Many people who know in the back of their minds that they got the
possibility to transform a monthly payment or annuity long term
payments into a big lump sum and by that to relieve some
temporarily financial problems, or need to buy a new car or a house
or help their children and so forth are tempted to exercise this
process into action.
Although it is a very natural feeling and sometimes even a real life
need or deep inner quest for power and control, it is not in their best
financial interest to say the least.
It is no wonder that the U.S federal laws encourage long term
payments in both cases like Structured settlements and lottery
winnings. There are many good reasons for that and I'm
going to spell them out as clear as I can.
- In some countries around the world it is legal to pay for lottery winning in one lump sum. Experience shows
many of these people lose most or
all of their money in a few years
Time, due to the following reasons:
- Ordinary people who get into their possession a very large sum of money don't really know how to manage their treasure or how to invest it wisely, they are not prepared for it and they are
overwhelmed with a delusion of over abundance of wealth, they
become totally careless on how and on what they spend their money.
- Even if they invest their money, they go to high risk speculative
investments as they try to get high yields. Instead of going for
a much solid and safer, "widows & orphans" type of investment
portfolio. Neither do they go for the golden middle way in between
of a mixed portfolio. They don't use investments advisers or
- They become over generous with their family and friends, they
buy their children homes, cars or any other materialistic requests,
they "lend " money to a friend in need...
- They listen to shrewd business people who talk them into investing
into all kinds of business adventures that seems to them very
profitable but in a short while turn into total failures and the money
- All kind of addictive behaviors like betting horse races or going to
play the roulette in the casino are now intensified with the feeling
of power and wealth, it might drive the person to gamble high sums
of money as if there is no tomorrow.
- Believe it or not but criminal elements might engage in putting
pressure to extort monies from the overnight rich poor guy.
They might threaten to harm his family etc'
- Charity institutions start to call all day and night asking for
donations to a very noble causes, they even send some slick
reps to convince him to donate money.
- His own children, some times his spouse becomes very greedy
and exert emotional pressure to give them more and more money.
In some cases the sudden riches literally ruined the families.
As I have shown you above, getting a large lump sum of money
might be a risky thing, this is In addition to the fact that you are
loosing a lot of money which was Tax free, that alone might be
a difference of anywhere between 35% - 65% , add to it the profits
of the fund who bought the annuity from you and you are loosing
big time. It is not recommended for an injured or a disabled person,
to transform the whole Structured Settlement long term payments
into one big lump sum or you might find yourself one day without the
money and facing high medical expenses and other bills you cannot afford.
MBA - International Trade & Finance - Heriot-Watt University. Bsc. Computers and Information Systems - Long Island University - C.W Post Campus. Married with two Children.