LOTTERY WINNINGS

Selling your lottery winnings can be relatively painless if you are informed and knowledgeable about your financial options. MyNoteMarket has collected information about the lottery sale process and resources to help you research your options.

Use the Education section below to quickly understand:

• How to Sell your Lottery Winnings
• How Lottery Winnings are Priced
• Due Diligence - What questions to ask.
• Terminology

Once you have gone through the Education section, use the additional Resources to research potential buyers, review current news and blogs, and get links to tax and legal sites.

Education

How To Sell your Lottery Winnings

1) First you should determine your current and future cash needs and financial condition. It is recommended that you consult a financial advisor or lawyer. Remember, you can sell all or just a portion of your future cash payments.

*Please note: some states prohibit the sale of lottery winnings. Also some personal situations such as bankruptcy, divorce, or medical needs can prohibit the sale.

2) Contact your payment provider, usually the state lottery commission, to determine the amount, number payments remaining , and terms of your lottery winnings. It is a good idea to get all contract information from your provider. You will need this information to give to the potential buyer.

*Ask your payment provider if they have worked with lottery winning buyers, they might disclose a few potential buyers to begin your search.

3) Determine what amount you would like to sell. You will receive more money for payments that will be receive sooner than payments in the distant future. Please see "How Lottery Winnings are Priced" to understand cash flow pricing and discounting.

4) Search for a buyer of lottery winnings. It is very important to feel comfortable with potential a buyer. Please see "Due Diligence" for tips a selecting a buyer.

There are a number of ways to find a potential buyer:

• talk to your financial advisor or lawyer,
• use this site to identify potential buyers,
• search the Internet,
• talk to friends and family who have sold a lottery winnings.

5) Get multiples quotes for your lottery winnings. While the highest quote may be attractive, you should consider all the factors together. These factors include: reputation, experience, your comfort level, etc.

*Tip: Ask the buyer up front about all costs and who is responsible for paying them.
*Tip: Beware of potential buyers who ask for a fee up front. There should be no fee for a quote or analysis.

6) Once you have selected a buyer, you will have to sign a contract with the buyer. This contract should outline the terms and conditions of the lottery lump sum payment. It is sometimes called a Disclosure and Transfer Agreement.

*Tip: It is strongly advised that you have your lawyer review this contract before you sign it.

7) Now the information gathering process will begin. The potential buyer will request specific information about your lottery winnings. It is recommended that you have as much information collected before you begin this process. This process can last between 2 to 14 days.

*Tip: Request to see the buyer's privacy policy.

Information requests can include copies of:

• Lottery Award Letter from state lottery commission
• Payment verification - most recent Lottery Check or Check Stub
• Bank statement showing lottery winning deposit.
• Your personal information including driver's license
• Marriage license or divorce decree (if applicable)
• Any documents relating to your lottery winnings including: assignments, revisions, or other documents
• Bankruptcy discharge documents (if applicable)
• Your lawyer's information

8) Once the buyer has all the required information, they will begin an underwriting process. This process usually lasts between 2 to 3 months, depending on statutory requirements, the company, and complexity of your situation.

*Tip: Ask the buyer up front about the process and time to completion. Be cautious of very short process times.

9) During underwriting, the buyer will have to request a court order from the court. A judge will review the lottery sale request and determine if it is in the your best interest to sell. The buyer should cover all costs associated with the approval process. While you are under no obligation to appear in court, you should consult a lawyer about your unique situation.

*Tip: Ask the buyer up front about all costs and who is responsible for paying them.

10) If the court grants your court order, underwriting will be completed and the buyer will transfer the cash to you.

Congratulations you sold your lottery winnings!

*Please note: these are general guidelines, all situations are unique and vary by state and company.

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How Lottery Winnings are Priced

Lottery winnings are priced by discounting the future payments by a discount rate. This discount rate can vary widely from 8% to 15% or more depending on the buyer. The lower the discount rate, the more you should receive for your lottery.

There are several factors in determining what discount rate to use, here are the most common:

• Type a lottery winnings i.e. certain cash flows or life contingent.
• Market conditions i.e. current interest rate
• Buyer's experience, profit target, and funding sources

Each potential buyer will individually determine how these factors are used to arrive at a price for your note. Pricing can vary greatly by buyer.

Check out these links for more information:

• Time Value of Money- Wikipedia
• Lottery Payments- Wikipedia

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Due Diligence

There are numerous potential buyers for your lottery winnings, it is hard to choose the right one. But with a little due diligence(research), you can select several that are reputable and right for you. One important point you should be aware is whether you are dealing with a principal or broker. If you a dealing with a principal, you may get better pricing due to the absence of the broker fee. Most principals use brokers to bring them business but there is a definite cost associated with this added layer of service. But brokers can be valuable in finding multiple buyers and could potentially get better pricing even after factoring in their fee. The buyer should pay the broker fee, not you.

Here is a guide to help you choose the right buyer:

1. How long have they been in business?
2. Is their contact and business information verifiable?
3. Are they bonded or insured?
4. What is their due diligence criteria?
5. How is their Better Business Bureau rating?
6. Do they handle your type of lottery?
7. How many lottery purchases do they do a year?
8. Are they familiar with your state practices?
9. How will they price your lottery?
10. What discount rate did they use in the quote?
11. Can they provide a time table for the process?
12. Do they use multiple financing sources for your quote?
13. Are they a principal or a broker?
14. Are they associated or member of a larger corporation?
15. Do they have a privacy policy?
16. Are they members of trade and professional organizations?
17. Are they professional in all communications and business presence?

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Terminology

Here is some basic terminology for lottery winnings:

Annuity - A financial product usually sold by insurance companies or other financial institutions to provide financial planning and/or savings. In a structured settlement, an annuity is used to make payments over a specific period of time. Annuities are regulated by several professional and governmental organizations. For more info see: Annuity - Wikipedia

Court Order- An official determination by a judge regarding interested parties of a court proceeding. It defines certain requirements and procedures to be carried out by the parties. For more info see: Court Order- Wikipedia

Discount Rate - is the rate at which future payments are discounted to calculate a present value in terms of today's dollars.

Split Payment- To sell only a portion of your future lottery payments.

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