Percentage Instructions For Money
Movement Out Of Accounts

If You Are Updating From Version 3.0.49 Or Earlier, Please Read This

Newer versions have a new rule regarding money movement instructions that are specified by percentage amounts. Your old plan may cause errors during calculations if you are using percentage instructions in a particular way. The error message will refer you to this Web page. This page shows the old way, which is not allowed, and explains how to fix it to conform to the new way

New Tests For Percentage Money Movement Out Of Accounts

A change has been made in how the program handles instructions for money movement out of accounts. These instructions are withdrawals, transfers, and beneficiaries, Any sequence of multiple instructions of these types cannot, in total, ask for more than the total of the account balance. Before, a final instruction was allowed to ask for more than was available, and it got the remainder with no error.

The old way mostly applied to money requests specified by percentages. The old way applied the specified percentage to the remaining account balance, after any prior instruction was handled. And a final 100% always got whatever remained. The new way applies each specified percentage to the beginning balance as it was at the start of the sequence of instructions. So a sequence of three transfer instructions for 33%, 50%, and 100% will now generate an error since the sequence is asking for more than 100% in total. (See example file: "example- 3 children as ira beneficiaries.frc")

 

The screen shot below shows the old way of specifying three beneficiaries so that each gets one third of the bequest. According to the old way, the first beneficiary got one third of the balance. Then after the balance was reduced by that bequest, the second beneficiary got one half of the reduced balance (equal to one third of the original balance). And finally, the third beneficiary got the total of the remaining balance (equal to one third of the original balance).

 

The screen shot below shows the new way of specifying three beneficiaries so that each gets one third of the bequest. According to the new way, the first beneficiary gets one third (33%) of the original balance. Then the second beneficiary gets one third (33%) of the original balance. And finally, the third beneficiary gets one third (34%) of the original balance. Notice that the percentages must add up to exactly 100%.

 

There are situations that require moving a fixed amount and then trying to move the reminder. Take, for instance, a joint trust terminating after the first to die. The balance at that time depends on future earnings and taxes. The desired beneficiary payments are 1.000,000 to a family trust and any remaining balance to a martial deduction trust. For situations such as these, a new instruction parameter named "Sweep Balance" has been added. Specify this for the last instruction in a sequence when you want to move whatever balance remains, taking the final balance to zero. (See example file: "example- estate planning with trusts.frc")

The screen shot below shows the old way of specifying a fixed amount and then moving the remainder. According to the old way, the first recipient got a fixed 1,000,000. Then after the balance was reduced by that amount, the second recipient got 100% of the remainder. This now causes an error, since the second instruction, to move 100%, is applied to the original balance. But that results in a total money movement of the original balance plus 1,000,000 which can't be done.

 

The screen shot below shows the new way of specifying a fixed amount and then moving the remainder. According to the new way, the first recipient gets a fixed 1,000,000. Then the second recipient gets all of the remainder by use of the new instruction parameter named "Sweep Balance". This parameter is available as a new check box in the data entry windows.

 

Use the new drag and drop capability to re-arrange the sequence of instructions to control the sequence of money movements.