Assets/Liabilities

Lifestyle assets are purchased for the owners’ personal use and enjoyment, and not for the purpose of funding goals or producing income. Examples include a house, vacation home, car, or boat.

To enter lifestyle assets, follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.

Enter Financial Data - Net Worth page - Assets/Liabilities tab

2. To add a lifestyle asset, click Add Lifestyle Asset, and then select an asset type from the menu. If applicable, enter the market value of the listed lifestyle asset. To enter additional details for the asset, click the corresponding button.

Enter Financial Data - Net Worth page - Assets/Liabilities tab - Details pop-up

NaviPlan estimates the before- and after-tax values of the asset on the sale date, as well as the buying power of those values (in today’s dollars).

To enter details regarding asset return rates, click the Return Rates link.

• If you do not want to use the default return rates and standard deviations associated with the asset, under Return Rates, select the Override option, and then make your changes

From the Lifestyle Asset Details dialog box, you can

• Create a new lifestyle asset by clicking Add Lifestyle Asset, and selecting an option from the menu. New lifestyle assets appear on the Assets/Liabilities page under Lifestyle Assets.
• View or edit another lifestyle asset by clicking Next Entry or Previous Entry

To generate the Assets/Liabilities report, go to the Assets/Liabilities page, and then click Assets/Liabilities Report.

To model a lifestyle asset sale follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.
2. Click the button for the asset you wish to sell.

3. Scroll down to the Sale Information section.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Details pop-up

4. Check the Sell Asset checkbox.

5. Enter in a Sale Date.

   Note: Reports will show the asset being sold on the exact month entered in this field.
6. Modify the Selling Cost if desired, the default percentage is 7.00%.
7. Choose where the money from the sale will initially go with the Direct After Tax Proceeds To drop-down. The options will include:
   • Cash Flow.
   • New Account.
   • any existing non-qualified entered into the plan.

You can enter many types of liabilities including mortgages, loans, credit cards, and other debts. Once entered, you can link a liability to a lifestyle asset.

To enter liabilities, follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.
2. To add a new liability, click Add Liability, and then select a liability type from the menu. The new liability item appears at the bottom of the liabilities menu.
3. If applicable, enter the liability’s description, balance, interest rate, and payment.
4. If applicable, from the Link to Asset menu, select the asset that is linked to the liability.
   Note: An asset can be linked to more than one liability but a liability can be linked to only one asset.
5. To enter additional details for the liability, click the corresponding button and enter the additional information.

Enter Financial Data - Net Worth page - Assets/Liabilities tab - Details pop-up

From the Liability Details dialog box, you can:

• Create a new liability or a copy of an existing liability by clicking Add Liability, and then selecting an option from the menu (new liabilities appear on the Assets/Liabilities page under Liabilities).
• View or edit an existing liability by clicking Next Entry or Previous Entry.

To change the liability calculation, under Calculation Options select an option from the Field to Calculate menu, and then modify the remaining calculation details. The calculated field updates.

To exclude a liability from the disability analysis, select the Insured for Disability option. The liability will be paid in full from disability insurance proceeds.

To indicate that the unpaid loan balance will be transferred to the survivor, select Transfer to survivor from the Payoff Options at Death menu.
OR
To indicate that the liability will be paid from the clients’ estate, select Payoff at first death (from estate) from the Payoff Options at Death menu.
OR
To model loans that are forgivable at death (for example, some student loans), select Insured for life from the Payoff Options at Death menu. This excludes the loan balance from the insurance analysis, as well as from estate planning cash flow calculations.

To view the liability amortization schedule report for a liability, on the Assets/Liabilities page, click Report beside the specific liability.

To generate the Assets/Liabilities report, click Assets/Liabilities Report on the Assets/Liabilities page.

To model a variable follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.

2. To add a new liability, click Add Liability, and then select the Variable Mortgage option from the menu.

   Note: For existing liabilities you can adjust the mortgage type within the liabilities details in the Mortgage Type drop-down.
3. Click the button for the new variable asset.

4. In the details, scroll down to the Calculation Options section.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Details pop-up

5. If you wish to add a variable payment, adjust the Variable Payment? drop-down to Yes.
6. In the Variable Interest Rate Schedule section, click the Add Interest Rate Period button.

7. Clicking this button will add a new field for interest rate payment, you may adjust the interest rate and the period that this rate will be paid.

   Note: The 5.00% interest rate is the default value within entry, it can be adjusted to represent the last portion of a client's variable mortgage or ignored by adding additional interest fields that last for the entire mortgage life.

To modify how a liability is paid off follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.
2. Click the button for the liability you wish to modify.

3. Scroll down to the Calculation Options section.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Details pop-up

4. Under Field to Calculate, there are several options that can modify how a liability is paid off:
   • Amortization: Allows entry of the Balance and Payment fields to calculate an amortized period required to pay off the liability. This is the default option.
   • Payment: Allows entry of the Balance and Remaining Amortization fields to calculate the required payment amount to pay off the liability.
   • Balance: Allows entry of the Payment and Remaining Amortization fields to calculate what the balance of the liability is.

In situations where a liability will receive additional payments on top of the base fixed expense, select the Debt Modification tab at the bottom of the Details pop-up.

1. Click the Add Debt Modification button.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Details pop-up - Debt Modification tab

2. Enter the Amount, Frequency and time frame (Start Date and End Date) for the additional payments.

   Note: Debt Modification strategies are additional expense strategies for liabilities. These strategies will appear on cash flow reports as additional expenses tied to the liability they are entered for. NaviPlan will factor debt modification when calculating base liability expenses and will reduce the balance and payment periods accordingly.

You can enter real estate assets that are purchased for investment purposes. NaviPlan includes fields for rental income and expenses. Real estate assets that are purchased for the clients’ personal use and enjoyment should be entered as lifestyle assets.

To enter real estate assets, follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.
2. To add a new real estate asset, click Add Real Estate.
3. If applicable, enter the market value and rental income net of property taxes for the real estate asset.
4. To enter additional details for an existing real estate asset, click .



Enter Financial Data - Net Worth page - Assets/Liabilities tab - Real Estate Details pop-up

5. Enter the purchase and valuation details of the real estate asset.

6. Go to the Rental Information tab, and then enter the rental income net of property taxes, expenses, frequency, growth rate, etc. For properties that have rental income from multiple sources, click Add Income/Expense to add another data-entry row.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Real Estate Details pop-up

7. To enter the cost of additions made to the property prior to the current year, go to the Additions tab. Enter the cost of the additions, the depreciation so far, the dollar amount that the addition will depreciate annually, and the number of years until the addition will be fully depreciated.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Real Estate Details pop-up

8. If you know the clients will be selling the real estate asset, go to the Sale Information tab, and then select a sell option from the Sale Option menu. Enter a sale date, a selling cost rate, and then select an option from the Direct After Tax Proceeds To menu. If you select New Non-Registered, NaviPlan creates a new account and opens the Account Details dialog box. NaviPlan uses the selected destination for after-tax proceeds from the sale of the asset.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Real Estate Details pop-up

9. If you do not want to use the default return rates and standard deviations associated with the asset, go to the Return Rates tab, select the Override option, and then make your changes.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Real Estate Details pop-up

From the Real Estate Details dialog box, you can:

• Create a new real estate asset by clicking Add Real Estate, and then selecting an option; new real estate assets appear on the Assets/Liabilities page under Real Estate.
• View or edit another real estate asset by clicking Next Entry or Previous Entry.

To generate the Assets/Liabilities report, click Assets/Liabilities Report on the Assets/Liabilities page.

Business entities can only be entered in plans using the Detailed Tax method that also include the optional Business Planning module.

Business entities are organizations that are separate entities for legal and financial purposes. You can add:

• Limited liability companies (LLC)
• Partnerships
• S corporations
• C corporations

Businesses that the clients holds serves as flow-through assets.

Business entity assets are excluded from asset allocation.

To enter a business entity, follow these steps:

1. Go to the Enter Financial Data – Net Worth – Assets/Liabilities page.
2. Under Business Entities, click Add Business Entity, and then select the business entity type from the menu. A new data-entry row appears.
3. Enter a description and the start-of-year market value.

4. To enter additional information, click .

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Business Entity Details pop-up

Entering business activity

Business activity such as income, expenses, and distributions can be entered for all business entities, except for C corporations.

To enter the activity for a business entity, follow these steps:

1. In the Business Entity Details dialog box, go to the Activity tab.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Business Entity Details pop-up

2. Enter the dollar value of the Income generated by the business entity asset. This amount will not affect the clients’ personal cash flow.
3. Enter the dollar value of the Expenses incurred by the business entity. This amount will not affect the clients’ personal cash flow.
4. Enter the Distributions amount that will flow into this year’s cash flow to fund the current year tax liability.
5. If applicable, enter an amount in the AMT Adjustments field. This amount is a tax item only. It can be positive or negative and does not affect the clients’ personal cash flow. The amount entered in AMT Adjustments will be reported as passive activities in the AMT section of theIncome Tax Details report.
6. From the Frequency menu, select the frequency of the income.
7. If the activity is to be indexed to inflation, select the Infl option, and then, if applicable, enter a percentage. The inflation rate applies to all fields on the Activity tab.

Entering the sale of a business entity

To enter the sale of a business entity, go to the Sale Information tab and follow these steps:

1. From the Sale Option menu, select the appropriate option.
2. If selling, enter the Sale Date. You can enter a specific date, or you can specify that the sale will be triggered by an event, such as retirement or death. You can also offset the sale from the triggering event by a given number of years. For example, you can specify that the business entity will be sold two years before the owner’s retirement by entering ret. -2.
3. Enter the cost of selling the business entity (as a percentage of the market value).

4. If you plan to sell the business entity in installments, enter the details under Installment Sale Details.

   

   Enter Financial Data - Net Worth page - Assets/Liabilities tab - Business Entity Details pop-up

Modifying return rates

To modify return rates, go to the Return Rates tab, and then enter the Growth Rate and Standard Deviation.

Enter Financial Data - Net Worth page - Assets/Liabilities tab - Business Entity Details pop-up