Assets/Liabilities Information

• On the Assets/Liabilities page you can enter, edit, and delete your clients’ lifestyle assets, real estate assets, and liabilities. You can also generate an Asset/Liabilities report that summarizes all the assets and liabilities entered in the plan.
• Below, you will find information on the types of assets you can enter on this page. Use this section as a resource for answering basic and frequently-asked questions for these topics.

1. From the Assets/Liabilities page (Enter Financial Data category — Net Worth category), click Add Lifestyle Asset and select Residence from the menu.
2. Click for the newly-created residence and enter any relevant information.
3. Under Sale Information, select Sell Asset and set the Sale Date to Retirement from the Calendar menu.
   Note: You can further specify the sale date of Retirement to 1st to retire, 2nd to retire, or to Client\Co-Client's retirement.
4. Navigate to the Lifestyle Assets subtab in the Scenario Manager (Results section - Analyze Goals category - Scenario Manager - Modify Financial Data - Net Worth - Lifestyle Assets).
5. Select Add Lifestyle Asset and select Residence from the menu.
6. Select for the newly-created residence and enter any relevant information.
7. Set the Purchase Date using theCalendar. To avoid cash flow irregularities, ensure that the date set here matches the sell date for the first residence.

• Lifestyle assets are assets that do not produce income (such as a house, a second residence, or a boat).
• Lifestyle assets can have a sale date assigned to them (unlike individual investment assets which are sold systematically to cover cash flow deficits in retirement).

Residences

•  When a personal residence asset is sold, it is taxed with certain exclusions. It is assumed that ownership and use requirements have been met when calculating the exclusion of capital gains on the sale of a personal residence. This is assumed regardless of the purchase date of the asset.
  • The maximum amount of realized gain that can be excluded from gross income is $500,000 for married taxpayers filing jointly.
  • The maximum exclusion for other taxpayers is $250,000.
  • The growth on second residence, personal use property, and other personal assets is fully taxed after such assets are sold.

Purchasing lifestyle assets

• Lifestyle assets can be added to NaviPlan with a purchase date within one year of the plan analysis date.
  • When the purchase date occurs in the previous year, cash flow is unaffected.
  • When the purchase date occurs in the current or next year, a cash outflow for the purchase amount is created.

Selling lifestyle assets

• Lifestyle assets cannot be used to fund goals because they are non-divisible assets. However, they can be sold and the proceeds of that sale can be used for goal funding.
• To sell a lifestyle asset, enter a future sale date. The system-calculated projected value of the asset on the sale date will be added as a cash inflow in all relevant reports.

• You can enter an unlimited number of real estate assets.
• You can enter the rental property value and the rental income. The duration of the rental income will be the same as the asset period. When the property is sold, the projected value will be brought into cash flow and the income will end.

  • Rental income will be paid over the asset period (that is, not before January 1 of the plan date and will end when the property is sold or at death, whichever comes first).

  • If there is a period of vacancy, you can enter an offsetting expense for this period to properly model the effects on cash flow.
  • Depreciation is not considered in this analysis, which may result in an understatement of cash flow, since depreciation is a tax or accounting item and not a cash flow item. This may also affect the capital gain calculations when the real estate asset is sold.

• Note: Real estate assets produce rental income and are considered to be investment properties. The rental income on a real estate asset is assumed to be net of property taxes. Real estate assets that are purchased for the owner’s personal use and enjoyment should be entered under Lifestyle Assets on the Assets/Liabilities page.

• Business entities are organizations that possess a separate existence for legal and financial purposes.
• This list shows all the business entity assets that are part of the clients’ financial picture.
• You can add any of the following types of entities that the clients hold as flow-through assets.
  • Limited liability companies (LLC)
  • Partnerships
  • S corporations
  • C corporations
• Business entity assets are excluded from asset allocation.

• You can enter the details of loans, mortgages, and other debts.
• NaviPlan calculates principal and interest payments, and includes them in the clients’ cash flow.
• Lifestyle items such as auto-lease payments and rental expenses should be entered on the Cash Flow page. Do not enter liability payments on the Cash Flow page.

• In some situations proceeds from the sale of lifestyle assets will be used to cover liabilities linked to that asset. Remaining proceeds will be allocated to a non-qualified account. Liabilities will be covered if all of the following requirements are met:
  • The asset sale is based on a specific date, not an event.
  • The asset is linked to a liability, the sale of which is enough to pay off the liability’s principal and interest on the sale date. This will end the liability.
  • Remaining proceeds can be allocated to either the clients’ cash flow or a newly created non-qualified account.
• Note: The allocation of proceeds from the asset sale is selected in the Lifestyle Assets Details dialog box from the Direct After Tax Proceeds To menu.

• From the Link to Asset menu, select the asset you want to link to the liability.
  Note: An asset can be linked to more than one liability.