Buying annuities and lotteries is, in some ways, similar to buying a mortgage
receivable. However, it is very different in other ways. As a result, there
is a wide range of discount when pricing these assets.
First, annuities and lotteries are promises to pay just like a mortgage.
However, the party guaranteeing payment is entirely different. For
mortgages, the parties who sign the promissory note guarantees payment. In
some cases, only the real estate guarantees payments. With annuities, the
guarantor is usually an insurance company. With lotteries, the guarantor is
usually the State where the lottery was won.
Next, mortgages virtually always charge some level of interest. The interest
rate might be below, above or right at where bank rates are. Most lotteries
and annuities, however, do not accrue interest.
In pricing annuities, we look at the amount of money being received and the
duration of payments. For example, Mr. Jones is receiving $1,500.00 per
month for the next 20 ½ years or until his death, whichever is later.
Payments are being made by and guaranteed by ABC Insurance Company. Mr.
Jones can sell us the next 5, 10 or 15 years of payments, or he can sell us
the entire annuity. We will also have to assess whether the annuity itself
allows it to be assigned or whether we will have to get a Court order to
obtain such an assignment.
In pricing lottery winnings, the lottery winner must decide to either sell
the entire winnings or a portion of the winnings. They can sell part of each
payment. They can sell just a certain number of payments. Are these winnings
assignable, and what are the steps necessary for the particular State to
recognize this assignment? These are the questions we must answer when
buying a lottery winning.
We welcome you to Contact Us to sell your
annuities and lottery winnings.