Wealth In Motion. Guide for Using Software Enhancements. For use with Versions P a g e

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1 1 P a g e Wealth In Motion Guide for Using Software Enhancements For use with Versions

2 2 P a g e TABLE OF CONTENTS Page Topic 3 Expense Popup on Present Position 7 Present Position Model Output Zoom 8 Main Menu Hide/Unhide Bar in Present Position 9 Model Debt Illustrated in Debt Window 10 Redesign of P9 Life Insurance Add/Edit Screen 19 Historical Data Calculator 20 Life Horizon Tables 22 Retirement Withdrawal Order 24 Life Insurance LOC Calculator Redesign 26 Present Position Report Modifications 27 Person A / Person B Calculator Modifications 28 Living Expense Inflation Modification in Detail Cash Flow 29 Internal Design Printed Report Selection Copyright 2009 LEAP SYSTEMS, Inc. PS&G Model, LEAP, LEAP SYSTEM, and Wealth In Motion are trademarks and service marks of LEAP SYSTEMS, Inc. No part of this document or visual may be reproduced, abstracted, excerpted, transmitted in any form by any means, electronic, mechanical photographic, or stored in information systems, except as set forth in writing under a license from LEAP SYSTEMS, Inc. Any other use is prohibited.

3 3 P a g e Welcome to the Wealth In Motion Software Enhancement Guide Expense Popup on Present Position Another breakthrough for the Wealth In Motion software, users may now click on the withdrawal from certain drawers (box with money in green font) within the Present Position that launches a popup which explains where the number comes from. The popup is also functional for contributions into S1 WCA. What is meant by this is that the popup identifies and breaksdown the withdrawal from the drawer in line item fashion. This allows you and your client to identify the various categories of expenses which collectively create the need for the Wealth In Motion software engine to withdraw money from a particular drawer. To see the Withdrawal Expense Popup, simply click on a withdrawal from a drawer within the Savings or Growth Components from the following list: S1-S9 G1-G6 To see the S1 Contribution Popup, simply click on the contribution box for: S1 Currently, the popups are not enabled for any drawers within the Protection Component or G7- G9 but will be made live in a future release.

4 4 P a g e After clicking on a withdrawal, a popup will appear with the title of the drawer: The popup will identify the various expenses that create the total withdrawal from the drawer. In the example above, you can see that $52,600 is being withdrawn from S8 Tax Free at the Client s Age 46. After the user clicks on the box containing the withdrawal, the popup shows:

5 5 P a g e This means that there is a withdrawal for the originally specified tuition for the University of Virginia of $32,854 plus an amount of $19,746 of tuition inflation based on the tuition inflation factor entered in the Education Module. The total of the two numbers equals $52,600. DEFINITION OF TERMS IN POPUPS: Withdrawal Popups: Carryover Taxes : Tax on withdrawal from a tax-advantaged account made in the previous year. Since withdrawals from certain types of tax-advantaged accounts (401K, IRA, etc.) create taxes when money is withdrawn, these taxes must be tracked and paid. Tax withdrawals are made after tax is calculated within the WIM engine, so tax on tax withdrawals always occur in the following year. Carryover Tax is an expense, so the WIM engine covers the expense by income and proportionally calculated withdrawals. The expense is not necessarily paid from the drawer that created it. Note that only S7, S8, and S9 can create Carryover Tax. For example, someone who has a retirement living expense of $100,000, and a tax bracket of 25%, may find the WIM software automatically withdrawing $125,000 from a 401K. In doing so, the 25% tax on the $100,000 portion is covered, but the extra $25,000 of withdrawal has also created a tax ($25,000 * 25% = $6,250). This $6,250 is the Carryover Tax. Remaining Tax : This refers to the proportional amount of the withdrawal being taken out of any drawer to cover taxes on investments and withdrawals that are not covered by Tax on Withholdings (ie. taxes paid out of available cash flow from income). This never includes Carryover Taxes. Tax on Withholdings : Proportion of annual income Surplus used to pay tax on investments. Only shown in S1 Withdrawal Popup. Planned Withdrawal : These are user-specified withdrawals listed in account details. G8 Asset Income is considered a planned withdrawal as well as Required Minimum Distributions from certain Qualified Retirement Plans (G7 & G9). Calculated Withdrawal : These are withdrawals calculated by WIM engine to pay the portion of expenses, taxes, and contributions that are not covered by income and income Surplus. S1 New Money Popup: Withdrawals Made : Total withdrawals made within model in year shown. Withdrawals Made includes all user-specified withdrawals and Required Minimum Distributions, and Calculated Withdrawals from education accounts (529 Plan and Education IRA). Taxes Paid on Withdrawals : The amount of Income used to pay taxes on withdrawals. Note that only S7, S8, and S9 will have withdrawal taxes.

6 6 P a g e Excess Cashflow Deposits : The amount of money remaining after paying income taxes, tax on withdrawals, contributions, and expenses. Excess Cashflow Deposits includes the calculated End of Year (EOY) Tax on Investments, which are withdrawn from S1 at end of year. EOY Tax on Investments : Amount of tax on Investments. EOY Tax on Investments is the same as Tax on Withholdings in the S1 Withdrawal popup. Used to show the portion of the surplus that is used to pay the investment tax.

7 7 P a g e Present Position Model Output Zoom You can now zoom or enlarge the total hypothetical output from the Present Position by simply clicking on the total box: After clicking, the total box is now zoomed and will remain zoomed until you click it again:

8 8 P a g e Main Menu hide/unhide bar in Present Position You hide or unhide the Main Menu on the Present Position by clicking the dark green bar to the left of the main menu:

9 9 P a g e Model Debt illustrated in Debt Window If a client s expenses exceed the available cash flow and assets in a client s model (ie. client effectively runs out of money), the Wealth In Motion software has always carried forward the unpaid-for expenses as a debt- as if the client borrowed to cover the expenses. Now, this debt is illustrated in the Debt Window whereas previously it was tracked by the WIM engine but not displayed on the screen. As you can see, when the client runs out of money, any living expenses that are still being paid (insurance policies are dropped) are considered to have been borrowed for. The model keeps track of the debt in the Debt Window and it is notated by the Loan Type being labeled Debt.

10 10 P a g e Redesign of P9 Life Insurance Add/Edit screen The screen in the Questionnaire where life insurance policies are added or edited has been redesigned to be more user friendly, intuitive, and visually pleasing. The redesigned elements include: 1. Vertical Illustration Orientation: Previously, the insurance schedule was oriented horizontally allowing for premiums, cash values, dividends and death benefits to be displayed for only 10 years at any given time. Now, the schedule is presented vertically, similar to an actual life insurance company life illustration: The manner in which you enter data into the schedule has not really changed from the previous version. Policy values are entered in one of two ways: i. Illustration Import Utility same as previous version

11 11 P a g e a. Using Microsoft Excel, create a CSV vile and import accord to instructions provided on Licensee Section of the LEAP SYSTEMS, Inc. website ( b. Automatically import to Wealth In Motion software from your companies life insurance illustration software** **Not all life insurance companies have performed the necessary programming changes to interface with the Wealth In Motion software ii. Manually entering data in schedule- same as previous version a. Click on any cell, type in the value and hit the <ENTER> key to edit the value for that year only b. Click on any cell, type in the value and hit the <TAB> key to edit the value for that year and all years thereafter You can entered the desired length of time the policy is meant to remain in force by entering the Policy Term : If you have a 20 year term policy, enter 20 in this field along with Insurance Type as Term-Life. You will notice that doing so will gray-out the years in the schedule beyond year 20: [IMAGE ON NEXT PAGE]

12 12 P a g e In this example, you would not be able to edit any of the cells beyond Year 20 unless you change the Policy Term to a longer period. Likewise, since it is term insurance in this example, you will notice that the Cash Value and Dividend columns are also grayed-out since they are not applicable to term insurance. Remember, the Policy Term is the amount of time you wish the policy to remain IN FORCE, regardless of the actual number of years a premium is paid (ie. 20 pay life)

13 13 P a g e 2. Illustration Summary Table: The illustration summary table in the lower left-hand corner of the screen is now noneditable, which means that users will no longer experience inadvertent overwriting of any insurance values in the schedule. The table remains a valuable resource in order to provide a quick-view of insurance values at key ages of 65, 85, and 100. Also, the table may be overlaid by a graph by clicking on the graph tab: [IMAGE ON NEXT SCREEN]

14 14 P a g e 3. Point-by-Point Cash Value/Death Benefit Interpolation: For those users manually entering data into the Wealth In Motion software from a life insurance illustration (and not creating a CSV file), the interpolation methodology has been enhanced to include point-by-point refinement. Previously, WIM allowed the user to use straight-line, tiered, or algorithmic interpolation. While these three base methods still exist, the user can now enter as many points as desired throughout the schedule and interpolate using those points for better refinement. The more points entered, the more closely a manually entered illustration will reflect actual life insurance illustration values.

15 15 P a g e Step 1: Click Activate Interpolation checkbox Step 2: Chose the desired interpolation method by clicking on the X next to Cash Value, Dividend, and Death Benefit i. Tiered: click X once ii. Straight-line: click X twice iii. Algorithmic - click X three times Step 3: Enter the various values in the illustration schedule (presumably from the life insurance illustration) and click the I.P. radio button next to each row. The more points you enter, the closer the results should be to the actual life insurance illustration. [IMAGE ON NEXT PAGE]

16 16 P a g e Step 4: Click the <Interpolate> button in the lower left hand corner of the screen

17 17 P a g e The Wealth In Motion software will now perform the interpolation using both the method you selected as well as using the points you entered to arrive at the result:

18 18 P a g e 4. Cost Basis For Existing Policy : Data entry field for the cost basis of a client s existing policy is now available to ensure the proper taxation of withdrawn dividends or cash value from an existing cash value life insurance policy entered into WIM. The software will keep track of the cost basis of the policy and apply a tax on any dividend withdrawals when they exceed the aggregate cost basis of the policy. The aggregate cost basis is any pre-existing cost basis in the policy (if the policy is not new and has been in force) plus any additional premiums/puas paid into the policy.

19 19 P a g e Historical Data calculator This new calculator uses the historical data tables found within WIM (ie. Buy Term Save the Difference calculator) and allows the user to access the data for any series of years and apply a current balance, annual payment or both. The annual, compounded results are displayed and an Average Yield and Actual Yield are identified based on the data set used. Users of the LEAP SYSTEM will recognize it as Wealth In Motion s version of the LEAP SYSTEM software s Market History calculator.

20 20 P a g e Life Horizon Tables This new calculator uses the 2001 Commissioners Standard Ordinary (CSO) Mortality Table and the 2001 CSO Aggregate Composite Mortality Table to provide data on projected mortality age of a male or female ( Mortality Table ) or the Survivor Probabilities or joint mortality of two lives (male and female) based on the ages entered for each. Users of the LEAP SYSTEM will recognize it as Wealth In Motion s version of the LEAP SYSTEM software s Mortality Tables calculator. Mortality Table:

21 21 P a g e Joint Mortality Calculator: The age of a Male and Female are entered into the lower right-hand portion of the calculator, and the aggregate joint mortality is calculated and presented as a Percent Probability of: Male dead/female alive Male alive/female dead Both dead One dead

22 22 P a g e Retirement Withdrawal Order The Withdrawal Order feature has been updated to now include pre- and postretirement withdrawal orders, effectively creating two tiers. You can now completely customize the order in which a client s assets will be depleted to cover any expenses not paid for from cash flows based on whether the client is retired or in pre-retirement. For example, while it is unlikely that a client would liquidate any part of a qualified plan while still working or under age 59 ½, you can now model the qualified plan being the first account depleted when in retirement while being the last account to be accessed in pre-retirement. To open the Withdrawal Order, go to the Cash Flow tab of the Questionnaire and click the <Withdrawal Order> button

23 23 P a g e This will launch the Withdrawal Order control window. Here, you will be able to set up two custom withdrawal orders: one for pre-retirement and one for post-retirement. The order that you set up will affect the order of asset liquidation in the client s Present Position Model. By default, the client s Post-retirement withdrawal order is the same as the Pre-retirement withdrawal order unless you customize the Post-retirement order. **NOTE** Post-Retirement is considered the age that the first of the Client or Spouse retires.

24 24 P a g e Life Insurance LOC Calculator Redesign In order to take full advantage of the power of this calculator in showing the true cost of term insurance and 2 nd to Die/Survivorship life insurance, it has been redesign for easier use. The user can select either Term or 2 nd To Die to display on the screen, not both. While the calculations remain the same, some of the field headers have been changed for ease of use and enhanced understanding by clients. Simply select either Term or 2 nd To Die by choosing a radio button at the top of the screen. You can illustrate either type of insurance on the screen, but not both simultaneously. The main columns of significance are: i. LOC on Premium Period a. This is the lost opportunity cost of the premiums paid during the premium paying period

25 25 P a g e ii. iii. iv. Premium LOC to Survivor Life Horizon a. This is the lost opportunity cost of the premiums paid during the premium paying period and then compounding from the end of the premium paying period to the death of the surviving spouse Death Benefit LOC a. This is the lost opportunity cost, if any, if the death benefit lapsed prior to the death of the insured and to the surviving spouse s Life Horizon Total LOC to Survivor Life Horizon a. This is the total lost opportunity cost of the Premium LOC to Survivor Life Horizon added to the Death Benefit LOC to arrive at the total lost wealth to the family at the death of the surviving spouse

26 26 P a g e Present Position Report Modifications The Present Position printed report has been modified to include the following: Present Position Model has been enlarged slightly for easier viewing Green Header expanded for visual appeal Your Present Position Model text added to header Hypothetical Input has been removed

27 27 P a g e Person A/Person B Calculator Modifications The following upgrades have been made to the Person A/Person B calculator: Hide/Unhide buttons now appear in expanded view Concept Sample Present Value starts at $0 Font size increased in the Totals line Income Analysis section added to the lower right side of the Display Graph Person A and Person B separator added to printout

28 28 P a g e Living Expense Inflation Modification in Detail Cash Flow The application of inflation to a client s living expenses has been simplified to be either: Use Global Inflation Rate Use Personal Inflation Rate If Global is selected, the inflation factor entered in the Global Inflation Rate in the General Data tab of the Questionnaire will be used. If Personal is selected, the user will be prompted to add a custom inflation rate for a particular client s living expenses.

29 29 P a g e Internal Design Printed Report Selection The printed report for Internal Design can now be printed out by component (Protection, Savings, or Growth*) instead of all three simultaneously. *Printing of the Growth Component Report is restricted in the Insurance Version of Wealth In Motion