|Posted: April 6, 2003, 10:57 am - IP Logged|
Also, Lump-Sum Option
One of the two typical ways a lottery prize is paid (the other being Annuity).
When a lottery prize is paid with the Cash Option, the winner receives one large payment from the lottery, usually within a few weeks of redeeming the winning ticket. Applicable taxes are normally withheld prior to the payment, although the winner may be responsible for additional taxes after receiving the prize, depending upon their situation.
Although most government lotteries allow the winner to choose the cash option within 60 days of the drawing, some juridictions do not allow this option. Therefore, players who wish to exercise the cash option in those jurisdictions must select the cash option when they purchase their lottery ticket.
The cash value in a lottery is typically 50% - 60% of the corresponding annuity value. This, plus the fact that most lotteries place a heavy emphasis on the higher annuity value, leads many people to believe that the cash value is derived (calculated) based on the annuity value. However, the opposite is true
The cash value is the actual amount that the lottery has in its prize pool after the total lottery proceeds are divided into administrative overhead, marketing costs, government programs, and the prize pool. The annuity value is then calculated from the available cash value, based on prevailing interest rates (see "Annuity" for more information).