Every year people win vast sums of money from lotteries. You have probably heard of individuals who win millions but are broke in a few years. In most instances, it is the first time they get such an amount of money and do not know how to manage their winnings. If you play the games, you would want to know your payment options and how you can avoid spending the money within a short period. Depending on the game, lottery companies may give you options for receiving the money you win after playing. You can choose to get a lump sum payment or opt for an annuity. The latter option will eliminate the risk of exhausting the money fast. You should select the option that works best for you for your lottery winnings payment. We will look at how the annuities work to know if it is the best option for you.
What are Annuities in Lottery?
Annuity lottery payments entail periodic payments on winnings rather than the lump sum amount. However if a lump sum is needed down the road, you may have the option to sell the future annuity payments to structured settlement companies for immediate cash. However, you will get a lower value than what you would in the long run since the buyer will be out to make a profit.
How Annuities Work with Lotto’s
Although every lottery game has its own way of giving payments, most will work similarly. Suppose you chose the option to receive your lottery winnings over time. In that case, you will typically get an initial amount, and the rest will be in instalments over a particular period. The company disburses the money periodically per the terms. Quite often you will get a higher sum over time than if you chose to take the money in a single payment. Lottery companies will use a standard annuity calculating method to determine the amount of money they will pay immediately and the balance. Suppose a winner dies before receiving the last payment on their winnings. In that case, depending on the arrangements, their winnings may become part of their estate.
Are Annuities Right for Me?
It is common for people to want a portion of the lottery winnings if you hit the jackpot. Choosing to get annuities over the lump sum payment will help you avert the risk of misusing the money. It may be better to spread the payments over many years to ensure you do not run out of cash soon after winning. Keep in mind you will most likely pay taxes on the money you will receive every year. Although lump sum payment allows flexibility as you can invest the money, there are chances of squandering. It would help to go for annuity disbursements to protect yourself from the risks. Furthermore, if necessary, you may be able sell the future payments to a third party for lump sum cash.