STATEMENT: “PRODUCING” VS. “NONPRODUCING” ASSETS
First, let’s understand the difference between producing assets and nonproducing assets.
- Producing Assets. Producing assets are investments that are made for the sole purpose of trying to increase your net worth. They usually produce capital gains, dividends, income, or are relatively easy to sell. This includes your accounts at the bank, your investment accounts, insurance contracts, precious metals, and rental real estate.
- Nonproducing assets. Meanwhile, nonproducing assets are purchased primarily for pleasure and use. They usually do not produce income and can be very difficult to sell.
This category includes your home (after all, you have to live somewhere!), your second home/cabin, cars, boats, artwork, and hobby collections (e.g., antiques, stamps, etc.).
Next, gather the data you will need for all of your assets. (We’ll cover liabilities in step two, but feel free to get those statements as well).
- Inventory of producing assets. First, make an inventory of all your producing assets. Get all bank statements (checking/savings/money market/ CDs), investment statements (brokerage account, stocks, bonds, 401(k)s, 457(b)s, 403(b)s, etc.), life and long-term-care insurance policies, and information regarding any rental properties or investment real estate. Use Zillow.com or the last property tax valuation to get an approximation of real estate values.
- Inventory of nonproducing assets. Second, make an inventory of all your nonproducing assets, as discussed above.
Utilize the chart to help yourself get organized. I’ve included a small sample for your review.
The asset category is divided into three subcategories: liquid, nonqualified, and retirement.
Try to write them down as sorted by the asset category: liquid assets first, then nonqualified, and then retirement. Print out an additional sheet if needed.
- Liquid assets. Liquid assets are anything in bank accounts: checking, savings, and money market accounts, and CDs.
- Nonqualified assets. Nonqualified assets are assets that you could liquidate without any tremendous tax penalty and don’t have restrictions placed on them by the government. They commonly include brokerage accounts, stock awards and options, and real estate investments.
- Retirement assets. Retirement assets are assets that give you a tax advantage due to a tax deduction or tax deferral. They commonly include 401(k), 457(b), 403(b), IRA, and Roth IRA accounts, annuities, and cash value life insurance. Make sure to find out if your life insurance policy has a cash value, which usually applies to universal life, whole life, and variable life policies. Term insurance policies do not have a cash value and should not be included as an asset.
Another column on the chart is availability. This is the ability to withdraw the funds without worrying about penalties. For example, you cannot withdraw funds from IRAs or 401(k)s until you are 59.5 years old without incurring an early withdrawal penalty of 10 percent. Some annuities levy surrender penalties depending on the term limits. Some levy a penalty for withdrawals made within a four-year period; others specify seven years; and some, even 10 years.
Advisory services through Capital Advisory Group Advisory Services LLC and securities through United Planners Financial Services of America, a Limited Partnership. Member FINRA and SIPC. The Capital Advisory Group Advisory Services, LLC (CAG) and United Planners Financial Services are not affiliated.
The views expressed are those of the presenter and may not reflect the views of United Planners Financial Services. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary & require consideration of your unique objectives & financial situation.
"Neither United Planners nor its financial professionals render legal or tax advice. Please consult with your accountant or tax advisor for specific guidance."