Survivor Income Objectives

• To determine if the client is adequately insured, the income analysis in NaviPlan simulates death at the end of the current year.
• Adjustments to the survivor's age, life expectancy, and tax rate information on this tab are for purposes of the survivor analysis only and do not affect the rest of the plan.
• NaviPlan makes the following asset availability assumptions for survivorship situations:
  • Non-qualified assets are available at death.
  • Qualified assets are available at retirement.
  • Lifestyle assets are available for the estate.

• Life insurance analysis can be based on a goal and expense analysis method, an income coverage analysis method, or a Quick Assessment method.
• The Goal and Expense Analysis method analyzes the amount of insurance needed to maintain the survivor’s standard of living. NaviPlan calculates an insurance recommendation that accounts for the goals and expenses defined in the plan. The parameters of the goal and expense analysis can be changed to cover the survivor’s needs.
• The Income Coverage Analysis method analyzes the survivor’s income, the lost income due to death, and any lump-sum needs or expenses that would occur as a result of the client’s death. NaviPlan calculates a recommended amount of insurance to replace the lost income and to cover any additional lump-sum needs that are defined.
  • Note: The Income Coverage Analysis method is designed to be used as a standalone survivor income analysis and assumes the Estate Planning defaults of a Simple Will and ignores estate strategies because data entered for the survivor income analysis does not require the entry of other plan data.
• The Quick Assessment calculates your clients' additional insurance needs on the basis of a simple comparison of their lump sum and ongoing needs to their assets available to offset those needs. This assessment is designed to quickly assess your clients' need and provide you with an accurate amount of additional life insurance they will require.

• Insurance goals behave somewhat differently than other screens in NaviPlan. Each page in the Survivor Income category corresponds to an insurance goal; one for the client, one for the co-client, and a third representing a situation in which both clients die.
• Within each page, you will find a series of subtabs. Each subtab contains information and fields relating to a single aspect of the survivor income goal. Review and modify data for each of these subtabs to fully-model a survivor income goal for your clients.
  • When you have completed this process for the client, repeat it for the co-client and follow the same steps to model a situation in which both clients die, if applicable.

Follow these steps to enter a survivor income goal in the event that one client dies

Assumptions subtab

1. Review the data under the Adjust Milestones section. To modify the Survivor Retirement Age or Survivor Life Expectancy fields, select the appropriate Override option and enter new data.
2. Review the data under the ROR on Cash Flow Surpluses & Liquidations section. To modify the return rate for any of these surplus/liquidation types (or for the total) for the retirement and/or pre-retirement period enter new data.

Ongoing Expenses subtab

1. By default, assumes that 85% of lifestyle and medical expenses will continue in a survivorship situation where a single client dies. To modify this assumption, enter a new value into the Percentage of lifestyle and medical expenses to cover field under Annual Expenses.
2. By default, NaviPlan assumes that any education goals will continue in a survivorship situation and will still need to be covered at 100%. To modify this assumption, enter a new value into the % to Cover field under Education Goals.
3. If the decedent may have a cash flow surplus, you can indicate what percent of that surplus is to be spent and what percentage is to be saved using the Percent surplus spent and the Percent surplus saved field (respectively).
4. When Assume surplus is spent is selected, NaviPlan projects the cash flow that would have occurred in pre-retirement if neither client had died. Any pre-retirement surpluses resulting from this projection become additional pre-retirement survivor expenses. This helps to prevent survivor expenses from being understated.
5. Use the Add Additional Expense button to model any additional expenses that apply in the event of death.
   Note: NaviPlan treats the Additional Expenses as monthly cash flow items, and not as annual expenses that occur on a specific anniversary. Although you enter the annual dollar amount, NaviPlan divides this amount by 12 to determine the monthly amount for calculation purposes. The monthly expense is assumed to end upon the End Date defined.

Additional Annual Income subtab

1. Use the Add Annual Income button to model any additional incomes that will apply in a survivorship situation.

Lump Sum Needs subtab

1. The Pay Off Outstanding Liabilities section will appear if a client has at least one outstanding liability. Each liability has an associated check box:
   • If a liability's check box is selected, it is paid out at its outstanding balance on December 31 of the current plan year.
   • If a liability's check box is cleared, the payments will continue to be removed from the client's cash flow. The assumption is that additional insurance is not required and that the liabilities were separately insured for life.
   • Note: The client or co-client may have sufficient cash flow to cover ongoing liability payments and may not want the liability paid out in the insurance analysis. If the client will not have sufficient cash flow to cover the ongoing liability payments, select the check box next to the corresponding liability so that it is paid out at the client’s death or disability.
2. By default, NaviPlan assumes that any major purchase goals will continue in a survivorship situation and will still need to be covered at 100%. To modify this assumption, enter a new value into the % to Cover field under Major Purchase Goals.
3. Use the Add Lump Sum Need button to model any additional needs that apply in the event of death.

Asset Availability subtab

1. This subtab displays all assets in the plan and allows you to indicate whether or not each asset is available to help cover needs in a survivorship situation.
   • To indicate that an asset is available immediately in a survivorship situation, select Available Immediately or Liquidate Immediately (depending on the type of asset).
   • To indicate that an asset is available as of the date of retirement, select Available Starting at Retirement or Liquidate At Retirement (depending on the type of asset).
   • To indicate that an asset is not available to cover survivor needs, select Not Available.
2. To indicate that an asset is not available to meet the estate’s settlement needs, select Not Available at <client/co-client's> Death.
   • If selected, it forms part of the deceased’s estate. If the asset is solely owned by the survivor and is not community property, this check box is automatically selected and cannot be cleared.
   • Note: When analyzing survivor income needs in a joint plan, the Not Available at <client/co-client's> Death option only controls the availability of the asset to cover estate needs at first death; it does not affect the availability of the asset to cover estate needs when the survivor dies. The availability of the asset to cover estate needs at second death is controlled using the Not Available For Estate Needs check box on the Asset Estate Details page.

Note: The Education Specific Accounts container is present on this page for informational purposes only and cannot be modified. This list includes all 529 plans, Coverdell accounts, and UTMAs/UGMAs.

Follow these steps to enter a survivor income goal in the event that both <client> and <co-client> die:

Assumptions subtab

1. Review the data under the ROR on Cash Flow Surpluses & Liquidations section. To modify the return rate for any of these surplus/liquidation types (or for the total) for the retirement and/or pre-retirement period enter new data.
2. If your clients have at least one dependent entered in the plan, you will see a Tax Rates section.
   • If applicable, select Override Tax Rates to change the tax rates used in the dependent's income tax calculations
   • Make a selection for the dependent(s) from the Tax Bracket menu.
   • Enter the State tax rate.
   • Enter the tax rate for the Average and Marginal federal tax.
   • Enter the Long-term Capital Gains.
   • Note: The selections made here will apply in both retirement and pre-retirement periods.

Ongoing Expenses subtab

1. Use the Add Support for Dependent button to model the addition of an income source for any dependents in the event that both clients die.
2. By default, assumes that any education goals will continue in a survivorship situation and will still need to be covered at 100%. To modify this assumption, enter a new value into the % to Cover field under Education Goals.

Lump Sum Needs subtab

1. Use Add Lump Sum Need to model any additional lump sum needs that may occur in a survivorship situation (e.g. funeral expenses).

Asset Availability subtab

1. For each asset, use the Available and Not Available options under Survivor Needs to indicate whether or not each asset is available to cover survivor's expenses (in the case of investment accounts) or to be sold (in the case of real estate, business entity assets, and lifestyle assets).
2. For each asset, use the Not Available at Death option to indicate that the asset is not available to help settle the deceased's estate.

Note: The Education Specific Accounts container is present on this page for informational purposes only and cannot be modified. This list includes all 529 plans, Coverdell accounts, and UTMAs/UGMAs.

Follow these steps to enter a survivor income goal in the event that one client dies

Assumptions subtab

1. Review the data under the Adjust Milestones section. To modify the Survivor Retirement Age or Survivor Life Expectancy fields, select the appropriate Override option and enter new data.
2. Review the data under the ROR on Cash Flow Surpluses & Liquidations section. To modify the return rate for any of these surplus/liquidation types (or for the total) for the retirement and/or pre-retirement period enter new data.

Lump Sum Needs subtab

1. The Pay Off Outstanding Liabilities section will appear if a client has at least one outstanding liability. Each liability has an associated check box:
   • If a liability's check box is selected, it is paid out at its outstanding balance on December 31 of the current plan year.
   • If a liability's check box is cleared, the payments will continue to be removed from the client's cash flow. The assumption is that additional insurance is not required and that the liabilities were separately insured for life.
   • Note: The client or co-client may have sufficient cash flow to cover ongoing liability payments and may not want the liability paid out in the insurance analysis. If the client will not have sufficient cash flow to cover the ongoing liability payments, select the check box next to the corresponding liability so that it is paid out at the client’s death or disability.
2. By default, assumes that any major purchase goals will continue in a survivorship situation and will still need to be covered at 0%. To modify this assumption, enter a new value into the % to Cover field under Major Purchase Goals.
3. Use the Add Lump Sum Need button to model any additional needs that apply in the event of death.

Annual Income Needs subtab

1. Use the Current Income Level Calculator to determine how much of the clients' income to continue in the selected survivorship situation.
   • Enter a value in the % to cover field, this value corresponds to the percentage of income you want to cover.
   • When you are satisfied, click Add to Annual Income Needs. A new entry is added to the Annual Income Needs section.
2. Use the Add Annual Income Need button to add any additional needs that apply in the selected survivorship situation.
3. Use the Add Support for Dependent button to model the addition of an income source for any dependents.

Survivor's Income subtab

1. By default, this tab reflects the incomes shown on the Cash Flow page.
   • Use the Add Survivor Income button to enter any additional incomes that apply in the selected survivorship situation.
   • Use the Reset button to revert any changes and reflect the incomes from the Cash Flow page.

Asset Availability subtab

1. This subtab displays all assets in the plan and allows you to indicate whether or not each asset is available to help cover needs in a survivorship situation.
   • To indicate that an asset is available immediately in a survivorship situation, select Available Immediately or Liquidate Immediately (depending on the type of asset).
   • To indicate that an asset is available as of the date of retirement, select Available Starting at Retirement or Liquidate At Retirement (depending on the type of asset).
   • To indicate that an asset is not available to cover survivor needs, select Not Available.
2. To indicate that an asset is not available to meet the estate’s settlement needs, select Not Available at <client/co-client's> Death.
   • If selected, it forms part of the deceased’s estate. If the asset is solely owned by the survivor and is not community property, this check box is automatically selected and cannot be cleared.
   • Note: When analyzing survivor income needs in a joint plan, the Not Available at <client/co-client's> Death option only controls the availability of the asset to cover estate needs at first death; it does not affect the availability of the asset to cover estate needs when the survivor dies. The availability of the asset to cover estate needs at second death is controlled using the Not Available For Estate Needs check box on the Asset Estate Details page.

Note: The Education Specific Accounts container is present on this page for informational purposes only and cannot be modified. This list includes all 529 plans, Coverdell accounts, and UTMAs/UGMAs.

Follow these steps to enter a survivor income goal in the event that both <client> and <co-client> die:

Assumptions subtab

1. Review the data under the ROR on Cash Flow Surpluses & Liquidations section. To modify the return rate for any of these surplus/liquidation types (or for the total) for the retirement and/or pre-retirement period enter new data.
2. If your clients have at least one dependent entered in the plan, you will see a Tax Rates section.
   • If applicable, select Override Tax Rates to change the tax rates used in the dependent's income tax calculations
   • Make a selection for the dependent(s) from the Tax Bracket menu.
   • Enter the State tax rate.
   • Enter the tax rate for the Average and Marginal federal tax.
   • Enter the Long-term Capital Gains.
   • Note: The selections made here will apply in both retirement and pre-retirement periods.

Lump Sum Needs subtab

1. The Pay Off Outstanding Liabilities section will appear if a client has at least one outstanding liability. Each liability has an associated check box:
   • If a liability's check box is selected, it is paid out at its outstanding balance on December 31 of the current plan year.
   • If a liability's check box is cleared, the payments will continue to be removed from the client's cash flow. The assumption is that additional insurance is not required and that the liabilities were separately insured for life.
   • Note: The client or co-client may have sufficient cash flow to cover ongoing liability payments and may not want the liability paid out in the insurance analysis. If the client will not have sufficient cash flow to cover the ongoing liability payments, select the check box next to the corresponding liability so that it is paid out at the client’s death or disability.
2. Use Add Lump Sum Need to model any additional lump sum needs that may occur in a survivorship situation (e.g. funeral expenses).

Ongoing Expenses subtab

1. Use the Current Income Level Calculator to determine how much of the clients' income to continue in the selected survivorship situation.
   • Enter a value in the % to cover field, this value corresponds to the percentage of income you want to cover.
   • When you are satisfied, click Add to Annual Income Needs. A new entry is added to the Annual Income Needs section.
2. Use the Add Support for Dependent button to model the addition of an income source for any dependents in the event that both clients die.
3. By default, assumes that any education goals will continue in a survivorship situation and will still need to be covered at 100%. To modify this assumption, enter a new value into the % to Cover field under Education Goals.

Asset Availability subtab

1. For each asset, use the Available and Not Available options under Survivor Needs to indicate whether or not each asset is available to cover survivor's expenses (in the case of investment accounts) or to be sold (in the case of real estate, business entity assets, and lifestyle assets).
2. For each asset, use the Not Available at Death option to indicate that the asset is not available to help settle the deceased's estate.

Note: The Education Specific Accounts container is present on this page for informational purposes only and cannot be modified. This list includes all 529 plans, Coverdell accounts, and UTMAs/UGMAs.

Type

Classification or source of expense.

Expense Type	Description
Alimony	Payments made to a spouse or former spouse where the payment is for the benefit of the recipient, and the payments are fully deductible to the payer in the year paid and taxable to the recipient.
Deductible above the line	Used for deductible above-the-line expenses that are not included in other areas of the plan, such as moving expenses. By default, these expenses are fully deductible and deducted from total income to arrive at adjusted gross income (AGI).If entered elsewhere in the plan, it is not necessary to include in this category deductible above-the-line expenses related to items such as deductible contributions or deductible alimony paid, as NaviPlan Select will calculate these.
Deductible itemized	Used for itemized expenses that are not captured in other areas of the plan, such as casualty or theft losses. It is not necessary to include state taxes in this category, nor, if entered elsewhere in the plan, deductible itemized expenses such as medical expenses, property taxes, and tax-deductible interest, as NaviPlan Select will calculate these.
Deductible subject to 2% limit	Expenses that are deductible to the extent that they total more than 2% of AGI, for example, unreimbursed employee expenses or tax preparation fees.
Gifts to Charity	For cash flow purposes, NaviPlan Select reports the full amount of the expense as charitable donations. For income tax purposes, NaviPlan Select considers these as donations to a 50% charity, the income tax reports include a Gifts to Charity deduction up to 50% of AGI. Amounts in excess of this limit are carried forward and used in the next available year. For example, if the client has AGI of $100,000 and charitable donations of $60,000 that are 100% deductible, in cash flow NaviPlan Select will report an expense of $60,000, while the income tax reports will include gifts to charity of $50,000 with the remaining $10,000 carried over for use in the next available year. When entered as expenses, NaviPlan Select does not consider these amounts as gifts to charity for estate planning purposes. If these expenses should be considered as part of the client’s estate plan, they should be entered as part of a gifting strategy.
Lifestyle	Regular expenses such as food, clothing, entertainment, utility, rental, and lease payments. This expense type is not tax deductible.
Medical	Expenses incurred as a result of treatment from a recognized medical practitioner. This also includes prescriptions, ambulance charges, and non-government health plan contributions. Medical expenses incurred and not reimbursed qualify as itemized deductions if the total medical expense exceeds 7.5% of the client’s AGI.
Real Estate & Prop Taxes	Any taxes that the client has paid on real estate, owned by the client, that was not used for business. This category includes foreign property.
Self-Employ/Bus	Work-related expenses of self-employed clients. These expenses are deducted from self-employment income for tax purposes. The total may include expenses such as: Purchasing business assets that will be consumed in the year Amortizing a capital asset that will be used by the business over a number of years Providing taxable benefits to employees Contributing to defined benefit pension plans Paying union dues and professional fees The costs of maintaining an office or a vehicle for a self-employed individual

Future State of Residence

• This section will appear on the Assumptions tab (Set Goals section – Survivor Income category– <client/co-client/both> Objectives page) when the following is true:
  • Your client(s) plan to move to a new state in the future.
  • You have entered the details of the move on the Income Tax page (Plan Management section – Assumptions category).
• You can use the Proceed with the change of state/residence as planned option to indicate whether or not your client(s) still plan to move in a survivorship situation.