Know Your Options for Selling
Winning the lottery is a once in a lifetime opportunity which comes only to a lucky few. The significant amount of money can provide financial support for life.
Yet, winning the lottery is not the end of the process. In a manner, it is only the start. After winning the lottery, there are two payout options:
1. Lump sum payment: Receive complete lottery winnings at one time.
2. Annuity: Break the winnings into installments, known as annuity payments. These annuities can last for as long as 29 years, breaking your payout into 30 annual installments.
Receiving a lump sum amount for your winnings means an almost immediate supply of a staggering amount of money.
In contrast, receiving annuities ensures a consistent income for three decades. You will typically have approximately 60 days to make a decision between these options.
Both options have advantages and disadvantages.
Lump Sum or Annuity – What’s the Difference?
While a lump sum payment could lead to access to a significant amount of money, there are disadvantages.
One of them is that it could lead you to a few months of spending without control, which eliminates the chance to live the rest of your life comfortably. When all of your cash gets spent on luxury purchases or wild vacations, there are fewer investments than expenditures and opportunities will be missed.
The tax implications of being the recipient of such a large amount of cash should also be considered. As of 2018, in addition to a payment of more than $150,000, you may be required to pay a 37 percent tax on the amount above $500,000. That’s almost four dollars out of every ten which will go to the government.
If your lottery winnings were in the tens of millions, you are losing millions to the tax authorities!
Those who choose a lump sum amount often fail to plan adequately and end up living in luxury for a brief time before finding themselves in the same financial situation as before their winnings.
On the other hand, choosing an annuity not only lowers the tax rate, but when you receive a controlled amount on an annual basis most winners are able to keep their expenses in check as well. While it keeps them from receiving their lottery winnings all at once, but it also ensures steady income for possibly the rest of their life.
What if the annuity is not enough? Is there an option to change?
If you choose the annuity, when you need immediate access to the money you have in your lottery winnings, you will not be able to access it. You simply cannot change the terms of your agreement and your next payment will only come according to the schedule you have set.
There are other options. A leading way to get more cash now is to selling annuity payments. If you find the right buyer, you will be able to access your funds now.
Why People Choose to Cash Out
While this aspect is not known to many, it is perfectly legal to cash in lottery annuities. This is useful to help cover emergency expenses or make important purchases such as:
If you are considering selling lottery payments, here are a few points to keep in mind.
- The amount you receive for your annuity will be less than the annuity value itself.
- Selling all of your lottery payments is not the only option. You can sell part of the annuity if that will be sufficient to cover needs. No need to sell all future payments at the same time.
- Once you locate a buyer and determine to proceed with selling, you will need to attend a basic court proceeding during which the judge will review the transaction to ensure that it is in compliance with relevant laws.
This is the process – it’s simple!
- Request a quote from a reputable company
- Discuss options with company’s representative
- Finalize agreement
- Appear in front of a judge to finalize the agreement
- Receive money in your bank account
There are a few points to keep in mind to ensure that you are dealing with a credible buyer and not one who will try to take advantage of people in need:
- Make sure that the company is tenured. A reliable company will have years of operation behind it to back up their claims.
- Ensure that the terms are explained to you right from the start – any buyer who is not clear on this should be excluded from consideration
- Confirm that the process is in compliance with local and federal laws. A good buyer will be able to explain the relevant rules and regulations and show a clear knowledge of their field of work.