Settlements, Notes, and Lotteries OH MY

By: Ivanovich Cuxev

Owning a financial instrument which involves receiving a large amount of money in small deferred payments doesn't necessarily mean that there are no other options when it comes to utilizing the full value of such instrument. There are several monetary packages which offer small deferred payments according to every situation. The most popular are structured settlements, mortgage or business notes and lottery winnings.

Understanding how each one works is crucial to invest or utilize such funds. One characteristic that all these monetary packages have in common is that they are not paid in full through a lump sum, they are paid periodically through small payments until the full amount of such financial instrument has been delivered.

As bad as they may sound in terms of fund availability, each package has it's useful features ad well as disadvantages. Lets start by explaining what each instrument represents and how they work.

Structured Settlements:

A cash structured settlement occurs when an insurance company provides small schedule payments resulting from the settlement of a personal injury lawsuit or claim settlement. This type of monetary package was first introduced during the early seventies in Canada and then spreading quickly to the United States, Australia and Europe. The reason this payment method is widely used in the US is that it provides tax free installments over a period of time.

Mortgage and Business Notes:

These type of monetary instruments are acquired after the sale of a property or business which results in small payments from buyers. Selling a business note doesn't necessarily involve selling property as part of the deal, the only object transacted is the business itself. Historically Businesses have a high failure rate and business note holders end up taking back the note, that is the reason why getting a loan approved for the purchase of a business is more difficult than having a loan approved for the purchase of a property.

Lottery Winnings:

Depending on which State you reside in, lottery winnings may be subject to federal, state, and/or local income taxes, depending on jurisdiction requirements. It is widely known that there two payment methods are offered when trying to collect lottery winnings, they are lump sum and periodic installments.

Depending on the type of note you hold you may want to utilize a considerable amount of capital in different ways. The top 5 reasons financial instruments holders may want to get a lump sum payment are:

1. To Eliminate Debt
2. To invest or buy real estate
3. Paying for medical emergencies
4. To fund and plan a child's education
5. Or just to have enough money to take an amazing vacation

Receiving a lump sum installment basically means that a one time amount will be paid to the recipient instead of breaking the the total of such monetary instrument down into multiple payments over an established period of time. As you can see having a large payment is beneficial in many ways which can definitively help solve financial problems.

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