This screen is where you will enter a number of assumptions and settings, including the following:
- Start Year (sets the tax year for child support)
- Number of years for cash and net worth projections (1-50)
- Annual inflation rate
- Default mortgage interest rate
- Default allocation between the parties for assets and debts.
Here are some of the assumptions and settings you can specify on this screen.
Report Column Headings
By default, the column headings are the first names of the parties, but you can change that. You can also change the initials that are used for onscreen display. Those initials do not affect any print outs.
Rates of Return and Borrowing Costs.
In the financial planning part of the software, positive net income at the end of each year is invested in a hypothetical diversified portfolio.
Here on the Assumptions screen, you can specify how that diversified portfolio is invested, in general terms.
You can set the rates of return for each asset category (interest, dividends, capital gains, and tax free income).
This is explained in more detail on the pop-up help at the line for the rate of return on accumulated savings.
If you want to eliminate future interest and dividend income on accumulated savings, set all of these rates to zero.
Sometimes people see interest and dividend income appearing on the View/Edit Taxes report for future years, and they wonder where that is coming from.
Typically, it is coming from Accumulated Savings.
If you want to eliminate that interest and dividend income, set the rates of return to zero.
Partial Initial Year
For the budget report, you can specify that the initial year is only a partial year. This will enable you to see the incomes and expenses for only a partial year. Please use caution when using this capability.
Specifying a partial initial year will cause taxes, guidelines, and financial affidavits in the first year
to be wrong, because they will be using only partial data.
Also, the setting up applies only to items that are entered after it has been set.
So set this at the beginning of a case, if you are going to use it.
The way to specify a partial initial year is to specify a month and day as of which the calculations will begin. We will prorate the wages and all expenses, for example, to apply only to the partial year.
State/Provincial and Local Tax Rates
The software includes state tax rates for all states. Occasionally, a state will change its tax rates and we will not yet have updated to reflect that change. This allows you to specify what the tax rates are for your state.
Covering Liquidations
If expenses exceed income, the software will liquidate assets in order to cover that shortfall.
By default, the software will cover liquidations as follows:
- Use previous accumulated savings.
- Sell taxable financial investments.
- Sell IRA/401k assets.
- Borrow.
When investment accounts are liquidated, the software also calculates the capital gain that will have to be paid. It is important to enter the tax basis for these accounts if liquidations are happening and you are doing cash flow projections.
The software saves retirement accounts for last because there is a penalty on liquidation, which the software reflects.
If the software gets to a point where all available liquid assets have been liquidated, and the deficit is not covered, the software automatically creates a hard-coded account called “Net Debt.”
The software automatically charges interest on that account as well.
You can set the rate of interest on this screen as well, in the section where you set the rates of return on assets.
You can specify that we should skip or not use any of the first three tactics. So for example, if you wish to not sell any financial investments and go right to distributing 401K assets, you can specify that here.
Future Down Payments
Similarly to liquidations, there are alternatives as to how to cover future down payments, which you may set in this section.
This setting is on a case by case basis. You change the setting for one case, that will not affect other cases.
Terminology:”Alimony” vs “Spousal Support” vs “Spousal Maintenance”
The term used most commonly to specify spousal support varies from state to state.
This term applies on menus throughout the software.
We have tried to choose the term that is most commonly used in your state.
But there is a setting that will enable you to change the term that is used to more accurately match the one that is used where you practice.
Case Information
You can also specify items of case information that will carry to the financial forms, including the following
- Which party is Plaintiff and which is Defendant
- Case Number
- Case Name
- Court address information