Wealth Planning Suite

Wealth Planning Suite

Discussion

CalculationsAsset or Item Interest/Income Comments

Checking 1/12th compounded monthly Reinvested

Cash, Savings 1/12th compounded monthly Reinvested

Money Markets 1/12th compounded monthly Reinvested

Treasury Notes 1/12th compounded monthly Reinvested

Example: 12% entered would be 1% per month compounding to 12.6825 in one year

CalculationsAsset or Item Interest/Income

401k, 403b Compounded monthly to produce effective annual rate entered*

IRAs Compounded monthly to produce effective annual rate entered

Profit Sharing Compounded monthly to produce effective annual rate entered

Roth IRA Compounded monthly to produce effective annual rate entered

529 Plan Compounded monthly to produce effective annual rate entered

Coverdell Compounded monthly to produce effective annual rate entered

Example: 12% entered it is compounded monthly at 0.948879%

* Monthly compound rate (R) to produce effective annual rate (EAR) entered

EAR = (1+R)1/12 – 1


EAR = (1+R)1/12 – 1

CalculationsAsset or Item Growth

Speculative Assets Compounded monthly to produce effective annual rate entered *

Personal Property Compounded monthly to produce effective annual rate entered

Collectibles Compounded monthly to produce effective annual rate entered

Bonds ½ coupon interest rate times face amount; not reinvested;paid January and July

Annuity deferred growth rate is 1/12th compounded monthly


EAR = (1+R)1/12 – 1


EAR = (1+R)1/12 – 1 Example: 12% entered it is compounded monthly at 0.948879%

CalculationsAsset or Item Appreciation

Mutual Funds

Growth Compounded monthly to produce effective annual rate entered

Income 1/12th paid monthly

Reinvested Income 1/12th compounded monthly

Capital Gains 1/12th paid monthly

Reinvested Capital Gains 1/12th compounded monthly

Income and capital gains percentage calculated on same end of month value


Stocks


Dividends 1/12th paid monthly

Reinvested Dividends 1/12th compounded monthly *


EAR = (1+R)1/12 – 1 Calculated each month on beginning of year value

Effectively – Reinvested Dividends work exactly the same as Growth



Effectively – Reinvested Dividends work exactly the same as Growth


FLPs

Growth Compounded monthly to produce effective annual rate entered*

Income (not distributed) 1/12th compounded monthly

Income (distributed) 1/12th monthly


EAR = (1+R)1/12 – 1


EAR = (1+R)1/12 – 1


Businesses & Farms


Dividends (always distributed)

Paid monthly at monthly compound rate to produce the effective annual rate entered*

Income Dollar amount entered, in addition to dividends, and paid net of business expenses



Effectively –Dividends work exactly the same as Growth



Effectively –Dividends work exactly the same as Growth


Real Estate Assets

Growth Compounded monthly to produce effective annual rate entered*

Income Dollar amount entered, in addition to dividends, and paid net of business expenses


EAR = (1+R)1/12 – 1


EAR = (1+R)1/12 – 1


Trusts


Income (reinvested) 1/12th compounded monthly

Income and capital gains percentage calculated on same end of month value

CalculationsItem Assumptions

Education Goals

Compounded monthly to produce effective annual rate entered

Education costs paid monthly

1/12th of estimated cost

Timing of payments Assumed August – July (5 payments one tax year, 7 payments the following tax year)

Education Inflation Its own rate applied at the start of each school year

Trust Accounting

• Current– New trust assumed to start and have anniversary date

the same as the date of the proposal– All ledgers show end-of-year values– Unitrusts percentage payouts based on end-of-year

trust value– Ledger values show portions of two trust years

• Solution:– Change calculations– Improve footnotes and messaging

Changes if no calculations changes

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FLP Distributions

• Current– “FLPs and Defective Trust”

• All income distributed• Trust needs distributions for premiums and loan payments• Trust does not distribute its remaining income

– All other FLPs• Assumes FLP does not distribute any income

• Additional Problem– FLP only allows income as a percentage– Hard to match when rental or business put in FLP

Pension Protection Act (PPA) and IRC 101

• Employee’s prior notification and consent required PRIOR to issuance of BOLI

• Company “policing”?• How broadly interpreted?

– Stephan Leimberg’s – very• Suggested wording in Assumptions or Important Notice to

save some customization:Insurance death proceeds are generally received income tax free [IRC § 101 (a)]. For employer-owned life insurance policies issued after August 17, 2006, IRC § 101 (j) provides that death proceeds will be subject to income tax; however, where specific employee notice and consent requirements are met, and certain safe harbor exceptions apply, death proceeds can be received income tax free under IRC § 101 (a).

References to NASD• Now that NASD and NYSE have merged to form FINRA• Regulations still refer to “NASD Rules and Regulations”

and NYSE Regulations• New members are referred to as FINRA and are subject to

NASD Rules and Regulations if not also a member of NYSE• FINRA rules refer to

– “prior NASD only members” – “both NASD and NYSE members” – “NYSE only members”

• Consensus Needed– Should references be changed throughout products– Continue referring to NASD

State Inheritance and Estate Taxes• Many states have and are changing due to the elimination

of the federal credit for state inheritance and estate taxes• Calculations are updated as we receive notices – each

new release has the most up-to-date at time of beta• ***Uses state on Estate Tax tab in Assumptions***• Calculations are identified where possible for state rates

– State rates applied to “federal” amounts– No split states (additional expenses or taxes can be used)

• Some states require additional beneficiary information– Percentage to each class & # in class

• State Death Taxes page conditional by state for proposed scenario

Recent Changes:Kansas Repeal effective 1-1-2010 (graduated step down 2007—09 Implemented in 2006R2Substantial Changes or Repeal:Arizona 2006Arkansas 1-1-2006Louisiana 1-1-2008Nebraska 1-1-2007Virginia 7-1-2007

State Death Taxes by Scenario

Conditional State Death Tax Page

ETA’s Relationships within Initial Graphics

The Calculus of PlanLab and ETA

Multiple Changes – Changes behind the Scenes

• Desire to make one change and have it applied to all similar items

• Impact tries to not make changes – to actual entries – behind the scenes

• Must be considered on very specific items

Living Trusts – Specifying Assets

• Now – assumes all probate-able assets included

• Additional reporting required if individually selected

• Would specifying specific assets to be placed in the trust constitute practicing law?

SuperLedger – Multiple Scenarios

• Each scenario available• Each separately calculated module available

Page Numbering Option

• Renewed requests from banks, RIAs, non-insurance related firms to make page numbering an option

• Is this still a compliance concern?

Wealth Planning Suite

Documents

Transcript of Wealth Planning Suite