Rich with debt
Suzanne Mullins won $4.2 million in the Virginia Lottery in 1993. After she split the money with her family, and taxes ate away some of the prize, her 20 annual payments of less than $50,000 weren't remotely enough to lead a millionaire's lifestyle.
In financial straits only five years later, she took out a loan of nearly $200,000 from the People's Lottery Foundation, using her winnings as collateral. When lottery rules changed after that, she chose to receive a lump-sum payment.
Choosing the right payment method is important -- and it depends on the winner and his or her habits, says Christian Dill, a wealth management adviser for Northwestern Mutual.
"Is the person likely to spend it all if there was access to a lump sum? If so, they may benefit from an annual income instead," Dill says.
According to multiple media reports, Mullins was sued in 2004 when she still owed the foundation more than $150,000 from the loan.