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Projections
See Notes Below
This couple will get an annual statement
this year showing the value to be $106,000. What the Catalyst wants them to
see is a statement for years 5, 10, 15, and 20 and the net results to their
heirs if they keep this asset. If they die next year after income and estate
tax, their children will get $94,840. Remember that the couple invested $70,000
five years ago.
It does look better 20 years from now; at least they don't have a loss. However,
the $320,714 (column 1) 20th year value is reduced to $242,992 (column 7) after
taxes. If the current $100,000 value produces $242,992 net to heirs 20 years from
now, that's only a 0.0445 annual rate of return!
Now that we have disillusioned them, it is not likely that, based on their goals,
this under performing asset will be kept. It's time to reposition.
Now let's examine an alternative. |
