Lump-Sum Distribution

A one-time payment for the entire amount due, rather than breaking payments into smaller installments. Some lump-sum distributions receive special tax treatment.

Investopedia Says:
A commission check or a pension plan distribution because of the pensioner's death are two examples of lump-sum distributions.

In general, distributions from qualified plans are treated as lump sum, if the following requirements are met:

1. The total plan balance is distributed over the same tax year.

2. The distribution is made as a result of the employee:
- attaining age 59.5
- being deceased (applicable to beneficiaries)
- separating from service (not applicable to self-employed individuals - but applies to their common-law employees) or
- being disabled (applicable only to self-employed individuals).

3. The distribution occurs after five years of participation (this requirements is waived for beneficiaries).

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Death benefit option in which a beneficiary of a life insurance policy receives the death benefit as a single sum payment instead of installments.

Single payment to an account beneficiary, for example, the beneficiary of a retirement account, as opposed to scheduled payments at regular time intervals. The holder of an Individual Retirement Account for example, can either reinvest the assets of the account in a rollover account, or the proceeds can be recognized as ordinary income, and taxed at an average rate over a 10-year period.

A single amount of money; a sum paid all at once rather than in part or in installments. For instance, under an insurance policy the proceeds may be paid immediately, as a lump-sum payment, or at the option of the payee over time as an annuity or in installment payments.

lump-sum alimony payment the discharge of one's obligation to pay alimony by the payment of a single lump sum. For income tax purposes, the payment of lump-sum alimony may or may not shift the income tax burden on the alimony to the payee, depending on the circumstances. I.R.C. §71.

lump-sum distribution lump-sum payment to an employee from a pension or profit-sharing plan upon termination of employment either by retirement or death.