Which is Right for You: Lump Sum or Payments?

sell your lotto win for a lump sumWinning the lottery may be a very exciting time, but it is not without its challenges. If you have won the lottery, then your life is about to change drastically. Winning lottery payments like this requires financial wisdom and decision making. One of the main things that you need to decide is whether you want to receive a lump sum payment or structured settlement annuity. If you are wondering what the difference is or if you should sell your lotto win for a lump sum, then keep reading. Hopefully, this article will explain everything for you in a way that you can understand and make an informed decision by the end of it.

What is the difference between structured settlements and a lump sum?

Structured Settlements: This is when your payout is split up into either monthly or annual payments. For example the Mega Millions payout is given as 30 annual payments. While it sounds good to have a payment given to you every year for the next three decades, those payments will be relatively small, because they’ve been split up.

Lump Sum: This is when you receive all of the money at one time in one large payout. For example, if you choose to sell your payments then you will be paid out the entire amount at the same time without having to worry about keeping track of payments through the years.

Advantages and why you should sell your lotto win for a lump sum.

  1. Right off the top, the lottery takes 25% for federal tax. Then, another six to nine percent for state tax is taken off depending on where you live and also what tax bracket you are in.
  2. If you receive your payment all at one time, then you can purchase a house, send your kids to college, or even pay off debt. The average person has over $15,000 in credit card debt and almost $15,000 in other debt like loans and other things. Imagine being able to pay all that off and never have to worry about it again.
  3. Receiving payments will still force you to have to save those payments year by year if you are putting it towards something specific, but if you receive the entire amount, you can immediately do what needs to be done.

These are just a few reasons why you should sell your lotto win for a lump sum.

Disadvantages

  1. Selling off structured payments can cost up to 10% of the amount, but if you are using the payment to do something like pay off debt, think about all the interest rates that you’re paying to credit card companies and lenders right now anyway.
  2. If you sell before you are 59, the sale could trigger penalties and extra fees. However, the truth is that the federal and state taxes you would have to pay from the structure payments anyway would probably equal out to the same amount or more.

How it all works

  1. The structured settlement holder calls and applies for the lump sum.
  2. The team will review the settlement, as well as the applicant’s reason to request the cash.
  3. Should the application be approved, the applicant will be offered a sum payout in exchange for the structured payments. This amount is open to negotiation.
  4. Once the amount is agreed upon, the company will petition the court for the settlement to be transferred to the company.
  5. The judge is the final say in the approval process.

So, whether you have decided to sell your lotto win for a lump sum or receive the payments that they offer, you should always request the help of a professional financial adviser when making decisions regarding such a large sum of money. It can make all the difference in the long run and remove any chance of regret if you make the wrong choice.

Never try to make such a big decision like this on your own. Having the support of trusted family members or friends is just as important as receiving professional assistance from someone who has dealt with a situation like yours before.

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