Understanding Structured Settlements of Lottery Prizes

Understanding Structured Settlements of Lottery Prizes

Few people know what really happens after the lottery pot money is won. Many of us would imagine the winner cashing out the prize all at once and then spend it any way he/she wants. But that is not the reality — winners will not be able to get the entire amount of the prize that he/she have won. As per the rules of most lottery games across the country, only a portion or a fraction of the total amount won will be released to the winner; the remaining portion will be given to the winner after an allotted period. This method of payment is called “Structured Settlements”.

Agencies that sponsor lottery games intend to “protect” the interest of the winner by assisting them in handling their newly acquired fortune. There is an assumption that lottery winners tend to overspend once they get their money and end up having nothing in a few months. Thus, as a sort of moral obligation, the agencies have decided to give the prize in a structured settlement scheme. Nonetheless, the other reason why agencies do this is to protect their financial stability. Of course, if they would need to pay the winner that much money all at once, they might run out of fluid or spendable money (as most agencies would invest on properties which can be likened to frozen money). This way, they would still be able to give the winner what is due to him/her while maintaining their companies’ financial status.

The settlements may be paid in a few months, but some (especially those that involve very large amounts of money) can last for years. Some agencies would give the portions of the prize on a monthly or yearly basis, all these depends on the money in question. Of course, they would also offer the winner interest growths, just like what would happen if the winner have deposited the entire amount to a bank and get monthly dividends. Essentially, if the sponsoring agency of the lottery has no intention of cheating on their winners, such a payment scheme would truly secure the winner and assure that he/she will have enough money for the rest of his/her life.

However, not everyone see the value of structured settlements. Some winners get tired of waiting for their monthly or yearly cheques, which can somehow restrict them to explore other options like investing on a business or something (which could have made them richer). Thus, some winners would sell their structure settlement plans in the same way that businesses would sell bonds or stocks. So what happens is that another person would become entitled of the monthly or yearly cheques while the real winner would receive a good sum of money from that new person. However, since the new owner of the “prize” would have to wait for the monthly or yearly cheques, it would “force” the original winner to sell the settlement plan at a price lower than its actual value.

The buy-out can be a good or a bad idea depending on the character of the winner. Like what have been said, some people just don’t know how to handle lump sum money and many of them would simply end up living as a millionaire for a couple of months or so and then have nothing left. Nonetheless, some people are really good businessmen and they would be able to invest their money into something that would grow big. Since we can’t really assess which kind of a person we are, the best possible approach to know which decision should be taken is to consult finance advisors. These people can sort of “analyse” us and tell assess how well we will be able to deal with the money. They can also give us precious advises as to how handle our finances.

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