Assumptions and Special Data Entries

The software starts with a number of assumptions, all of which you may change.

The software also gives you the ability to mark entries as “unknown,” to add footnotes, and to override entries.

This chapter discusses those capabilities.

Key rates: Inflation, Earnings, Debt, Discount Rate

The software starts with initial assumptions that are based on recent history and our best guesses of the future.  The initial assumptions cover:

 You may change any of these rates on the Planner tab, on the Assumptions screen.

The software also has a default rate of return on reinvested funds.  We use this for the default interest rate (discount rate) for defined benefit pension and for alimony present value.  The software updates this rate regularly.  To get the latest rate, update your software (Home tab > Software Updates > Download).

Start Year

The software assumes that the case data begins in the current year.

However, if you are looking at historical data, you may enter a prior year as the Start Year.

Or, if you wish to begin the data in the next year or any other year, you may enter that year as the Start Year.

The Start Year determines the first year that appears on all of the reports that show cash flow and net worth projections.  It also determines which tax laws apply to each of the relevant years.



Figure 70 - Entering the Start Year on the Assumptions screen

Setting an Initial Partial Year

Usually, the parties will separate on a day other than January 1.

After the separation, both parties’ expenses are different than they were at the beginning of the year.

You may want to show these expenses, then, beginning as of the separation.

With some caution (see below), the way to do that is to specify a “partial initial year” for the data, as in the figure below.


Figure 71 – Setting a “Partial Initial Year” for Data

The software will then pro rate any expenses you enter to a partial year for that first year.

Note, though, the following cautions:

 

It might be best to focus on pre-tax income in that first year.  Or, you may override the taxes to show any numbers you think will best show the reality of the situation.

To override taxes, you select Planner, then Reports, then select the report View/Edit Taxes.

State Tax Rates

You may view the state tax table for the state where both parties live by clicking the link labeled "state tax rates."


Figure 72 – Link for State Tax Rates on the Assumptions Screen

We update the state tax tables annually and the rates should be current.

But if a rate is incorrect for any reason, you may override it.

Creating Footnotes

Whenever you see a link labeled [Fn], you may click on it to enter a footnote about the current item.


Figure 73 – Footnote or Reminder Dialog Box

A dialog box like the one shown above will appear.  Simply type the footnotes that you wish to enter.

To enter a blank line, press <Ctrl>+Enter.

When you return to the data field, you will see the link shown as [Fn*].  The “*” indicates that you have entered a note.

The footnote will appear on key reports, including the After-Tax Cash report and the spreadsheet style reports.

If you wish to find a footnote that you entered, you may click the “View Footnotes” link at the top of the reports screen, as shown below.

Figure 74 –"View Footnotes" link on reports screen

If you wish to delete a footnote, simply erase the text of the note.

Marking Items as “Estimated” or “Reminders”

You may enter reminders on any item of income or expense, or any asset.


Figure 75 – Footnote [Fn] Symbol on Item

Simply click the [Fn] (for “footnote”) next to any item (as shown above).  A “Footnote or Reminder” dialog box will appear.


Figure 76 – Footnote or Reminder Dialog Box

To make the item be simply a reminder, and not a footnote, simply check the box labeled “This is a reminder (do not print as footnote).”

You may click [Fn] next to each reminder to edit the note.

There are special footnotes on the Planner Assumptions screen, to allow the entry of footnotes relating to taxes.

Marking Items as “Unknown”

In any number field, you may press Ctrl+U.

The software will fill in the word “Unknown.”

For financial purposes, this calculates as a zero.

You may also type Ctrl+H, and the software will fill in the phrase “H has info.”

Or, you may type Ctrl+W, and the software will fill in the phrase “W has info.”

These values calculate as zero as well.

For purposes of state financial forms, if you are entering expenses this way, you must put this special text entry in either the "Weekly" column, the "Monthly" column, or the “Annual” column, whichever is going to be displayed when the affidavit is printed.

Entering Dates

You may enter any date in any of the following formats:

Overriding Specific Entries

In the Planner, you may override many fields to enter data more precisely.  Below are some examples of fields you may override, and why you might wish to override them.

 

Note that taxes are overridden on a separate report.  To view this report, click the Planner tab, then Reports on the left, then the link for View/Edit Taxes

Liquidations: Expenses In Excess of Income and Downpayments

If a person spends more than he earns, in real life, he draws down savings, sells investments, and perhaps liquidates his IRA.  Only after all that, does he borrow.

The software will do the same.  If it has to sell investment assets in order to meet the deficit, the software will automatically calculate the incremental tax from those sales.

Similarly, if a party is making a down payment on a home to be purchased in the future, the software will automatically use cash and investments to pay for that down payment.

The settings relating to liquidations are found on the Assumptions screen of the Planner.  Click the link labeled “Click here for alternatives relating to downpayments and liquication.”  You will then see the screen shown in the figure below.


Figure 78 –Showing Options for Liquidations

Typically, you will leave the settings set the way they come.

Liquidations reduce Accumulated Savings, and they show up on the Accumulated Savings report.  There are also a number of reports that detail exactly what is being liquidated and the additional tax that is being paid.

The software liquidates assets one at a time, starting with accumulated savings, and moving to cash and investments, and then moving to IRAs. To see the liquidations in detail, including the calculation of tax paid on each sale, you may view the “Liquidations to Cover Negative Cash Flow” report on the Reports screen, as well as backup reports as show below.


Figure 79 – Backup Reports of Liquidations Details on the Reports Screen

Observations

At the bottom right hand corner of the screen is a button labeled “Observations,” as shown below.


Figure 80 – Observations button

If you click the button, it will generate a report with observations about this case.

Typically, these observations are the less-obvious things that may be significant, or answers to questions that often arise in situations like this.

Below is an example Observations report.


Figure 81 – Observations Report