax Considerations
When structured correctly, the payment may be treated as part of property division and therefore remain tax-free, rather than being handled as ongoing support.

What is Divorce at Altitude? 

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado. 

To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here.  If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at info@kalamaya.law.

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DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.

Transcript

Ryan Kalamaya (1s):
Welcome to Divorce at Altitude A Podcast on Colorado Family Law. I'm Ryan Kalamaya. Each week, along with my business partner and co-host Amy Goscha, or an expert, we discuss a particular topic related to Divorce or co-parenting in Colorado. In addition, we have created a short series of lessons that will take you through the legal process of Divorce and answer your questions from simple to complex. Divorce isn't easy. The end of a marriage, especially when children are involved, brings a great deal of loss and change. We hope these practical tips and insights will help you on your journey to a new and better life.

Ryan Kalamaya (44s):
This is a how to episode on a maintenance Buyout in a Colorado Divorce. First, let's define what Buyout means. Buyout simply means a lump sum or one time payment in from one spouse to the other. So, and that would be in exchange or in lieu of future payments. An example is probably the easiest way to explain this concept in our hypothetical Divorce client scenario. Eric and Melanie. Wolf. Let's say that Eric is going to owe Melanie $10,000 per month over two years, 24 months. Well, a Buyout would be Eric paying Melanie, in essence, $240,000.

Ryan Kalamaya (1m 25s):
And, and that would be in exchange for a release or no more future payments. There's a benefit to Melanie and that she gets certainty. She gets that money upfront. And the same thing for Eric. Instead of cutting a monthly check or doing a monthly transfer, then he is just done. Now, there's also some risk in that. What if Eric is prepaying over two years for something that he might not actually have to pay? Let's say he loses his job in a year. Well, and he could potentially modify that down. He's already paid that and it's done. So those are just some things to keep in mind. Another feature is how does this actually work?

Ryan Kalamaya (2m 7s):
Well, Eric would pay Melanie $240,000 and that would be off the top, or in addition to whatever property division, the property the parties agree to. So if we have our hypothetical Divorce clients, Eric and Melanie Wolf, and they're selling their house and they agree to equally divide the, the proceeds from the house, well, Melanie would get $240,000 off of the top or out of Eric's share. And there's different features and ways that this would, work. And normally we would characterize this as an additional property payment, and that would mean that it would be tax free.

Ryan Kalamaya (2m 47s):
So that's in essence how property payments and maintenance buyouts work when you work in in conjunction with each other. Thanks for listening or watching this short lesson on the Divorce Altitude podcast. If you found this helpful, please leave a review or share with a friend. It does help for others that are going through or thinking about Divorce in Colorado. If you want to find out more information, please visit Kalamaya.law or Divorce at Altitude dot com. And that's ka la ma y law. Remember, this is educational information. It's not intended to be legal advice. Please consult with an attorney about the particulars of your case.

Ryan Kalamaya (3m 28s):
We're Happy to answer questions. Feel free to give us a call at 970-31-2365.