Winning the lottery can be a life-changing event, especially if you end up with big lottery winnings that can help pay off debt and start fresh with financial stability. But what many Americans don’t realize is that there are two different options for lottery payments: a one-time lump sum lottery payout, which is taxed very heavily, and a long-term payout option of a lottery annuity, which often ties up smaller lottery payments for as long as 25 years.
Both options can be frustrating because it’s impossible to take home the entire amount you’ve won, but because a lottery annuity typically offers more of the winnings and less taken by taxes, a lot of people choose to go with the annuity settlement.
Unfortunately, there’s still a catch.
Because an annuity is a financial agreement where the lottery winner agrees to have smaller payments sent out over a long period of time, the person will face extremely steep fines if he or she tries to withdraw a larger amount of money than what has been allocated for that period.
The real problem occurs when this person ends up facing a financial emergency — maybe it’s an unexpected medical problem, maybe it’s a lot of credit card debt, or maybe it’s just the desire to start up a new business or go back to school. Whatever the reason may be for needing more money, many lottery winners find that their regular annuity payments aren’t enough to cover their expenses.
For this reason, many lottery winners will sell annuity payments in order to get the most of their money as possible without waiting around for all the individual installments and without paying expensive early withdrawal fees.
It’s pretty easy to sell annuity payments and the process is fairly quick; all it requires is some basic paperwork and a simple court proceeding in order to make sure that the sale is legal and safe for all parties involved, and then the person receives a lump sum of their own money which they can use as they please.
Winning the lottery is definitely a little trickier than most people imagine, but for those who choose to sell annuity payments of their winnings, it can still be a great opportunity to find financial stability.
