Planit:Entering Other Revenues Case Study

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Canada English

In Single Needs Analysis or Life Planning the proper entry of special revenue streams will greatly impact on the accuracy of your projections. Something like an inheritance, downsizing residence upon retirement or the sale of a business, will all bring in immediate revenue, but will also trigger important tax calculations in a full life goals analysis. Click here for an additional Singapore case study on CPF Payouts and Annuities. Contents 1 Example Problem One: Inheritance: 1.1 Solution Using Detailed Pension Information: 2 Example Problem Two: Residence Downsize: 2.1 Solution Using Detailed Pension Information: 3 Example Problem Three: Sale of a Business: 3.1 Solution Using Detailed Pension Information: 4 Example Problem Four: Gift From Children 5 Solution Using Detailed Pension Information: 6 Example Problem One: Inheritance: 6.1 Solution Using Detailed Pension Information: 7 Example Problem Two: Residence Downsize: 7.1 Solution Using Detailed Pension Information: 8 Example Problem Three: Sale of a Business: 8.1 Solution Using Detailed Pension Information: 9 Example Problem Four: Gift From Children 10 Solution Using Detailed Pension Information: 11 Example Problem One: Inheritance: 11.1 Solution Using Detailed Pension Information: 12 Example Problem Two: Residence Downsize: 12.1 Solution Using Detailed Pension Information: 13 Example Problem Three: Sale of a Business: 13.1 Solution Using Detailed Pension Information: 14 Example Problem Four: Gift From Children 15 Solution Using Detailed Pension Information: Example Problem One: Inheritance: Sally Barber expects to receive an inheritance in about 20 years of a value of $100000. Solution Using Detailed Pension Information: Go to the Pensions and Other Revenues screen. Here all of the current data entry has been created based on data entered in previous screens. Now, you are going to add her special inheritance revenue stream: Click on the Add button above the current revenues Enter a Description In the drop-down menu beside Owner change the setting to Spouse The $100000 value of the inheritance can be entered in the Amount per Year field Both the From Year and To Year fields should be set to 20 years from now, since the inheritance is a one-time revenue To be conservative, the Index Rate should be set to 0%, since Sally’s parents are likely to spend their returns from the investment. The Percent Taxable should be set to {{{Percent taxable 1}}}, based on the estate or inheritance tax rates for your country. Note: Even if there are no estate/inheritance taxes for your country, for Islamic client paying zakat, the Percent Taxable should be set to 2.5%. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the inheritance will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. The Amount on Death can be set to {{{Amount on death 1}}}, since if Sally died, Robert would not likely receive the inheritance. The Amount on Disability would be {{{Amount on disability 1}}}, since Sally would still accept the inheritance The drop-down menu beside Model As should be set to Fixed Period since this revenue stream will not be affected by Sally’s retirement age. Click Save to return back to the summary Pensions screen Example Problem Two: Residence Downsize: Walter and Alice Black, would like to sell their house in about four years and buy a small bungalow closer to their friends and family. They expect that they will net about $70000 after moving expenses, real estate agent fees et cetera. Solution Using Detailed Pension Information: In the Pensions and Other Revenues screen, add their special residence downsize: 1. Click on the Add button above the current revenues 2. Enter an appropriate Description, such as Residence Downsize 3. The drop-down menu beside Owner can be left at the default. 4. The $70000 value of the residence downsize can be entered as the Amount per Year 5. Both the From Year and To Year fields should be set to four years from now, since the residence downsize is a one-time revenue 6. The Index Rate can be left at the client’s default inflation rate, or another appropriate index rate, since the value of residence often increases more quickly than other goods. 7. The Percent Taxable should be set to 0%, since a residence downsize usually comes in to the client’s world tax-free. Note: For Islamic client paying zakat, the Percent Taxable should be set an additional 2.5% higher than the amount entered above. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the inheritance will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. 8. The Amount on Death can be set to 100%, since the remaining partner would still move. 9. The Amount on Disability would be 100%, since disability would not affect the changing of residence. 10. The drop-down menu beside Model As should be set to Fixed Period since the clients are already retired, and this pension is independent of retirement. 11. Click Save to return back to the summary Pensions screen. Example Problem Three: Sale of a Business: Using our earlier clients, Robert and Sally Barber, you will add a ‘Sale of Business’ revenue in their Pensions and Other Revenues screen, to complete the effects of the business on their financial position. So Rob owns a small business, Bookworms Inc., which he plans on selling when he retires. It is worth approximately $200000, and he feels that this value will grow with inflation until he sells it. When Robert bought the store it was valued at $25000. Solution Using Detailed Pension Information: Many countries have different rules for the taxation and sale of a business. To enter this other revenue properly you should refer to the link for your country below: Canada, United Kingdom, Singapore, Malaysia Example Problem Four: Gift From Children Ming and Elsie have 5 grown children. The children pay their parents a monthly amount of $250 and Ming and Elsie think this will continue until they die. They would like this revenue included in all their future planning. Solution Using Detailed Pension Information: Go directly to the Pensions and Other Revenues screen. To add the special gift revenue stream: Click on the Add button above the current revenue entries Enter an appropriate Description, such as Gift from Children The drop-down menu beside Owner can be left at the default. The Amount per Year will be $15000 ( $250 /month x 12 months x 5 children = $15000) The From Year can be set to the current year since they are already receiving this amount The To Year can be set to the year of their age 80 – at their assumed mortality. The Index Rate can be left at the client’s default inflation rate. The Percent Taxable should be set to 0%, since the gift will come into the client’s world tax-free. Note: For Islamic client paying zakat, the Percent Taxable should be set 2.5% higher than the % Taxable indicated above. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the revenue will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. The Amount on Death can be set to 50%, since they would likely receive less. The Amount on Disability would be 100%, since disability would not affect the gift. The drop-down menu beside Model As should be set to Fixed Period since this revenue is independent of retirement. Click Save to return back to the summary Pensions screen

United States of America
{{{United States Workbook Template}}}

Argentina
{{{Argentina Workbook Template}}}

Brazil
{{{Brazil Workbook Template}}}

United Kingdom

In Single Needs Analysis or Life Planning the proper entry of special revenue streams will greatly impact on the accuracy of your projections. Something like an inheritance, downsizing residence upon retirement or the sale of a business, will all bring in immediate revenue, but will also trigger important tax calculations in a full life goals analysis. Click here for an additional Singapore case study on CPF Payouts and Annuities. Example Problem One: Inheritance: Sally Barber expects to receive an inheritance in about 10 years of a value of £50,000.. Solution Using Detailed Pension Information: Go to the Pensions and Other Revenues screen. Here all of the current data entry has been created based on data entered in previous screens. Now, you are going to add her special inheritance revenue stream: Click on the Add button above the current revenues Enter a Description In the drop-down menu beside Owner change the setting to Spouse The £50,000. value of the inheritance can be entered in the Amount per Year field Both the From Year and To Year fields should be set to 10 years from now, since the inheritance is a one-time revenue To be conservative, the Index Rate should be set to 0%, since Sally’s parents are likely to spend their returns from the investment. The Percent Taxable should be set to 0%, based on the estate or inheritance tax rates for your country. Note: Even if there are no estate/inheritance taxes for your country, for Islamic client paying zakat, the Percent Taxable should be set to 2.5%. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the inheritance will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. The Amount on Death can be set to 0%, since if Sally died, Robert would not likely receive the inheritance. The Amount on Disability would be 100%, since Sally would still accept the inheritance The drop-down menu beside Model As should be set to Fixed Period since this revenue stream will not be affected by Sally’s retirement age. Click Save to return back to the summary Pensions screen Example Problem Two: Residence Downsize: Walter and Alice Black, would like to sell their house in about four years and buy a small bungalow closer to their friends and family. They expect that they will net about £40,000 after moving expenses, real estate agent fees et cetera. Solution Using Detailed Pension Information: In the Pensions and Other Revenues screen, add their special residence downsize: 1. Click on the Add button above the current revenues 2. Enter an appropriate Description, such as Residence Downsize 3. The drop-down menu beside Owner can be left at the default. 4. The £40,000 value of the residence downsize can be entered as the Amount per Year 5. Both the From Year and To Year fields should be set to four years from now, since the residence downsize is a one-time revenue 6. The Index Rate can be left at the client’s default inflation rate, or another appropriate index rate, since the value of residence often increases more quickly than other goods. 7. The Percent Taxable should be set to 0%, since a residence downsize usually comes in to the client’s world tax-free. Note: For Islamic client paying zakat, the Percent Taxable should be set an additional 2.5% higher than the amount entered above. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the inheritance will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. 8. The Amount on Death can be set to 100%, since the remaining partner would still move. 9. The Amount on Disability would be 100%, since disability would not affect the changing of residence. 10. The drop-down menu beside Model As should be set to Fixed Period since the clients are already retired, and this pension is independent of retirement. 11. Click Save to return back to the summary Pensions screen. Example Problem Three: Sale of a Business: Using our earlier clients, Robert and Sally Barber, you will add a ‘Sale of Business’ revenue in their Pensions and Other Revenues screen, to complete the effects of the business on their financial position. So Rob owns a small business, n/a, which he plans on selling when he retires. It is worth approximately £150,000, and he feels that this value will grow with inflation until he sells it. When Robert bought the store it was valued at £40,000. Solution Using Detailed Pension Information: Many countries have different rules for the taxation and sale of a business. To enter this other revenue properly you should refer to the link for your country below: Canada, United Kingdom, Singapore, Malaysia Example Problem Four: Gift From Children {{{Male Name 4}}} and {{{Female name 4}}} have {{{Number of kids}}} grown children. The children pay their parents a monthly amount of {{{Monthly payment}}} and {{{Male Name 4}}} and {{{Female name 4}}} think this will continue until they die. They would like this revenue included in all their future planning. Solution Using Detailed Pension Information: Go directly to the Pensions and Other Revenues screen. To add the special gift revenue stream: Click on the Add button above the current revenue entries Enter an appropriate Description, such as Gift from Children The drop-down menu beside Owner can be left at the default. The Amount per Year will be {{{Amount per year}}} ( {{{Monthly payment}}} /month x 12 months x {{{Number of kids}}} children = {{{Amount per year}}}) The From Year can be set to the current year since they are already receiving this amount The To Year can be set to the year of their age {{{Assumed mortality}}} – at their assumed mortality. The Index Rate can be left at the client’s default inflation rate. The Percent Taxable should be set to {{{Percent taxable 3}}}, since the gift will come into the client’s world tax-free. Note: For Islamic client paying zakat, the Percent Taxable should be set 2.5% higher than the % Taxable indicated above. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the revenue will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. The Amount on Death can be set to {{{Amount on death 3}}}, since they would likely receive less. The Amount on Disability would be {{{Amount on disability 3}}}, since disability would not affect the gift. The drop-down menu beside Model As should be set to Fixed Period since this revenue is independent of retirement. Click Save to return back to the summary Pensions screen

Russia
{{{Russia Workbook Template}}}

China
{{{China Workbook Template}}}

Malaysia
{{{Malaysia Workbook Template}}}

Singapore

In Single Needs Analysis or Life Planning the proper entry of special revenue streams will greatly impact on the accuracy of your projections. Something like an inheritance, downsizing residence upon retirement or the sale of a business, will all bring in immediate revenue, but will also trigger important tax calculations in a full life goals analysis. Click here for an additional Singapore case study on CPF Payouts and Annuities. Example Problem One: Inheritance: {{{Female Name}}} {{{Last Name}}} expects to receive an inheritance in about 20 years of a value of $200000. Solution Using Detailed Pension Information: Go to the Pensions and Other Revenues screen. Here all of the current data entry has been created based on data entered in previous screens. Now, you are going to add her special inheritance revenue stream: Click on the Add button above the current revenues Enter a Description In the drop-down menu beside Owner change the setting to Spouse The $200000 value of the inheritance can be entered in the Amount per Year field Both the From Year and To Year fields should be set to 20 years from now, since the inheritance is a one-time revenue To be conservative, the Index Rate should be set to 0%, since Sally’s parents are likely to spend their returns from the investment. The Percent Taxable should be set to 0%, based on the estate or inheritance tax rates for your country. Note: Even if there are no estate/inheritance taxes for your country, for Islamic client paying zakat, the Percent Taxable should be set to 2.5%. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the inheritance will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. The Amount on Death can be set to 0%, since if {{{Female Name}}} died, {{{Male Name}}} would not likely receive the inheritance. The Amount on Disability would be 100%, since {{{Female Name}}} would still accept the inheritance The drop-down menu beside Model As should be set to Fixed Period since this revenue stream will not be affected by {{{Female Name}}}’s retirement age. Click Save to return back to the summary Pensions screen Example Problem Two: Residence Downsize: {{{Male Name 2}}} and {{{Female Name 2}}} {{{Last Name 2}}}, would like to sell their house in about four years and buy a small bungalow closer to their friends and family. They expect that they will net about {{{Net Worth House}}} after moving expenses, real estate agent fees et cetera. Solution Using Detailed Pension Information: In the Pensions and Other Revenues screen, add their special residence downsize: 1. Click on the Add button above the current revenues 2. Enter an appropriate Description, such as Residence Downsize 3. The drop-down menu beside Owner can be left at the default. 4. The {{{Net Worth House}}} value of the residence downsize can be entered as the Amount per Year 5. Both the From Year and To Year fields should be set to four years from now, since the residence downsize is a one-time revenue 6. The Index Rate can be left at the client’s default inflation rate, or another appropriate index rate, since the value of residence often increases more quickly than other goods. 7. The Percent Taxable should be set to {{{percent taxable 2}}}, since a residence downsize usually comes in to the client’s world tax-free. Note: For Islamic client paying zakat, the Percent Taxable should be set an additional 2.5% higher than the amount entered above. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the inheritance will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. 8. The Amount on Death can be set to {{{Amount on death 2}}}, since the remaining partner would still move. 9. The Amount on Disability would be {{{Amount on disability 2}}}, since disability would not affect the changing of residence. 10. The drop-down menu beside Model As should be set to Fixed Period since the clients are already retired, and this pension is independent of retirement. 11. Click Save to return back to the summary Pensions screen. Example Problem Three: Sale of a Business: Using our earlier clients, {{{Male Name 3}}} and {{{Female Name 3}}} {{{Last Name 3}}}, you will add a ‘Sale of Business’ revenue in their Pensions and Other Revenues screen, to complete the effects of the business on their financial position. So Rob owns a small business, {{{Business}}}, which he plans on selling when he retires. It is worth approximately {{{Business Worth}}}, and he feels that this value will grow with inflation until he sells it. When Robert bought the store it was valued at {{{Original Value}}}. Solution Using Detailed Pension Information: Many countries have different rules for the taxation and sale of a business. To enter this other revenue properly you should refer to the link for your country below: Canada, United Kingdom, Singapore, Malaysia Example Problem Four: Gift From Children {{{Male Name 4}}} and {{{Female name 4}}} have {{{Number of kids}}} grown children. The children pay their parents a monthly amount of {{{Monthly payment}}} and {{{Male Name 4}}} and {{{Female name 4}}} think this will continue until they die. They would like this revenue included in all their future planning. Solution Using Detailed Pension Information: Go directly to the Pensions and Other Revenues screen. To add the special gift revenue stream: Click on the Add button above the current revenue entries Enter an appropriate Description, such as Gift from Children The drop-down menu beside Owner can be left at the default. The Amount per Year will be {{{Amount per year}}} ( {{{Monthly payment}}} /month x 12 months x {{{Number of kids}}} children = {{{Amount per year}}}) The From Year can be set to the current year since they are already receiving this amount The To Year can be set to the year of their age {{{Assumed mortality}}} – at their assumed mortality. The Index Rate can be left at the client’s default inflation rate. The Percent Taxable should be set to {{{Percent taxable 3}}}, since the gift will come into the client’s world tax-free. Note: For Islamic client paying zakat, the Percent Taxable should be set 2.5% higher than the % Taxable indicated above. We are assuming this extra income will be used to invest in financial assets and thus subject to zakat. This 2.5% of the revenue will not be paid immediately, since the client might object, but is just used to show that not all of this revenue will be available for investment or lifestyle after the end of the year. The Amount on Death can be set to {{{Amount on death 3}}}, since they would likely receive less. The Amount on Disability would be {{{Amount on disability 3}}}, since disability would not affect the gift. The drop-down menu beside Model As should be set to Fixed Period since this revenue is independent of retirement. Click Save to return back to the summary Pensions screen

Hong Kong
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India
{{{India Workbook Template}}}

Caribbean
Jamaica {{{Jamaica Workbook Template}}} Trinidad and Tobago {{{Trinidad and Tobago Workbook Template}}} Barbados {{{Barbados Workbook Template}}} Bermuda {{{Bermuda Workbook Template}}} Bahamas {{{Bahamas Workbook Template}}} Puerto Rico {{{Puerto Rico Workbook Template}}}

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