Lottery Prizes Awarded Through Periodic Settlement Payments

A lottery is a form of gambling which involves the drawing of lots for a prize. In the United States, the prize money offered in a lottery is paid in periodic installments to the winner. Because of this, the winner usually waits for years to get the full amount.

With inflation threatening to devalue the dollar over time, the longer the wait the less value the winner receives in the end. This does not have to be the case and winners have the option to sell lottery payments (either in part or in its entirety) and get a lump sum of cash.

The Benefits of Selling Lottery Prize Payments for Cash

Besides inflation, winners may have any number of the following reasons for selling lottery winnings for a lump sum:

1. MORE MONEY FOR A WINNING GROUP – Sometimes, individuals would join a group that pools its members’ money together in order to buy lots of tickets thus increasing the chances of winning. If one of the group’s tickets is drawn periodic payments that are small and far between may leave the group members feeling like losers instead of winners.

2. INVESTMENTS OR BUSINESS OPPORTUNITIES – Aspiring and established entrepreneurs who win the lottery usually want to sell lottery payments for cash needed to start, maintain or upgrade their businesses.

3. LIQUIDITY – Like most people, lottery winners like having cash they can access at their own convenience.

4. PEACE OF MIND – Winners who sell lottery payments can use the lump sum to pay for debts and outstanding bills.

5. TAXES – Some people may need a large amount to solve a tax situation. Furthermore, some taxpayers may prefer to recognize certain tax consequences currently instead of over a period of time.

6. VACATION, COLLEGE, OTHER PROJECTS – A lottery prize winner’s cash flow can be converted to a lump sum to finance vacations, college tuition, buying a new home or vehicle, adoptions, and any other project that the winner may want or need to do.

Perceived Disadvantages of Selling Lottery Winnings

The discount of the lottery payment cash flow is sometimes viewed as significantly large. This makes many winners hesitant to pursue selling lottery winnings. Some even don’t consider the option at all. However, keeping the threat of inflation in mind, many still believe that today’s lump sum is more valuable than the upcoming years’ periodic payments.

Another risk is the unfamiliarity to sudden wealth. Lump sum cash recipients may be tempted or duped into using their wealth unwisely. Many million dollar winners have gone from extreme riches to abject poverty in a matter of years.

Either payment method – periodic payments or lump sum – has its advantages and disadvantages. It is always up to the prize winner to exercise his own discretion to see whether or not selling lottery winnings suit his needs