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1. Sell Your Real Estate With Seller Financing Seller Financing to the Rescue
The Problem
When it comes to selling real estate, one of the most difficult and frustrating situations for sellers is when market conditions make it nearly impossible to sell at the desired price point. A high initial listing price might be because the seller simply has an unrealistic idea of how their house stacks up against the competition in the area, or because the owner needs to sell for a set minimum price in order to pay off their loan against the property.
With traditional property sales methods, the only way to prevent the property from sitting on the market indefinitely is to keep dropping the price. Unfortunately, this technique doesn't always work - especially if the seller is unwilling to "discount" their house by much.
In areas flooded with homes for sale, reducing the asking price slightly will not bring the desired result. In fact, it's common that the property will continue to sit on the market without offers, alongside the multitude of other unsold properties with similarly reduced prices.
Anyone experienced in sales understands that making your product stand out from the crowd is a critical technique for success. But if there's too much competition offering the same attributes, the only logical way to attract the attention of serious buyers is to drop the price so that your property is a much better value than the competition.
In cases where the seller is too inflexible with their asking price, this is not a practical solution. Without an alternative strategy, the seller is forced to keep the house on the market for an extended period of time with an unrealistic asking price, hoping for the right buyer to come along. And as you know, that "Mr./Mrs. Right" might NEVER materialize!
The Seller Finance Solution
Property sellers who want to both obtain their desired price and close on the deal quickly should consider seller financing. Seller financing is a powerful tool to remedy real estate situations that otherwise look grim.
Many home sellers (and their real estate agents) do not see seller financing as a viable option. In actuality, seller financing can bring new attention to the listing and invite a different group of potential buyers - thereby opening up a unique, untapped market.
A large percentage of people throughout the country cannot get approved for bank funding to buy real estate because of their credit situation. Many of these people are still in the market to buy a house, however. The "credit-challenged" are often frustrated with the limitations of apartment living or being renters; as a result, many are willing to pay a higher price just for a chance to get seller financing and improve their quality of life.
A savvy property seller who recognizes this opportunity can salvage an unfavorable situation and turn it into a bonafide seller's market. By using this type of creative financing, the seller could actually end up getting more than the original asking price - without resorting to the questionable strategy of patiently waiting for the "right buyer".
Seller finance can enable homeowners to receive a favorable selling price despite bad market conditions. In addition, the real estate agent (if any) gets to close a deal and move on to other sales, while a home buyer with poor credit is able to become a home owner. It's one of those rare situations where everyone at the negotiating table gets what they want.
Paper Tigers
Many home sellers never consider seller financing because they don't understand the benefits. There are also common misconceptions that it's much too complicated to attempt to orchestrate a seller financed deal, or that there are no buyers willing to sign a private note.
Once a property seller takes the time to learn about the basic process, the advantages of offering financing instead of a lower price to sell their property become very clear. Plus, a little education about seller finance will make it apparent that drafting a secured private note is actually a very straightforward process.
The bottom line is seller financing can enable a home owner to "have their cake and eat it too" - i.e., sell at the desired price, close the deal quickly, and even receive additional income from interest payments as well.
Call Eddie Franklin At 312 638 0922
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2. Sell Your Real Estate With Seller Financing Seller Financing to the Rescue
The Problem
When it comes to selling real estate, one of the most difficult and frustrating situations for sellers is when market conditions make it nearly impossible to sell at the desired price point. A high initial listing price might be because the seller simply has an unrealistic idea of how their house stacks up against the competition in the area, or because the owner needs to sell for a set minimum price in order to pay off their loan against the property.
With traditional property sales methods, the only way to prevent the property from sitting on the market indefinitely is to keep dropping the price. Unfortunately, this technique doesn't always work - especially if the seller is unwilling to "discount" their house by much.
In areas flooded with homes for sale, reducing the asking price slightly will not bring the desired result. In fact, it's common that the property will continue to sit on the market without offers, alongside the multitude of other unsold properties with similarly reduced prices.
Anyone experienced in sales understands that making your product stand out from the crowd is a critical technique for success. But if there's too much competition offering the same attributes, the only logical way to attract the attention of serious buyers is to drop the price so that your property is a much better value than the competition.
In cases where the seller is too inflexible with their asking price, this is not a practical solution. Without an alternative strategy, the seller is forced to keep the house on the market for an extended period of time with an unrealistic asking price, hoping for the right buyer to come along. And as you know, that "Mr./Mrs. Right" might NEVER materialize!
The Seller Finance Solution
Property sellers who want to both obtain their desired price and close on the deal quickly should consider seller financing. Seller financing is a powerful tool to remedy real estate situations that otherwise look grim.
Many home sellers (and their real estate agents) do not see seller financing as a viable option. In actuality, seller financing can bring new attention to the listing and invite a different group of potential buyers - thereby opening up a unique, untapped market.
A large percentage of people throughout the country cannot get approved for bank funding to buy real estate because of their credit situation. Many of these people are still in the market to buy a house, however. The "credit-challenged" are often frustrated with the limitations of apartment living or being renters; as a result, many are willing to pay a higher price just for a chance to get seller financing and improve their quality of life.
A savvy property seller who recognizes this opportunity can salvage an unfavorable situation and turn it into a bonafide seller's market. By using this type of creative financing, the seller could actually end up getting more than the original asking price - without resorting to the questionable strategy of patiently waiting for the "right buyer".
Seller finance can enable homeowners to receive a favorable selling price despite bad market conditions. In addition, the real estate agent (if any) gets to close a deal and move on to other sales, while a home buyer with poor credit is able to become a home owner. It's one of those rare situations where everyone at the negotiating table gets what they want.
Paper Tigers
Many home sellers never consider seller financing because they don't understand the benefits. There are also common misconceptions that it's much too complicated to attempt to orchestrate a seller financed deal, or that there are no buyers willing to sign a private note.
Once a property seller takes the time to learn about the basic process, the advantages of offering financing instead of a lower price to sell their property become very clear. Plus, a little education about seller finance will make it apparent that drafting a secured private note is actually a very straightforward process.
The bottom line is seller financing can enable a home owner to "have their cake and eat it too" - i.e., sell at the desired price, close the deal quickly, and even receive additional income from interest payments as well.
Call Eddie Franklin At 312 638 0922
Click Here For More Information Hyperlink Text
http://www.prlog.org/rss/world-all-top5-headlines.xml
Strategies for Strong Resale When property sellers need to receive as much cash as possible immediately for the down payment on their next house, it is critical to anticipate this need in order to use seller financing to their advantage. Getting top dollar for a note In a typical seller-financed closing, the seller only receives cash from the down payment at the time of sale. This amount could be used to pay the real estate agent and put the remainder toward their own down payment on another house, but in many cases, the amount received is not enough. In addition, sellers who uses private financing to close the sale will not get the full amount financed when the note is sold. Most sellers need as much money as possible when they "cash out" their newly created note, so their objective is to sell the note at the lowest discount possible. And to do this, they will need to create a secured cash flow that is attractive to note buyers. Note pricing factors The size of the discount - i.e., the difference between the purchase price and the remaining balance - depends largely on factors such as the specifics about the payer, the property/price, and the note terms. If the note is created without these important criteria in mind, the seller may have a difficult time finding a buyer to pay the amount that the homeowner needs. The Payer
Clearly, there isn't much the seller can do about the "quality" of the payer because most people interested in accepting seller financing are higher-risk borrowers. Still, if there is more than one party interested in buying their property, sellers offering financing can still discriminate based on credit history or the amount of the down payment offered. The Property/Price Similarly, the seller can't change the basic facts about their property - where it's located, the type of structure, or its age or condition. But, the seller can control the price they set for their property. Most sellers have a specific amount in mind that they need to get out of a sale. In traditional real estate sales, getting that money usually is determined by the property's price. But with seller financing, there is another step that is taken before the seller ends up with the total amount of money they were looking for - the note must be sold. Since private notes are typically sold at a discount, the seller must set their price higher than the amount they were looking for to compensate for the drop that will come with the buyer's offer. By setting the price slightly higher than market value, the seller can create a note that sells with a minimal discount. Individuals that don't qualify for conventional funding are motivated to buy real estate, even if the price is somewhat higher than market value. Increasing the sales price and the implied value of the property will not actually affect the buyer's discount, but the adjustment could lead to more money in the seller's pocket. A higher sale price means a note with a larger unpaid balance, which could still bring the seller the desired net amount after discounting. Keep in mind that higher sale prices can also lead to larger down payments (as a set percentage of the price), resulting in more money in the seller's pocket.
The Note Terms The most important thing for sellers to do is to structure their note so that the buyers won.t be forced to incorporate a deep discount into their offers. From the buyer.s point of view, higher interest rates and shorter terms are preferred. The actual offer made is based on the yield the buyer is looking for; in general, higher yields are associated with riskier notes. The discount is directly related to the difference between the interest rate on the note and the buyer.s desired yield. While sellers can.t know exactly what a buyer.s required yield will be, the seller can certainly create a note that could minimize the expected discount. Generally, buyers will want to receive a yield anywhere between 12% and 20% on a note. While yield parameters will fluctuate with the market, a 10% yield is typically the lowest they will accept for new notes. A note creation example
Because buyers usually want to earn a yield above 12%, creating a note with an interest rate under 10% would automatically mean a steep discount when the note is sold. For example, creating a cash flow with a 3% interest rate doesn.t make any sense if the seller needs to get top dollar for their note, because there is already a seven-point difference between the interest rate and the buyer's desired yield. In addition, most buyers will create a gap in their favor by yielding at least one point more than the interest rate. Sellers can also avoid unnecessary discounts by reducing the terms of their notes. Another part of a buyer's discount is based on the time-value of money principle, meaning that notes that take longer to be paid off will usually be discounted accordingly. An ideal term for a private secured note is between five to ten years (60 to 120 months). Conversely, it isn't a good idea to shorten the term down to two years or less because a foreclosure situation will be created - the monthly payment will likely be too steep for the payer to keep up with for long. By keeping the eventual note buyer's criteria in mind when creating a private note, property sellers can ensure that their real estate note deal works out the best for them. and that they net the highest amount possible when a cash settlement is reached.
ED FRANKLIN’S Lottery Winnings Annuity sales get cash now
ED FRANKLIN’S Lottery Winnings Annuity sales get cash now
How can I insure a $50 million lottery win FDIC insurance deposits with a bank only insures up to $100,000 per account holder Will any bank accept a $50 million dollar CD and insure that money
The first thing I'll suggest is that with $50 million you can afford to pay for advice from a financial service professional It's just that you'll need more help than you're going to get in this column , or FDIC, insurance on $20 million of the $50 million is to use CDARS, the Certificate of Deposit Account Registry Service You deal with one bank and CDARS works with that bank to ensure that all of your deposit is FDIC-insured I've written about CDARS before and suggest that you read that column and also check out the CDARS Web site Treasury securities are considered risk-free investments when held to maturity You do face some price fluctuations day to day with changes in market interest rates, but the government guarantees the face value of the security at maturity You can own these securities in a brokerage account or in a Treasury Direct account The brokerage firm in most cases will be a member of the Securities Investor Protection Corp
The SIPC is much different from the FDIC, but it does provide a measure of protection from fraudulent brokerage firms " SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons The SIPC doesn't guarantee that your investments won't lose value, it just steps in to protect you from theft of your securities or the failure of a brokerage firm Investments held as cash are protected only up to $100,000 If it were my millions, I wouldn't hesitate to invest in U
Treasury securities in an account with a national firm, many of the large regional firms, a brokerage account with one of the large mutual fund companies or Treasury Direct Finding a home for this money while you're deciding how to invest is one thing Treasuries will protect your principal, but you can do a lot better without taking on a lot of risk, and you're probably going to want to expand your approved list of investments Municipal securities, for example, can provide tax-exempt income, but alternate minimum tax considerations means you'd want to consult with a tax professional about investing in municipal securities Try to get the big picture about what life goals you want to achieve with this money and what you'd like to accomplish with the remainder of the money after you're gone I'd actually focus on the life goals aspect before getting too deep into the how-to-invest-it part To that end, the Treasuries and CDs are fine for the short-term
I wish I had someone to recommend for you on the life-goal side, but I started out telling you that you'd need more advice that I could give you in this column A life coach seems like a reasonable place to start
Just don't listen to any advice about investing in a life-coach franchise Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money DonAsk a question  RESOURCES Find out when CD rates hit your target Hey, you Unlucky lotto winners who lost the money  TOP INVESTING STORIES Fame & Fortune: Jennifer Love Hewitt12 investment mistakes couples makeInvesting: To risk or not
Which is better -- a rebate or special dealer financing Develop a savings plan Every kind of CD explained Treasury bonds and more Pros and cons of annuities All about IRAs GUIDES Real Estate Guide What will $400K buy
This new statute overrides the constructive receipt doctrine and permits lottery winners to consult with their family, attorneys, accountants, and financial planners after winning the lottery in order to determine which payment option is most consonant with their goals and objectives The tax and financial considerations associated with a Section 451(h) election are discussed under "Planning," below The new law, which is effective for individuals winning the lottery after 10/21/98, creates a "qualified prize option" and a "qualified prize "6 A "qualified prize" is "any prize or award which (i) is awarded as a part of a contest, lottery, jackpot, game, or other similar arrangement, (ii) does not relate to any past services performed by the recipient and does not require the recipient to perform any substantial future service, and (iii) is payable over a period of at least 10 years " A "qualified prize option" is an "option which (i) entitles an individual to receive a single cash payment in lieu of receiving a qualified prize (or remaining portion thereof), and (ii) is exercisable not later than 60 days after such individual becomes entitled to the qualified prize " Section 451(h)(1) provides that, for a cash-method taxpayer, a "qualified prize option shall be disregarded in determining the taxable year for which any portion of the qualified prize is properly includible in gross income of the taxpayer " Section 451(h)(3) also instructs Treasury to issue Regulations for the application of the new rules to partnerships or other pass-through entities consisting entirely of cash-method individuals A significant transition rule gives previous lottery winners a one-time option to receive a lump-sum cash payment 105-277 provides that, for an 18-month period commencing on 7/1/99 and continuing to 12/31/00, previous lottery prize winners receiving payment in the form of an annuity may elect a lump-sum distribution equal to the present value of the remaining annuity payments Nevertheless, it is anticipated that most lotteries will begin offering the qualified prize option to prospective lottery contestants and prior lottery winners on 7/1/99 Unfortunately, Section 451(h) creates a class of prize winners who are not afforded its benefits
Under the statute, there are three classes of prize winners:Prize winners prior to 10/22/98 ("pre-effective date winners") Prize winners after 10/21/98 and before 7/1/99, the date on which it is anticipated that most lotteries will begin to offer a qualified prize option ("interim winners") Prize winners after 6/30/99 ("qualified prize option winners") Thus, as of 7/1/99, the pre-effective date winners can make the one-time "18-month election" to receive a lump sum Similarly, all qualified prize option winners will be given 60 days to choose between a lump sum or annuity prize But the interim winners are not permitted to make the 18-month election because their lottery prize was won after the effective date of Section 451(h); similarly, they are not permitted to make a 60-day election because the local lottery rules have not been changed to provide for a qualified prize option
The omission of the interim winners was most likely unintentional While legislation may be needed to cure the defect, it may be possible for the IRS to rule that it will not apply the constructive receipt doctrine to interim winners who are given an 18-month election to choose between a lump sum or an annuity First, many lotteries already offered a choice between a lump sum or an annuity In order to avoid the constructive receipt doctrine, the lottery contestant had to irrevocably elect the form of the prize prior to purchasing the ticket Regulations should clarify that pre-effective date winners and interim winners who chose to receive their prize as an annuity may nevertheless make the 18-month election to receive a lump-sum payment of the unpaid lottery prize Second, Section 451(h)(2)(b)(iii) requires that the lottery prize in the form of an annuity be payable over at least ten years Regulations should clarify, with respect to pre-effective date winners, that the annuity must be initially payable over ten years, as opposed to having at least ten years remaining on the annuity Example: On 3/15/87, Harold won a lottery prize payable in 20 annual installments On 7/1/99, the lottery board gives prior lottery winners a one-time 18-month election to receive a lump-sum payment Since Harold received 13 annual installments from 3/15/87 to 3/15/99, there are only seven remaining payments with respect to his annuity prize Regulations should clarify whether Harold is entitled to make the 18-month election Arguably, he should be, because his prize was initially payable over 20 years Other Constructive Receipt IssuesThe constructive receipt doctrine has been applied in other contexts with respect to lottery prize winners In Paul, TCM 1992-582, the taxpayer won the New Jersey lottery on 12/29/87 but did not receive payment until 1/22/88
The Tax Court held that winnings were includable in income in 1988, the year in which the payment was actually received In arriving at its decision, the court rejected the Service's argument that the taxpayer could have driven 68 miles to Trenton in the last two days of the year to demand payment "on the spot " The court considered such a requirement a "substantial limitation," thereby negating the application of the constructive receipt doctrine The treatment of the constructive receipt doctrine in Paul raises an issue with respect to lottery winners after the enactment of Section 451(h) If a lottery contestant wins on December 15th and is given 60 days to choose between a lump sum or an annuity, the contestant may argue that she is not required to include any portion of the lottery prize, whether a lump-sum distribution or an annuity installment payment, until the date on which she makes an election, possibly in January or February of the following year The IRS presumably would argue that the lottery contestant is given an election that may be exercised immediately, and therefore the existence of the election does not create a substantial limitation on the lottery winner's control or receipt of the lottery prize, in whatever form Economic Benefit DoctrineThe economic benefit doctrine is a related but separate income tax accounting concept that also should be considered
This doctrine provides that income is taxable under Section 61 even though it is not actually or constructively received in the form of cash Unlike the constructive receipt doctrine, it is not necessary that the taxpayer's interest in the property be assignable or for the taxpayer to be entitled to immediate possession; rather, it is only necessary that there be an identifiable property interest over which the taxpayer's rights have vested The Tax Court held that the winnings were taxable to the minor in the year they were deposited into the account for his benefit, not in the year of actual receipt Fortunately, certain restrictions in the lottery statute or rules avoid the application of the economic benefit doctrine Moreover, lottery rules typically provide that the winner has only an inchoate, contractual right to receive annuity payments from the lottery Withholding on Lottery WinningsSection 3402(q)(1) provides that "[e]very person, including the Government of the United States, a State, or a political subdivision thereof, or any instrumentalities of the foregoing, making any payment of winnings which are subject to withholding shall deduct and withhold from such payment a tax in an amount equal to 28 percent of such payment "15 Generally, proceeds exceeding $5,000 are subject to withholding Individuals who receive lottery winnings won by someone else or members of a group of winners on the same winning ticket must report their winnings on IRS Form 5754 Many lottery winners, especially large prize winners, are often dismayed to learn that, even after their lottery prize is substantially reduced by income tax withholding, they may be required to pay additional income tax Given the disparity between the 28% federal withholding rate and the 39 Gambling LossesLottery winnings are considered gambling gains " Therefore, gambling losses may not offset other income or be used as an NOL carryback or carryover The gambling loss deduction can be applied two ways:If a taxpayer's gambling activities constitute a trade or business, substantiated gambling losses are deductible in arriving at the taxpayer's adjusted gross income If a taxpayer's gambling activities do not constitute a trade or business, the IRS takes the position that the taxpayer must deduct such losses as itemized deductions
A limited federal credit for state death taxes is available Similarly, for lottery winners receiving payments as an annuity, the present value of the unpaid annuity payments is included in the lottery winner's gross estate In addition to the income taxes payable with respect to the lottery prize, Elizabeth's estate is required to pay estate taxes on the lottery prize included in her estate Assuming that the lottery prize is the only asset in Elizabeth's estate, that she made no taxable gifts during her lifetime, and that she is subject to a flat, combined 45% income tax rate, she would be required to pay income taxes of $4 After receiving the first five payments, Ann died on 11/1/98 Under Sections 2031, 2039, and 7520, Ann's estate is required to include the present value of the remaining 15 annuity payments, calculated to be $10,104,600 " This is an annuity, income, remainder, or reversionary interest that is "subject to any contingency, power, or other restriction, whether the restriction is provided for by the terms of the trust, will, or other governing instrument or is caused by other circumstances " Taxpayers have argued that lottery rules which prohibit or limit the assignability of the remaining annuity payments cause the annuity to be a restricted beneficial interest, thereby permitting a departure from the requirements of Section 7520 In TAM 9616004, the IRS rejected this argument, however, noting that Reg Because there is no restriction on the payment of the lottery prize annuity, the taxpayer is required to use the standard Section 7520 annuity factors , 1998), suggests that, for lottery winners dying between 4/30/89 and 12/13/95, departure from the Section 7520 annuity tables may be warranted
In Shackleford, the taxpayer died in 1990 after receiving the first three annuity payments of his lottery prize His estate reported the value of the remaining annuity at $2 The court concluded that a factual issue regarding the value of the annuity was in dispute, and therefore denied the Service's motion for summary judgment The taxpayer and her sister-in-law won a state lottery with a lottery prize payable as an annuity over 20 years The taxpayer's sister-in-law executed an affidavit stating that they regularly pooled their money, that they had a preexisting agreement to share their lottery winnings, and that the winning lottery ticket was purchased on behalf of their preexisting partnership The parties formed a limited partnership in which each was a 2% general partner and a 48% limited partner The limited partnership claimed the winning lottery prize After the first annuity payment was made to the partnership, the taxpayer died; it is significant that, as in Shackleford, the taxpayer died before 12/13/95, the effective date of Reg The taxpayer's estate listed the partnership interests on the estate tax return The partnership interests were valued by first computing the sum of the underlying assets, cash and 19 lottery payments receivable The estate then discounted the payments to present value using a discount rate based on the AAA-rated general obligation bond yield, as opposed to the Section 7520 factors
The estate further discounted each payment by 39 Finally, the estate took an additional 20% discount for the partnership interests for lack of control and another 25% for lack of marketability The Service rejected the estate's argument that the Section 7520 factors should not be used and found that the annuity payments were not restricted beneficial interests Based on the same rationale used in TAM 9616004, the IRS found that the nonassignability of the lottery prize did not affect the payment of the annuity In addition, the Service found that the right of the partnership to receive payment of the lottery winnings had not been restricted in any way The IRS concluded that the taxpayer's estate was required to use the standard Section 7520 annuity factors to value the annuity payments and that discounts for lack of marketability and income taxes could not be applied to the valuation of the annuity payments The Service expressed no opinion on entity discounts for lack of marketability and lack of control that were applied to the partnership interests Alternate ValuationOrdinarily, assets subject to the estate tax are valued as of the date of the decedent's death Section 2032(a), however, provides that the executor may elect to value the assets in the gross estate on an "alternate valuation date," typically six months after the date of the decedent's death If the property was distributed, sold, exchanged, or disposed of earlier than that date, it is valued on the date of disposition In TAM 9637006, a lottery winner was entitled to receive 16 additional annuity payments of $112,500 each at the time of his death On the day he died, the Section 7520 interest rate was 8 On the alternate valuation date six months later, the Section 7520 interest rate was 9 The estate valued the decedent's interest in the 16 annuity payments as of the date of death, but used the 9
The IRS ruled that an annuity is an interest that is affected by the mere lapse of time Valuation changes due to interest rate fluctuations, however, are not changes due to the mere lapse of time Changes due to mere lapse of time include changes attributable to the time value of money, the depletion of an asset, or the receipt of a benefit by an estate during the alternate valuation period The IRS concluded that the estate properly valued the interest as of the time of death with the adjustment for the difference in its value as of the alternate valuation date due to the change in the applicable federal rate Liquidity IssuesMany lottery winners and their families are discouraged to learn that, along with the return, estate taxes are due nine months after the date of death The estates of winners who received their prizes as an annuity are often placed in the difficult predicament of not having sufficient cash to pay estate taxes Example: The facts are the same as in the previous example, i , the present value of Ann's remaining lottery annuity is $10,104,600 Assuming that this is the only asset in Ann's estate (and that Ann made no taxable gifts during her lifetime), the estate taxes due will be $5,001,510 Ann's estate will not receive another lottery annuity payment until 10/31/99 Because of the illiquid nature of the annuity, there is simply insufficient cash to pay the estate taxes
ED FRANKLIN’S Lottery Winnings Annuity sales get cash now
ED FRANKLIN’S Lottery Winnings Annuity sales get cash now
How can I insure a $50 million lottery win FDIC insurance deposits with a bank only insures up to $100,000 per account holder Will any bank accept a $50 million dollar CD and insure that money
The first thing I'll suggest is that with $50 million you can afford to pay for advice from a financial service professional It's just that you'll need more help than you're going to get in this column , or FDIC, insurance on $20 million of the $50 million is to use CDARS, the Certificate of Deposit Account Registry Service You deal with one bank and CDARS works with that bank to ensure that all of your deposit is FDIC-insured I've written about CDARS before and suggest that you read that column and also check out the CDARS Web site Treasury securities are considered risk-free investments when held to maturity You do face some price fluctuations day to day with changes in market interest rates, but the government guarantees the face value of the security at maturity You can own these securities in a brokerage account or in a Treasury Direct account The brokerage firm in most cases will be a member of the Securities Investor Protection Corp
The SIPC is much different from the FDIC, but it does provide a measure of protection from fraudulent brokerage firms " SIPC helps individuals whose money, stocks and other securities are stolen by a broker or put at risk when a brokerage fails for other reasons The SIPC doesn't guarantee that your investments won't lose value, it just steps in to protect you from theft of your securities or the failure of a brokerage firm Investments held as cash are protected only up to $100,000 If it were my millions, I wouldn't hesitate to invest in U
Treasury securities in an account with a national firm, many of the large regional firms, a brokerage account with one of the large mutual fund companies or Treasury Direct Finding a home for this money while you're deciding how to invest is one thing Treasuries will protect your principal, but you can do a lot better without taking on a lot of risk, and you're probably going to want to expand your approved list of investments Municipal securities, for example, can provide tax-exempt income, but alternate minimum tax considerations means you'd want to consult with a tax professional about investing in municipal securities Try to get the big picture about what life goals you want to achieve with this money and what you'd like to accomplish with the remainder of the money after you're gone I'd actually focus on the life goals aspect before getting too deep into the how-to-invest-it part To that end, the Treasuries and CDs are fine for the short-term
I wish I had someone to recommend for you on the life-goal side, but I started out telling you that you'd need more advice that I could give you in this column A life coach seems like a reasonable place to start
Just don't listen to any advice about investing in a life-coach franchise Don, go to the "Ask the Experts" page, and select one of these topics: "financing a home," "saving & investing" or "money DonAsk a question  RESOURCES Find out when CD rates hit your target Hey, you Unlucky lotto winners who lost the money  TOP INVESTING STORIES Fame & Fortune: Jennifer Love Hewitt12 investment mistakes couples makeInvesting: To risk or not
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This new statute overrides the constructive receipt doctrine and permits lottery winners to consult with their family, attorneys, accountants, and financial planners after winning the lottery in order to determine which payment option is most consonant with their goals and objectives The tax and financial considerations associated with a Section 451(h) election are discussed under "Planning," below The new law, which is effective for individuals winning the lottery after 10/21/98, creates a "qualified prize option" and a "qualified prize "6 A "qualified prize" is "any prize or award which (i) is awarded as a part of a contest, lottery, jackpot, game, or other similar arrangement, (ii) does not relate to any past services performed by the recipient and does not require the recipient to perform any substantial future service, and (iii) is payable over a period of at least 10 years " A "qualified prize option" is an "option which (i) entitles an individual to receive a single cash payment in lieu of receiving a qualified prize (or remaining portion thereof), and (ii) is exercisable not later than 60 days after such individual becomes entitled to the qualified prize " Section 451(h)(1) provides that, for a cash-method taxpayer, a "qualified prize option shall be disregarded in determining the taxable year for which any portion of the qualified prize is properly includible in gross income of the taxpayer " Section 451(h)(3) also instructs Treasury to issue Regulations for the application of the new rules to partnerships or other pass-through entities consisting entirely of cash-method individuals A significant transition rule gives previous lottery winners a one-time option to receive a lump-sum cash payment 105-277 provides that, for an 18-month period commencing on 7/1/99 and continuing to 12/31/00, previous lottery prize winners receiving payment in the form of an annuity may elect a lump-sum distribution equal to the present value of the remaining annuity payments Nevertheless, it is anticipated that most lotteries will begin offering the qualified prize option to prospective lottery contestants and prior lottery winners on 7/1/99 Unfortunately, Section 451(h) creates a class of prize winners who are not afforded its benefits
Under the statute, there are three classes of prize winners:Prize winners prior to 10/22/98 ("pre-effective date winners") Prize winners after 10/21/98 and before 7/1/99, the date on which it is anticipated that most lotteries will begin to offer a qualified prize option ("interim winners") Prize winners after 6/30/99 ("qualified prize option winners") Thus, as of 7/1/99, the pre-effective date winners can make the one-time "18-month election" to receive a lump sum Similarly, all qualified prize option winners will be given 60 days to choose between a lump sum or annuity prize But the interim winners are not permitted to make the 18-month election because their lottery prize was won after the effective date of Section 451(h); similarly, they are not permitted to make a 60-day election because the local lottery rules have not been changed to provide for a qualified prize option
The omission of the interim winners was most likely unintentional While legislation may be needed to cure the defect, it may be possible for the IRS to rule that it will not apply the constructive receipt doctrine to interim winners who are given an 18-month election to choose between a lump sum or an annuity First, many lotteries already offered a choice between a lump sum or an annuity In order to avoid the constructive receipt doctrine, the lottery contestant had to irr
