Section 71 Payments
As an alternative to maintenance, the parties may agree to what we call “Section 71 payments,” payments made pursuant to 26 U.S.C. Sec. 71, which governs the tax consequences of maintenance. With careful drafting of a stipulation, Section 71 payments can be made non-modifiable.
Consideration of Section 71 payments requires a risk analysis. Because Section 71 payments are not modifiable, a payer must assess the likelihood that they will lose their employment and be unable to pay. Conversely, the person considering receiving Section 71 payments must evaluate the likelihood that they will need an extension or increase in maintenance if their circumstances change.